Slippery When Wet… Complications of the Prevailing Wage Calculations
Before you can drive off with the checkered flag, we need to review the prevailing wage.
If you’re a contractor who performs government jobs, your payroll has to be certified. Workers must receive a minimum level of pay as required by state or federal law. These prevailing wage calculations should be conducted as part of an automated process for accurate and timely processing to be sure to keep you in compliance.
The calculation can become complicated when companies have the option of paying the wage difference between the minimum required wage and the hourly wage paid to the worker with cash or with benefits.
For example, if a carpenter’s prevailing wage is $30/hour and he/she is making $45/hour, they can be paid the remaining $15/hour wage in cash or with benefits (union or HR).
Some additional decisions must be made with prevailing wages when it comes to taxation, as some earnings can be treated as taxable or non-taxable. Companies can save on FICA or Medicare by making these wages non-taxable and providing non-taxable benefits in the prevailing wage calculations.
To keep you on the straight and narrow path, your payroll app should be able to track and manage these different crafts/classifications as well as their associated prevailing wages, and be able to tie base rates and fringe benefits to these crafts/classifications.
In addition, the software should be able to calculate the fringe benefits as part of employer paid medical benefits in order to track the credit received for this process.
To remain in line with government compliance, certified payroll reports must be created and submitted in a timely manner. Effective payroll software should be able to meet these regulatory requirements with ease including the ability to upload those files into designated portals or allow for seamless integration with certified payroll reporting tools such as eMars and LCPTracker.
Contact us for more information on how to win your race with the prevailing wage, and check out our next edition of the Payroll and HR Blog Post Series.