Understanding & Implementing Prevailing Wage Decisions
Prevailing Wage Decisions can sometimes be very difficult to understand and implement, however, it’s very important that you learn to read and apply what is found in them.
The Wage Decision for a Public Works or Government Construction project provides you with the prevailing wage requirements, including Work Classifications, hourly rates of pay and hourly fringe benefit amounts for every trade classification that could possibly be involved on a project. Prevailing Wage requirements are found in the Labor Standard Clause of the Contract Provisions section of the bid package and become the backbone of payroll processing requirements for that specific project.
One would think that if a project had prevailing wage requirements that the Wage Decision would contain an easy to understand breakdown of the fringe benefit portion of the prevailing wage – however, that is not always the case. Wage Decisions can be quite difficult to understand; based on whether the project is funded with Federal or State money and whether or not there is a large Union presence in a specific state and unraveling this can quite often be very confusing.
Please be advised that the following is ONLY a general overview and does NOT take into consideration whether this is a Union or Non-Union shop or whether the fringes are paid to the Union Hall or into one or more bona-fide plans on behalf of the employee, or if you are paying the full fringe amount in cash in lieu of fringes.
Let’s look at some sample wage decisions:
It lists the Work Classification, the base hourly rate, and the full fringe benefit amount that you must pay. For example, employees who are classified as Flaggers are paid:
- a base rate of $11.15 per hour,
- and an hourly fringe benefit rate equal to $4.40 per hour
This means that you MUST pay any employee who is classified as a Flagger NO LESS than a combined grand total of $15.55 per hour. In this specific instance the hourly fringe rate must equal $4.40 per hour, with no specifics as to what type of union or bona-fide plan fringes must be paid (Health & Welfare, Pension, Vacation/Holiday, etc.). If you are not a Union Shop or have bona-fide fringe benefit plans in place you could end up paying the entire $4.40 in cash in lieu of fringe benefits.
A more specific wage determination:
Sometimes a wage determination is pretty darn specific. For example, employees who are classified as an Engineering Construction Cement Mason are paid:
- a base hourly rate of $26.57, with Employer Payments of
- $6.10 per hour for Health and Welfare
- $5.95 per hour for Pension
- $2.50 per hour for Vacation/Holiday
- $0.50 per hour for Training
- $1.73 per hour for Other (Supplemental Dues)
In this instance, anyone that is classified as an Engineering Construction Cement Mason must be paid a grand total of no less than $43.35 per hour ($26.57 base plus $16.73 total fringe package). This wage determination also provides you with specific types of fringe benefits that you are expected to pay – as well as the actually hourly values – if you are a Union Shop. If you are an open shop you can submit the total ($16.73) to one or more bona-fide plans or pay it as cash in lieu of fringes.
A wage decision that provides very little in the way of helpful/useful information:
Sometimes a wage decision is about as clear as mud! For example, employees who are classified as an Asbestos Worker with a job in New Castle is to be paid $27.64 per hour.
Last week, as a guest speaker for L2 Federal Resources, I delivered a live webinar called “Unraveling Certified Payroll Requirements for Government Contractors” and I talked a lot about Wage Decisions and the different ways in which contractors paid the fringe benefit portion. I always tell people that this is an introductory class which focuses on complying and completing the Federal WH-347 form; and that while I have a fairly good understanding of prevailing wage laws in all 50 states – that there is much of the fine print in the rules, regulations, and union requirements that I only “know enough to be dangerous” and that “specifics” should always be directed to:
- The company that directly hired them
- or the Prevailing Wage Division of the State their business is located in (or that the job is in)
- or the Union Hall
So here is where it gets interesting!
One of the webinar attendees asked the following question:
Do you have any categories that you can go over with +5, -5 A & B benefits? For example, an elevator mechanic has a base rate, then B: +5 for over 5 years @ 8% vacation, -5 under 5 years @ 6%, A-# of holidays
Well that was all of the information that she gave me – and it’s sometimes the problem with webinars! Anyway, without any additional information and not enough time to obtain the specifics (because obviously there is a LOT that is missing), I wasn’t able to provide an answer.
So I did a Google Search and this is what I came up with.
Elevator Mechanic: Base Rate $48.23/Fringes $25.185
With a footnote that said: Employer contributes 8% of regular hourly rate as vacation pay credit for employees with more than 5 years of service, and 6% for 6 months to 5 years of service. PAID HOLIDAYS: New Years Day, Memorial Day, Independence Day, Labor Day, Veterans Day, Thanksgiving Day, Friday after Thanksgiving, and Christmas Day.
Ok, so this one is sort of confusing, but still all of the information appears to be right there – and without any further information this is how I read this:
We have the base rate of $48.23 per hour:
A) IF an employee has 6 months to 5 years of experience his vacation fringe is equal to 6% of his BASE rate – OR – $2.8938 per hour ($48.23 x 6%), so out of the full fringe of $25.185 per hour, $2.8938 per hour is the Vacation fringe amount.
B) IF an employee has MORE than 5 years of experience his vacation fringe is equal to 8% of his BASE rate – OR – $3.8584 per hour ($48.23 x 8%), so out of the full fringe rate of $25.185 per hour, $3.8584 per hour is his vacation fringe.
There is no such thing as a totally straight forward, easy to understand Prevailing Wage Determination that I’ve ever seen (or even heard of for that matter), but you do need to be able to learn how to understand and interpret them – and going to the “source” (General Contractor, State Prevailing Wage Division, Union Hall, etc.) is the best way to learn.
I hope you found this post to be informative and I do apologize for the length, there is just a lot of ground to cover even in a general overview.