In effect since 1931, the Davis-Bacon Act is a U.S federal wage legislation that is applicable to construction and infrastructure building companies. Essentially, the Davis-Bacon legislation requires contractors (or subcontractors) working on federal and state-level construction projects to pay their laborers wages that are not less than the prevailing wage paid locally to workers for similar projects. In general, the Davis-Bacon Act applies to worker contracts of over $2,000.
Why has Davis-Bacon gained so much interest in recent months?
In an announcement made on March 18th this year, the U.S. Department of Labor (DOL) proposed some strategic amendments to the Davis-Bacon Act that could have far-reaching impacts. The revisions include the method used to determine the prevailing wages in a particular U.S state or county.
Previously, the prevailing wage was determined through public wage surveys conducted in a state. Under the new amendment, contractors will need to pay a prevailing wage as determined by the federal government. In short, the local labor unions will have more authority in deciding the prevailing wage rate in any geographical location in the U.S.
How do these amendments to the Davis-Bacon Act impact American construction companies and contractors? Let’s discuss.
How a Revised Davis-Bacon Can Impact Contractors
Wage-related amendments can directly impact contractors concerning their payroll management, timekeeping, and regulatory compliance.
Here are the three main areas where this Davis-Bacon amendment can impact American contractors:
Under the new amendment, the U.S. DOL has proposed a return to the “30% rule” that prevailed before 1983. This rule can be used to set the prevailing wage. According to this rule, the prevailing wage rate is decided by 30% of wage survey respondents.
The Davis-Bacon Act also stipulates that prevailing wages are paid to all workers (employed at the work site) involved in mechanical and labor work. The complexity lies in determining who these workers are (based on their work profile).
For instance, in some construction companies, positions like foremen, apprentices, or trainees are also classified as “workers.” Other laborers like pre-fabricators may not be “working at the construction site” but are part of any construction project.
Another payroll-related challenge is the accurate calculation of back wages. For instance, the DOL-led investigation recovered nearly $800K in back wages from a New Jersey-based contractor.
Adding to payroll-related challenges, contractors must submit their WH-347 payroll records every week for all federal contracts. This can be a cumbersome exercise when performed manually.
Accurate timekeeping is essential for correctly calculating hourly wages and overtime charges. According to CWHSSA, contractors must pay an overtime rate of 1.5-times the basic hourly rate to workers when their work exceeds 40 weekly hours.
Therefore, contractors must maintain accurate timekeeping using complex calculations. But what makes it complicated is that hourly wage rates (for the same worker) also differ according to the job that they are performing.
The proposed amendments can further increase the complexity of calculating the overtime wages paid to workers. Here is an instance of the U.S. DOL recovering an amount of over $72,000 from a Florida-based auto repair shop that did not pay the correct overtime wage. Another industry case is that of the recovered wages from the Reno landscaping company, which failed to record their worker’s hours.
Construction contractors are often in the firing line when it comes to complying with Davis-Bacon legal requirements. Contractors must stay compliant with the constant changes in laws governing federal employment. As it stands, businesses failing to comply with the law can face severe fines or debarments.
With the March 2022 announcement, the U.S DOL plans to change the existing compliance requirements regarding the prevailing wage. To remain compliant, contractors must use technology tools to review their payroll and timekeeping programs.
Apart from the Davis-Bacon Act, contractors must comply with the Fair Labor Standard Act (FLSA). They can refer to the FLSA Compliance Assistance toolkit to gain knowledge about major provisions in FLSA.
With the growing complexities of the amended Davis-Bacon Act, technology-based solutions are the only way for contractors to manage their worker’s payroll, timekeeping, and compliance requirements. Let’s discuss them in detail in the next section.
How Smart Payroll & Timekeeping Solutions Can Help Contractors
To keep up with changes in the Davis-Bacon Act, contractors can use payroll & timekeeping solutions to improve compliance and accuracy. Before selecting the right technology solution, here are some essential features to consider:
Time Tracking at Job Sites
Jobsite time tracking is essential for accurate timekeeping at any contractor job site. Manual or paper-based time cards are no longer sufficient to track the worker’s daily job time. Timekeeping solutions must enable contractors to track, record, and share daily activities from any device. For the best result, the timekeeping tool must seamlessly integrate into other third-party systems like payroll, project management, and HR.
State-Wise Payroll Compliance
Payroll solutions must be fully compliant with U.S labor laws and customized for state-wise payroll management. Moreover, the payroll solution must easily manage the various complexities of U.S wage rates, overtime, and differentials. Further, payroll solutions must simplify the process of calculating the prevailing wage for individual workers. Besides that, HR teams can access the payroll system for workers’ information and working hours.
As explained in this blog, manual or paper-based processes are the enemy of construction projects. For instance, HR departments waste valuable hours tracing and reconciling paper timecards for payroll management. Favorably, CEM’s time tracking and payroll solutions enable timecard data to flow directly into payroll & billing systems without any manual intervention.
With its proposed amendments, the U.S Department of Labor plans to make significant changes to the existing 1931 Davis-Bacon Act. This will bring more complexities into how U.S-based contractors manage their payroll and timekeeping activities.
At CEM Business Solutions, we have simplified the payroll process for major contractors and subcontractors working on U.S. construction projects with our cutting-edge products and solutions. Book a demo with us today!