Managing Construction Payroll Amid Prevailing Wage Laws

Managing Construction Payroll Amid Prevailing Wage Laws

There are two industries with such complicated payroll that outsourcing it to a specialized solution provider seems like a no-brainer. Construction is one of them. Managing construction payroll under normal conditions is tough enough when you consider balancing the different kinds of workers and how they are paid. When you throw prevailing wage laws into the mix, construction payroll can become totally unmanageable.

BenefitMall is a Dallas-based payroll provider with a specialized solution for construction companies. They say outsourcing payroll is a cost-effective way to manage the payroll problem so that contractors and construction firms can focus on what they do best. They also say that prevailing wage laws are not problematic for companies like BenefitMall They make it their business to stay abreast of both federal and state prevailing wage laws.

More About Prevailing Wage

A prevailing wage is a wage established by a government jurisdiction for public contract purposes. It can be established by any governmental jurisdiction and often includes hourly wages, benefits, and overtime pay. Here in the United States there are federal, state, and local prevailing wages. They are equal to union wages in many jurisdictions.

Construction companies that take government contracts are required to pay prevailing wage by law. On federal contracts, the prevailing wage is established by the U.S. Department of Labor based on what the majority of workers in a given class are normally paid. All workers on a particular contract must be paid the wage that applies to their class and the type of work they do.

Things get more complicated when construction companies have to balance federal prevailing wages, state prevailing wages, and wages paid on non-government projects. Sometimes construction companies can find themselves juggling dozens of different pay rates depending on where they have active contracts.

State Prevailing Wages

More than 30 states have their own prevailing wage laws as well. Wages can be higher or lower than federal wages, but that makes no difference. Construction companies are required to pay state prevailing wages on any and all state contracts. With that in mind, imagine a company working on multiple contracts simultaneously.

Imagine one of those contracts is a federal contract while the other comes from the state. They are likely to have different prevailing wages. Now company bookkeepers have to keep track of each worker and the project he or she works on. Heaven forbid any workers should have to contribute to both projects. Then the payroll department would have to tackle two different wages based on the amount of time the worker spent on each job.

Wages on Non-Government Contracts

Let us max things out for our fictional contractor and throw in some non-government contracts. Now you have an entirely new set of workers that do not have to be paid either federal or state prevailing wages. Some of those workers might enjoy federal prevailing wage for work on a federal project that only lasts three months. The remainder of the year they receive standard wages for their non-government work.

We could continue creating different scenarios showing just how convoluted payroll becomes when you start mixing prevailing and non-prevailing wages. The point of this is to say that things get extremely complicated for construction payroll when prevailing wages are involved.

Construction companies face additional challenges when it comes to employee classification. They have to worry about 1099s for their subcontractors and W-2s for their employees. It is just a real mess. No wonder more and more construction companies are outsourcing their payroll to the experts. Construction payroll is just becoming too complicated to keep in-house.