The following content is sponsored by Payroll4Construction.
In March of 2022, the Department of Labor proposed new rules to the existing Davis-Bacon Act and Davis-Bacon and Related Acts in an attempt to modernize regulations for the current state of the construction industry and the needs of its workers. While the Act itself is no stranger to updates and changes, the new proposal offers the most comprehensive overview of the Act’s regulations in the past 40 years.
While nothing has changed yet, contractors who frequently work federally funded jobs should be aware of the proposed changes and what they could mean for the future of these projects. Setting yourself up now with the right software and services to handle any potential changes can help save headaches down the road and make sure you don’t miss out on new contracts as they come up.
What Is the Davis-Bacon Act?
Before exploring the Department of Labor’s newly proposed changes, it’s first necessary to understand what the Davis-Bacon Act is and what it means for contractors.
Signed into law in 1931, the Davis-Bacon Act requires contractors working on federally funded jobs to pay laborers wages and benefits no less than what others locally pay workers for similar projects. This is called the “prevailing” wage, as it’s the wage that prevails in an area for a given trade or type of work. Under Davis-Bacon, contractors have options to pay this wage as a combination of both cash and fringe benefits.
Davis-Bacon generally applies to contracts in excess of $2,000 to which the U.S. government or District of Columbia is a party — including construction, alteration or repair of public buildings and public works. As an additional requirement, contractors or subcontractors must also prominently display the relevant wage scale at the worksite.
How Common Are Changes to the Davis-Bacon Act?
While the Davis-Bacon Act has been around since 1931, it’s gone through several revisions over the years to keep it relevant to the current construction market — 71 to be exact. Collectively, these additional Acts are known as the Davis-Bacon and Related Acts. The latest proposed changes are an attempt to enact changes across both the original Davis-Bacon Act and those related to it.
While many Acts have been put into place to alter requirements for Davis-Bacon contracts, two that contractors may already be familiar with as common examples are the Copeland “Anti-Kickback” Act, signed into law in 1934, and the Contract Work Hours and Safety Standards Act (CWHSSA), signed into law in 2015.
The Copeland — or “Anti-Kickback” — Act, as its name implies, makes it illegal for employers to receive any kickbacks from employees on federally funded projects. Notably, the Copeland Act requires contractors to submit weekly compliance reporting — commonly known as “certified payroll.”
More recently, CWHSSA was enacted to ensure standard overtime rates with Davis-Bacon contracts. As a result of the Act, contractors must pay a standard overtime rate of one-and-a-half times a worker’s base rate for any hours worked in excess of 40 per week on Davis-Bacon contracts.
Changes to how the Davis-Bacon Act is enforced and regulated are fairly common, but contractors are responsible for keeping up to date with what’s new, as updates will inevitably change Davis-Bacon wages for employees working these jobs.
What Are Davis-Bacon Wages?
Minimum Davis-Bacon wages are set by the U.S. Department of Labor. These wages are based on what the Secretary of Labor determines to be prevailing for related classes of laborers and mechanics employed on similar projects within an area. While the U.S. Department of Labor sets Davis-Bacon wages, they’re also responsible for maintaining them over time to ensure that the rates are accurate.
Wage determinations can be found on the Department of Labor’s website. Each wage determination lists both a cash portion and fringe portion to be paid for worker classifications.
Beyond federal requirements, state or local jurisdictions may also have additional wage requirements, so contractors should be aware of these and how they can affect employee wages.
What changes are being proposed?
The proposed changes to the Davis-Bacon Act and Related Acts primarily involves redefining the term “prevailing” for Davis-Bacon wages. With the proposed change, “prevailing” would return to a previous definition which had been adjusted in 1983.
Early definitions within the Davis-Bacon Act established what was “prevailing” according to a three-step process:
- Any wage rate paid to a majority of workers.
- If no wage rate is paid to a majority of workers, then the wage rate paid to the greatest number of workers, provided it was paid to at least 30 percent of workers. Also known as “the 30-percent rule.”
- If the 30-percent rule wasn't met, the weighted average rate.
In 1983, the second step, relating to the 30-percent rule, was eliminated over concerns of inflation. The newly proposed changes seek to reestablish this second step, effectively returning the 30-percent rule, effectively changing wage rates for Davis-Bacon contracts.
A second major proposed change would allow the Department of Labor to more frequently assess and adjust prevailing wage rates.
How can construction payroll software and services help?
Knowing Davis-Bacon wage requirements is only part of the process — the other is compliance, and more specifically, compliance reporting. While keeping up with the rules and regulations is key, contractors also have to find a way to manage compliance with Davis-Bacon wage requirements. Capturing accurate timecards, calculating complex wages and completing certified payroll reports are all necessary practices.
Construction software and construction-focused payroll services help take the stress away from businesses by allowing contractors and their staff to effectively manage data, automate processes, and reduce human error that can lead to inaccurate payment. By employing tools made specifically for construction, contractors get a multitude of benefits, like:
1. Handling multiple rate tables for localities and trades
Not every federal job requires Davis-Bacon wages, but they may still require some jurisdiction’s prevailing wages. Because of this, contractors may need to handle several different rate tables for different localities and jobs.
To further complicate things, wages also depend on not just an employee’s normal work classification but the classification they fall under for the hours they worked on the jobsite. For example, a laborer may need one rate when site clearing in the morning and a different rate when operating a dozer in the afternoon.
Construction-focused payroll software and services can help you set up correct rate tables while making it easier to track each employee’s hours performing a specific task. Plus, based on entered timecards, automatic calculations can be performed to determine the appropriate wage and fringes offered.
2. Fringe accruals and reductions
Davis-Bacon wage regulations allow contractors to pay fringes as cash. Many contractors find this to be an easier method, but it does amount to greater payroll taxes than if they paid out pre-tax fringe benefits. There may be preference to contribute bona fide fringes to a third-party plan — of which construction software and services can track accruals based off the appropriate rates and limits for each paycheck.
As an added bonus, construction software and services offer the ability to reduce fringe rates by the cost of bona fide fringes you already offer. Many contractors fail to take advantage of this because they find it difficult to calculate this information each week for each employee. With a construction-focused payroll service, you can calculate fringe reductions automatically, saving you money while remaining compliant.
3. Extensive Davis-Bacon Reporting
Perhaps most importantly is the ability to simplify compliance reporting. With automated reports generated after every payroll, construction-focused software and services can save you hours at the end of every payroll run. A construction payroll service should also be able to report historical reports and update certified payrolls retroactively, including federal Form WH-347 for Davis-Bacon wages and state prevailing-wage forms for print or electronic submission. These reports can then be used to complete Form WD-10 as well for Davis-Bacon wage determinations.
How should I prepare?
While the changes to the Davis-Bacon Act and Related Acts are still in the proposal phase, adjustments to requirements have happened frequently throughout the years, meaning it’s likely that more changes can — and will — occur. If you find that you’re struggling to keep up with the complexities of Davis-Bacon wages, it may be worthwhile to look into how a construction-focused payroll processor can help. Aside from keeping up with ever-changing laws associated with the Davis-Bacon Act and Related Acts, a construction-focused payroll service can offer tools to help simplify wage calculation and compliance on Davis-Bacon projects.
And while there’s no set timetable on when changes to the Davis-Bacon Act and Davis-Bacon Related Acts will occur, contractors should continue to follow the latest info to start planning now.