Prevailing wage applies to government contracts or any construction projects that are funded completely or partially by federal or state money. These can be any construction projects like building roads or new buildings for government offices and non-profit organizations that receive federal money for their capitol campaigns. Even private homes subsidized by government funds are included in this law.

Established in the 1930s, prevailing wage helps to ensure that the winning bidder of a government contract is not undercutting the competition by paying an unfairly low wage to workers. The standard wage is based on the average local wage for workers, almost like a minimum wage for the construction industry.

If you are bidding on a project or are part of a crew that must be paid prevailing wage, you should understand how this affects your paycheck or your overall profit.

Who gets prevailing wage?

Prevailing wage applies to all laborers, mechanics, contractors, and subcontractors working on any project that receives government funding. Not only does this dictate the amount each professional should make per day, but includes what benefits and overtime must be offered to workers.

All federally funded project are covered by prevailing wage laws. Currently, 32 states have prevailing wage laws for construction projects using state funds as well. Even some counties and municipalities have legislation that determines pay rates. Check to see if your state or community has a prevailing wage law to understand how this will affect your pay rate.

How do they determine prevailing wage?

Prevailing wage is a set amount of income plus benefits such as health insurance, pension, vacation time, sick compensation, and holidays that each employee involved in a project is entitled to. States and localities do surveys to determine the average wages paid in their area for both general laborers and specialist trade workers.

The Department of Labor (DOL) has compiled the information on their website for federal, state, county, and profession prevailing wages. Some areas determine prevailing wage on your job performed on the work site.

Bidding on a project with prevailing wage

Having a standard rate for trade professionals should make it easier to build an accurate bid for a project. If you are a contractor hoping to secure a federally funded project, you will need to itemize what subcontractors and laborers you will hire, and how much they will each be paid. Having a set wage ensure that the other contractors who are bidding are not undercutting you by paying workers an unreasonably low wage without benefits.

Knowing if your project is covered by prevailing wage before bidding will help you better plan for the total cost and keep your business compliant with all regulations.

What do I do if I’m not paid the correct amount?

If a contractor has been awarded a contract with a federal or state agency protected by prevailing wage, they are obligated to pay the predetermined amount to each worker on the project. If they fail to do this, they will be liable for unpaid wages, could lose the ability to bid on future government contracts, and possibly open themselves to litigation.

If you believe you have not be paid a fair wage on a prevailing wage project, follow these steps to recover your lost income:

  1. You can find accurate information about what you should be paid in each state at the local Wage and Hour Division Office. Find the closest one to you on the government’s website. They can help you determine if you are being paid fairly before taking any other steps.
  2. Talk to the general contractor. It may be a simple accounting error. Government forms and regulations are complicated, and if the contractor is new to government work, it would be easy to make mistakes. If you can settle the issues between professionals and maintain good relationships, it will be better for both parties. Let them know you have a concern and see if you can work together to solve it.
  3. Contact the Department of Labor (DOL). If you need to escalate your claim, go directly to the DOL office. To file a claim, you will need identifying information about the business and the contract as well as how you were paid. Pay stubs, contracts, and records of your work and hours will also be helpful. They will initiate an investigation and make a determination about what you are owed.
  4. Find a prevailing wage attorney. A lawyer can walk with you through the legal process if necessary. Attorneys with experience in prevailing wage cases understand the nuances of the law in your area and will help you determine what the next step is to recover your money.

As a government program, prevailing wage can be difficult to understand, but is intended to make construction projects paid for with federal or state money fair and balanced. Understand if your project is covered by prevailing wages before starting. It will help you accurately bid on a project, understand where money in the project is required to go, and keep your business compliant with the current laws. As an employee, you are responsible to know if you are being paid correctly by understanding the relevant prevailing wage laws.