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Prevailing Wage, The Davis Bacon Act, and the New Infrastructure Bill

You’ve likely seen the news about the infrastructure bill that was recently signed into law by the Biden administration. This bill contains necessary funding to ensure safe travel, as well as the efficient transport of goods and produce across the country, but along with those provisions, the bill also impacts the employee retention tax credit, workforce development grants, and most importantly for the construction industry, prevailing wage. We’ll be breaking down how what we know now impacts the construction industry, but keep in mind that more analysis will be coming in the next few months!

What is Prevailing Wage?

Prevailing wage refers to the rate of pay that contractors and vendors must offer their employees when doing business with a government agency.

A prevailing wage requirement is meant to help prevent vendors from understating their proposed potential costs for government contracts, generally to the detriment of their employees. One of the key components to the development of the modern prevailing wage was the Davis-Bacon Act of 1931. The prevailing wage for construction businesses specifically impacts those who secure contracts from government entities, whether that be at the federal, state, or local level.

What is Changing:

Sec. 41101 of the infrastructure bill mandates prevailing wages in accordance with the Davis-Bacon Act for laborers employed by contractors or subcontractors that work on a project assisted in whole or in part by funding made available under the relevant division.

It’s important to note that the bill does not include project labor agreement mandates, though it does include an expansion of Davis-Bacon requirements, including into all energy infrastructure provisions like the construction of electric vehicle charging stations.

Furthermore, another piece of recent legislation has raised the minimum wage for federal contractors to $15-per-hour. Those providing services to the U.S. government will have to pay workers at least that much under contracts implemented or renewed starting Jan. 30, 2022. Though the federal government already sets contractor minimums through prevailing wage laws, the raised minimum is the result of an executive order that was signed in April of 2021. That being said, this specific new $15/hr minimum wage ruling has no direct bearing on the vast majority of workers whose jobs are not explicitly tied to federal contracts.

What It Means for You:

If you’re employing construction workers, hold (or potentially may bid for) federal contracts, these changes in legislation are important for you! It’s important to keep in mind that these pieces of legislation are still developing, and more legislation will likely come out through the first few months of 2022 and beyond.

Changes made to prevailing wage laws and the Davis Bacon Act can impact the way that you pay your workers, and beyond that, can alter the way that benefits like pension contributions are accrued. These changes may inspire you to create a prevailing wage plan – no matter how the legislation changes, you’ll want to make sure that your business is taking advantage of any potential benefits, like allowing for more 401k contributions and leveraging tax law to your company’s advantage.

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When dealing with the Davis Bacon Act or the potential pitfalls of prevailing wage law, what you need is the ease of use and peace of mind. Constructionpayroll.com’s comprehensive compliance capabilities make it easy to navigate prevailing wage, union wage, fringe benefit calculations, and more.

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