Prevailing Wage
What is the prevailing wage?
The prevailing wage is essentially the hourly pay, along with standard benefits and overtime, that must be paid to most workers in a specific trade or occupation within a certain area.
It’s set at the local level, often based on what workers in the largest city of that county typically earn, and it helps ensure workers are compensated fairly and consistently across public projects.
How is the prevailing wage determined?
To determine the prevailing wage, local employers survey and gather data on the pay and benefits provided to workers in different trades, and the wage is set according to what the majority of workers in the area earn for similar work. Each county establishes its own rate, reflecting local labor market conditions, and the wage can vary based on the type of project, such as commercial versus residential construction.
The prevailing wage includes not only the hourly rate but also the value of standard benefits like health insurance, pensions, and vacation pay. Employers are required to offer a total compensation package, either through wages alone or a combination of wages and benefits, that meets or exceeds the prevailing wage rate.
In public works projects, the standard workday is eight hours, and any hours beyond 40 in a week must be compensated with overtime pay. This system ensures fair competition among contractors, as they all must meet the same wage standards and cannot undercut each other by lowering labor costs.
Who sets prevailing wage rates?
Prevailing wage rates for federally funded construction projects are set by the U.S. Department of Labor under the Davis-Bacon Act. These rates are based on what workers in the area are typically paid for similar jobs.
In states with their own “little Davis-Bacon” laws, state or local labor departments take on this responsibility, setting wage rates for state and locally-funded projects. This ensures that pay reflects local standards while keeping things fair for workers and contractors both.
How often are prevailing wage rates updated?
Prevailing wage rates are updated twice a year, on the first business day in August and February, with changes taking effect 30 days after publication. These updates reflect shifts in collective bargaining agreements (CBAs), wage surveys, and changes to minimum wages.
How do you calculate the prevailing wage level?
To figure out the prevailing wage for a job, employers need to gather three main pieces of information.
First, they need to identify the occupational classification, which is determined by the job duties rather than just the title.
For instance, a “Software Engineer” might actually fall under the category of “Software Developer” based on the specific responsibilities. The U.S. Department of Labor’s O*NET system helps organize these roles using Standard Occupational Classification (SOC) codes.
Next, employers need to determine the wage level. The Department of Labor (DOL) sets four wage levels for each SOC code, which take into account the required education and experience for the position as well as what current employees in similar roles have.
Finally, they must identify the area of intended employment, which refers to the city or region where the job will be performed. This ensures the wage data reflects local pay standards within a reasonable commuting distance.
Once these details are collected, the employer can determine the prevailing wage by following these steps:
- Access the DOL’s Online Wage Library: Use the Foreign Labor Certification Data Center to look up wage information.
- Select the State: Choose the state where the job will be based (for example, New Jersey).
- Select the County or Township: Narrow it down to the specific county (e.g., Hudson County).
- Search for the Occupation: Enter keywords like “Software Developer” or select from a list of SOC codes.
After running the search, the employer can view wage rates for the selected occupation. For instance, in Jersey City, NJ, the prevailing wage for a Level II “Software Developer, Applications” is roughly $48.33 per hour, or about $100,526 annually.
It’s important that this prevailing wage matches or exceeds what the employer plans to pay, as it’s a critical part of visa petitions like E-3, H-1B, or H-1B1. Mistakes in determining the prevailing wage can lead to serious consequences, so it’s a good idea to consult with an immigration attorney for guidance and compliance.
How to check prevailing wage
To check the prevailing wage for a specific job, employers must ensure they offer wages that meet or exceed the prevailing wage rate, which reflects the average pay for similarly employed workers in a particular occupation and area.
Employers can request a Prevailing Wage Determination (PWD) by submitting form ETA-9141 to the National Prevailing Wage Center (NPWC) via the Foreign Labor Application Gateway (FLAG) system. They may also use independent wage surveys or access wage data from the OFLC Wage Search tool, which provides data from the Occupational Employment and Wage Statistics (OEWS) program.
For visa programs like H-1B, H-1B1, and E-3, employers have three options for determining prevailing wages:
- requesting a PWD from the NPWC,
- using an independent wage survey,
- or accessing another reliable source.
Wage classifications are based on the Standard Occupational Classification (SOC) system, ensuring uniformity across regions. Obtaining a PWD from the NPWC offers safe-harbor status, protecting employers from wage compliance challenges as long as guidelines are followed.
Is Davis-Bacon different from the prevailing wage?
The Davis-Bacon Act is the federal prevailing wage law, specifically governing publicly financed construction projects at the federal level. State-level prevailing wage laws, often referred to as “Little Davis-Bacon” laws, function similarly but apply to state-funded or state-subsidized projects.
For example, in Wisconsin, the prevailing wage applies to public construction projects exceeding $221,000 (or $45,000 if only one trade is involved), while in Minnesota, it applies to state-financed projects worth at least $25,000 (or $2,500 for single-trade projects). Unlike Davis-Bacon, some local governments in Minnesota have their own prevailing wage ordinances, and Minnesota’s law doesn’t apply to projects fully funded by local entities like cities or school boards.
Frequently Asked Questions (FAQs)
1. What is the local prevailing wage?
The local prevailing wage is the average wage paid to workers in a specific occupation and geographic area, including wages and benefits, as determined by surveys or wage determinations.
2. What triggers prevailing wages?
Prevailing wages are triggered when public funds are used for construction projects, typically exceeding a certain monetary threshold, requiring employers to pay wages as per local standards.
3. What does prevailing wage include?
Prevailing wage includes the hourly wage, overtime, and usual benefits like health insurance, pensions, and vacation, ensuring workers receive fair compensation based on local standards.
4. What types of projects establish prevailing wage rates?
Publicly funded construction projects such as highways, schools, and government buildings establish prevailing wage rates—ensuring contractors meet local wage standards when using federal, state, or municipal funds.