What Are Davis-Bacon Wages? Pay Rules & Requirements Guide
Navigating the rules around prevailing wages can be tricky for agencies and contractors, especially when working on a mix of public and private projects. While the Davis-Bacon Act sets federal standards for wages on certain federally funded projects, not every construction job falls under these rules. Having a clear understanding when prevailing wages apply, as well as how state laws may add their own requirements, can help contractors stay compliant and avoid costly penalties.
What Are Davis-Bacon Wages?
The U.S. Department of Labor (DOL) sets prevailing wages, known as Davis-Bacon wages, for federally funded construction projects. These wages, along with fringe benefits and overtime, are mandated by the Davis-Bacon and Related Acts (DBRA) for contractors and subcontractors involved in the construction, alteration, or repair of public buildings or public works. The DBRA ensures that laborers and mechanics on these projects are paid at least the local prevailing wages and benefits for similar work in the area. Many states have also adopted their own versions of this act, often referred to as “Little Davis-Bacon.”
How Do Davis-Bacon Wages Work?
Davis-Bacon wage determinations are published on SAM.gov by the U.S. Department of Labor’s Wage and Hour Division. This division reviews and monitors wages nationwide and maintains the Sam.gov website, where agencies and contractors can search for prevailing wages related to their contracts. These wage determinations set the minimum hourly rates and fringe benefits that must be paid to laborers and mechanics on federally funded construction projects. Prevailing wages are determined based on factors such as regional averages, crafts and work classifications, job titles, and historical local rates. Prime and subcontractors sourcing workers for public projects can search the wage database to find the correct wage. If the organization uses eComply, the process of inputting and maintaining wage data is done for them at no additional cost.
What Is the Davis-Bacon Wage Rate?
The Davis-Bacon wage rate is the prevailing wage set by the U.S. Department of Labor (DOL) for a specific project location, worker classification, and type of work. These rates are updated periodically, often semiannually, but may be revised more often if economic conditions or local wage surveys suggest a change is necessary. The wage rate determines the minimum hourly pay and fringe benefits that must be provided to laborers and mechanics working on federally funded construction projects.
How Do You Calculate Davis-Bacon Wages?
Prevailing wages are determined using a three-step calculation method established by the U.S. Department of Labor:
- Majority Rule – If over 50% of workers in a job category earn the same wage, that rate is set as the prevailing wage.
- 30% Rule – If no majority exists, the wage paid to at least 30% of workers is used.
- Weighted Average – If neither condition is met, a weighted average of all wages in the group is applied.
These wages are often used for public works projects and government contracts to ensure fair pay based on local labor market conditions.
What Are the Davis-Bacon Wage Requirements?
Prevailing wage requirements ensure that workers on public works projects receive fair compensation based on local labor market conditions. These requirements typically include:
- Mandatory Wage Rates: Workers must be paid at least the prevailing wage set by the Department of Labor or state agencies.
- Apprenticeship Standards: Some projects require a percentage of work hours to be completed by registered apprentices.
- Recordkeeping & Compliance: Employers must maintain payroll records to verify compliance with wage laws
- Penalties for Violations: Failure to meet prevailing wage requirements can result in fines or disqualification from future contracts.
In California, for example, all workers on public works projects must be paid prevailing wages. Similarly, for certain clean energy tax incentives under the Inflation Reduction Act (IRA), the Treasury Department and IRS require compliance with prevailing wage and apprenticeship standards as defined by the DOL. The DOL provides the guidance and determinations used to verify compliance.
A solution like eComply can help agencies and contractors by digitizing the prevailing wage process. The solution organizes, tracks, and calculates reported wages to actual wages and flags any discrepancies. It will also notify the contractors if there are apprenticeship requirements and can track that data as well.
What Is the Difference Between Davis-Bacon and Prevailing Wage?
Davis-Bacon Act is the rule that sets the standards for the prevailing wage. Sometimes people refer to it as Davis-Bacon wage.
What Are Davis-Bacon Fringe Benefits?
Davis-Bacon fringe benefits are additional compensation that employers must provide to workers on federally funded construction projects. These benefits can be given in two ways:
- Cash Payment – Employers can pay the fringe benefit amount directly as part of the worker’s wages.
- Bona Fide Benefits – Employers can contribute to health insurance, pensions, vacation pay, or other approved benefit plans instead of paying the amount in cash.
Fringe benefits must be provided for all hours worked. When calculating overtime, the value of bona fide fringe benefits can be included in the regular rate for overtime pay, while cash payments are considered part of the worker’s wages. However, payments required by law, such as Social Security or workers’ compensation, do not count as fringe benefits benefits.
Who Enforces Davis-Bacon Wage Laws?
The Davis Bacon Act is enforced by the US Department of Labor’s Wage and Hour Division (WHD). The WDH will perform routine audits and will also investigate complaints filed against a contractor, to determine if a violation has occured. If a state has a Little Davis Bacon Act, that state’s equivalent department, such as California’s Department of Industrial Relations (DIR), enforces the law. eComply can help agencies and prime contractors match workers wages as reported in the system to real time wages, and if a discrepancy is found, the system will send notifications to the related parties. This gives them a chance to resolve the discrepancy before the DOL audits them.
Do all Construction Projects Require Davis-Bacon Wages?
No, not all construction projects require prevailing wages under the Davis-Bacon Act. Contractors can determine if prevailing wage requirements apply by considering the following factors:
- Project Funding: Federally funded projects typically fall under Davis-Bacon prevailing wage regulations. State-funded projects may also be subject to prevailing wage laws specific to that state.
- Contract Type: Public works contracts, including construction, repair, and maintenance, often require prevailing wages.
- Threshold Amount: Some laws apply only if the contract exceeds a certain dollar amount (e.g., $2,000 under the Davis-Bacon Act).
- State & Local Laws: Different states have their own prevailing wage laws, which may have impose further requirements.
By knowing the key factors—such as project funding, contract type, thresholds, and applicable state laws—contractors can determine whether Davis-Bacon or other prevailing wage requirements apply to their projects. Staying informed not only helps protect workers with fair pay, but also ensures that projects run smoothly without unexpected compliance issues. For those managing multiple projects or complex contracts, tools like automated wage tracking systems can make staying compliant easier than ever.
Ensure your projects meet federal wage requirements without the stress. Get in touch with our team and let us handle your certified payroll management.
