PREVA I L ING
BY GILBERT DAVIS AND EDWARD RILEY
NEW PREVAILING WAGE SOFTWARE
he Davis-Bacon Act and related regulations
T require both union and open shop contractors
performing federal construction contracts to pay
workers the same specified wage, usually the pre-
vailing union wage in the geographic area. The wage con-
sists of two components: the hourly pay rate and an amount
to cover fringe benefits, which the contractor may pay either
to a qualified benefits plan or to the employees in cash. The
federal government reimburses a contractor for wages, fringe
benefits and the cost of providing fringe benefits.
Union contractors generally take advantage of this pro-
vision by paying fringe benefit contributions to union-
administered benefits programs. Sometimes open shop
contractors pay these benefits in cash, which means that
both the contractor and the employees must pay taxes on
them. And there’s no way around it. Contractors that fail
to comply with Davis-Bacon requirements face severe penal-
ties, including cancellation of the contract, payment of back
wages and interest, debarment from federal projects for
three years and government withholding of payments due.
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PR E VA I L I N G WA GE H A S S L E
NEW TECHNOLOGY HELPS Sample Job Carpenter|Total When Fringe Applied to Plan • generate the reports the contractor needs
Recognizing the problems these contrac- for compliance with federal and state
Projected Cost Projected Cost Job Rate Per Projected
tors face in meeting the demands of pre- requirements.These reports serve as doc-
Trade Hours Cash with Fringe Savings Trade Hour Hours Cost
vailing wage requirements, benefits plan umentation of contributions to benefits
custodians and financial consultants have plans and provide the paper trail required
come up with new technology that estab- Laborer 8,078 242,792 227,888 14,904 Base Wage 22.44 under the Davis-Bacon Act and for fed-
lishes low-cost benefits programs or makes Carpenter 4,304 171,773 161,107 10,666 Burden on Base Wage (30%) 6.73 eral or state department of labor audits.
better use of existing benefits programs— Finisher 1,432 57,672 53,600 4,072 Wage Cost 29.17 With these low-cost tools, open shop
affording open shop contractors the same contractors can compete with unionized
13,814 $472,237 $442,237 $29,642 Fringe Rate 8.26
benefits unions receive. contractors while meeting prevailing wage
New prevailing wage accounting soft- Savings per hour $2.15 Total Labor Cost $37.43 4,304 $161,098.72 requirements and providing employees
ware tracks hours and accrued benefits to with a competitive benefits package.
help reduce payroll expenses, make com- Carpenter|Total Contractors Pay in Cash risk of costly, time-consuming government ing the additional payroll burden on pre- A contractor should seek the services
panies more competitive on federal con- Rate Per Projected compliance audits and fines. vailing wage jobs, increases profitability of a custodian and financial consultant
tracts and enable them to recruit and retain Trade Hour Hours Cost With proper planning and a compre- and complies with federal and state pre- knowledgeable about accounting in the
qualified employees. A contractor can hensive prevailing wage software, howev- vailing wage laws. construction industry and the Davis-
choose the benefits to include in these pro- Base Wage 22.44 er, a contractor can offer a better bid and Bacon Act before establishing a program.
grams—for example, health, disability and take credit for the full fringe rate for each SOFTWARE FEATURES TO CONSIDER
accident insurance; vacation and holiday trade classification on each job—with no Whichever administrator or financial Davis, CPA, is a principal in McCrory &
pay; and retirement—and decide the min- Total Wage 30.70 out-of-pocket cash being dispersed. services firm a contractor uses to manage McDowell LLC, a full-service accounting and
imum number of hours an employee must Burden on Total Wage (30%) 9.21 Once the contractor has established its payroll distribution, contractors should consulting firm headquartered in Pittsburgh.
work each month to be eligible for the plan. Total Labor $39.91 4,304 $171,772.64 the hourly cost it is going to contribute insist that the prevailing wage software Riley is president and chief executive officer of
For a contractor with even one or two for company-provided benefits, it can use used have the ability to: PrevWage Administrators, LLC, Cleveland,
prevailing wage jobs, this software can be an existing 401(k) plan or a separate • track every hour for every job by trade Ohio, which specializes in helping contractors
an enormous help. It can be used to track or work in more than one trade at differ- to their payroll costs,which makes the com- money purchase plan to accept the dif- and properly allocate fringe benefits; working in the prevailing wage market admin-
employees by trade, hour and job, always ent hourly rates. pany uncompetitive or cuts into its profit ference between the employer contribu- • accept payroll information electronically ister their employee benefit programs. For more
a challenging feat because open shop Contractors that pay fringe benefits in margin. Cash payments make for a less tion and the actual fringe benefits rate from any payroll system the contractor information, contact Davis via email, davis@
employees routinely move from job to job cash add as much as 30 percent per hour competitive wage package and increase the on each job. The contractor avoids pay- might use; and mccmcd.com or Riley, email@example.com.
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