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Construction payroll is never one size fits all. If your construction company works on government contracts or other publicly funded projects, you must submit a certified payroll that demonstrates you pay your workforce prevailing wage in compliance with the Davis Bacon Act.   

In this blog, we’ll explain the Davis Bacon Act, define prevailing wages and show how they are calculated. Then we’ll explain how certified payroll keeps you in compliance with the Davis Bacon Act and why it’s crucial to keep accurate, current payroll records.   

What is the Davis Bacon Act?  

Passed in 1931 by Congress to protect workers from low hourly pay, the Davis Bacon Act requires that prevailing wages must be paid on Federally funded public works projects worth more than $2000. The act covers work such as construction, repair or alteration of public buildings, or construction of public roads or bridges, with a minimum threshold of $2000.   

What is Prevailing Wage?  

According to the U.S. Department of Labor, the term is defined as the average hourly rate paid to a majority of workers engaged in a particular job type in a specific labor market area. 

Prevailing Wage Laws  

Contractors and subcontractors who work on publicly funded jobs must pay the majority of their workers no less than the local prevailing wage rate. That means that it’s not possible to use underpaid, non local labor to undercut local workers.   

Are there Penalties for Breaking these laws?  

Contractors who try to flout the rules and use less expensive, or non local labor could find themselves in legal trouble. If you fail to comply with prevailing wage laws, you could be liable for unpaid wages, or liquidated damages, and you may even be prosecuted in civil or criminal court. What’s more, you might be hurting your prospects for success in the future as you could be disqualified for seeking contracts for future public jobs.  

How Do You Determine Prevailing Wage? 

There are two ways to calculate a local prevailing wage. 

1. Prevailing wage in an area can be determined by surveying local employers and calculating the wage by a simple average that sums up the wage rates and divides by the number of hires, or (more accurately) by a weighted average, which weights the wage results by the number of employees. 
2. Using the prevailing wage rate published by the United States Department of Labor as per the Davis-Bacon Act and its amendments.  

Federal Prevailing Wage Rates    

Every Federal construction project is covered by the Davis Bacon Act and must pay prevailing wage to its workers, which is like a Federally guaranteed minimum wage for the construction industry. However, only 32 states have prevailing wage laws.  Here are the  thresholds for each state that has enacted dollar threshold amounts for contract coverage.  

What is Certified Payroll?  

Contractors who work on publicly funded construction projects must follow many rules, including the payroll stipulation that workers must be paid at least the local prevailing wage.   

In order to be in compliance with these construction payroll rules, General Contractors and Heavy Highways contractors must submit a form called the WH-347, to show they have fulfilled all payroll requirements. The form is submitted to the Department of Labor each week you work on a publicly funded project to prove you have maintained compliance with Davis Bacon requirements.   

What Does a Certified Payroll Include?  

In addition to the WH-347 form, you must submit the following information with your certified payroll: 

• The Name of your Contractor or Subcontractor business 
• Business address 
• Payroll number 
• Last day of the workweek 
• Project or contractor number 

Additionally, the form will ask you for the following information about your workforce.   

• Name of every employee 
• Type of work they performed on the project, or their Job classification 
• Employee’s wages 
• Employee’s benefits 
• Hours worked 
• Gross wages 
• Amounts withheld 

Your construction payroll is considered “certified” when you attach a signed Statement of Compliance, which is a declaration that all the forms are correct, and that no employee is paid less than the prevailing wage for their labor on the project.   

Davis Bacon Wage Determinations   

The Federal government has resources that will help you to determine prevailing wages in your area. And if you’re working in a state with prevailing wage laws, you can find resources for calculating it at the Department of Labor for your state.  

Final Thoughts: Use Software that Includes Certified Payroll Reporting  

Contractors who work on publicly funded construction projects can make the process of creating certified payroll more straightforward by using payroll software that includes these forms and helps you report on appropriate wage rates.  

Running payroll for a large construction company means you will probably come across wage garnishment orders more than once. Wage garnishment for construction can be complex or even tedious, but it doesn’t have to be. We’ll break down some of the terminology around wage garnishment, explain how garnishing orders work, how much can be garnished from wages, and show you how to ensure that your construction company will stay compliant.  

What is Wage Garnishment?  

Wage garnishment is a legal procedure when a person’s earnings are required by a court order to be withheld by an employer for the payment of a debt such as child support, outstanding taxes, or personal debt such as student loans. (link to definition) https://www.dol.gov/general/topic/wages/garnishments  

Wage garnishments are typically defined in one of three ways:  

• As a percent of total of gross earnings. 
• As a fixed quantity. 
• As a percentage of net pay. 

A court determines the type and amount of wage garnishment or garnishments in a document called a wage garnishment order. If there are multiple garnishments for a particular person, the court or the state will establish the priority order of those paycheck garnishments.  

Garnishment orders can apply to all kinds of payroll processes, including regular payroll, custom payrolls, Christmas bonuses, termination pay, and more. 

Wage Garnishment and Privacy 

Wage garnishments involve private information between an employee, the legal system, and an employer. An employer may not dismiss or discriminate against any employee who has a wage garnishment order.  

How to Garnish Wages 

It’s your responsibility to ensure that the wage garnishment orders are followed correctly, or you may risk being out of compliance. Following garnishment orders can be very convoluted. 

• Garnishment orders are forwarded to an employer by the courts.
• There may be multiple wage garnishment orders in place. 
• Wage garnishment orders can originate in different states or jurisdictions. 

Construction Payroll Software Simplifies Garnishment Calculations  

You need a comprehensive system that allows you to create garnishment calculations and deductions when they affect your employees. Your software should also allow you to customize garnishment rules that apply and process the garnishments.   

Ask yourself if your payroll software can handle the complexities of wage garnishment.  

What features are necessary for calculating garnishments accurately and easily?  

1. Wage garnishment feature should be scalable and flexible. 
2. System defaults should allow you to enter garnishment type(s), order of garnishments (if necessary), and set rules for wage garnishment according to the court order. 
3. Does your software provide enough flexibility to allocate payroll so that employee has some disposable wage as well?
4. Garnishments can have start and end dates and an advanced system should be able to turn them off and on as needed.  

Scalable and flexible systems save you time calculating wage garnishments for payroll. That’s critical for large organizations to remain in compliance with legal requirements for wage garnishment.  

There may also be rare instances when your construction payroll software needs to calculate and hold back pay for a new employee if that employee did not meet wage garnishment deductions because they left a job in a different state.  Alternately, as an employer you may find yourself responsible for back pay that is owing to an employee who was deducted twice for garnishments.   

Wage Garnishment Process   

After payroll has been completed, you must provide a check stub to the correct government and legal agencies to report the deduction and stay compliant with the garnishment order. Your employee must also be able to clearly identify the wage garnishment type and amount on their check stub.  

Within eCMS Construction Payroll Software, there are several types of garnishments for each jurisdiction which will process during the same payroll cycle.  Garnishment rules within eCMS system can be used to apply order of deduction and deduction limits as dictated by the multiple jurisdictions.

Get in touch with us today for more information about how our construction payroll software can help simplify wage garnishments for your company.