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Prevailing wage and the Davis-Bacon Act
How the government sets the wage you must pay on public construction, how to read a wage determination, and how fringe benefits factor into the total.
The prevailing wage is the hourly base rate plus fringe benefits that construction workers must be paid on public projects, set by the government for each trade classification and locality. On federal contracts the Davis-Bacon Act requires it, and the U.S. Department of Labor publishes the rates as wage determinations by county and craft.
- Federal statute (Davis-Bacon Act, 40 U.S.C. 3142)
- Contracts over $2,000
- Federal rate source (U.S. Department of Labor)
- Wage determinations on SAM.gov
- California threshold (Labor Code 1771)
- Public works over $1,000
- California rate updates (DIR)
- Twice yearly, Feb 22 and Aug 22
The federal law
What the Davis-Bacon Act requires
The Davis-Bacon Act, codified at 40 U.S.C. 3142, requires that every federal construction contract over $2,000 pay laborers and mechanics no less than the locally prevailing wage. The Related Acts extend the same rule to dozens of federally assisted programs, from highways to housing, which is why the coverage is far wider than direct federal building.
The prevailing wage is not a single number. It is set per classification, such as electrician or cement mason, and per geographic area, usually the county. The Department of Labor determines these rates from surveys of local wages and issues them as wage determinations that the contract incorporates.
Base plus fringe
How the total wage is built
A prevailing wage has two parts: a base hourly rate and an hourly fringe benefit amount. A worker must receive the combination of the two. You can satisfy the fringe portion by paying into a bona fide benefit plan such as health insurance or a pension, by paying the equivalent as cash on the paycheck, or by a mix of both.
The distinction matters for cost and for compliance. Cash paid in lieu of benefits is taxable wages, while contributions to a qualified plan generally are not, so the fringe credit you claim has to be documented and correct. Certified payroll is where you report exactly how the fringe was delivered.
Reading the rate
How to read a wage determination
Find the right determination
Look up the county and construction type (building, heavy, highway, or residential) on SAM.gov for federal work.
Match the classification
Locate the exact trade classification for the work performed, not a general labor rate.
Read base and fringe separately
The rate lists a base hourly rate and a separate fringe amount; the worker is owed both.
Check the effective date
The determination locked into your contract governs the job, even after newer rates publish.
Apply overtime correctly
Overtime is computed on the base rate under federal rules; some states add daily overtime.
State programs
State prevailing wage and California DIR
More than half the states run their own prevailing wage laws, often with lower thresholds and separate rate schedules than federal Davis-Bacon. A project funded by both state and federal money can be subject to both, in which case the worker is owed the higher of the two rates for their classification.
California is the largest program. The Department of Industrial Relations sets rates by county and craft and issues general determinations twice a year, on February 22 and August 22, each taking effect about ten days later. California prevailing wage applies to public works over $1,000, well below the federal threshold.
Frequently asked questions
How is prevailing wage determined?
A labor agency surveys wages actually paid for each construction classification in a geographic area and sets the prevailing rate from that data. Federally, the U.S. Department of Labor does this and publishes the result as a wage determination by county and craft.
What is the difference between prevailing wage and minimum wage?
Minimum wage is a single legal floor for all workers. Prevailing wage is much higher and specific: it is the local going rate for a particular construction trade, including fringe benefits, and it applies only on covered public projects.
What is the difference between Davis-Bacon and prevailing wage?
Prevailing wage is the general concept of a required local rate on public work. The Davis-Bacon Act is the specific federal law that imposes prevailing wage on federal and federally assisted construction contracts over $2,000. States have their own prevailing wage laws.
What is the Davis-Bacon threshold?
Two thousand dollars. The Act applies to federal construction contracts over $2,000, a figure set in 1931 and never indexed, so in practice nearly every federal construction job is covered.
How do fringe benefits count toward prevailing wage?
The prevailing wage is a base rate plus a fringe amount, and the worker must receive both. You can meet the fringe portion with contributions to a bona fide benefit plan, with cash paid on the check, or with a combination, and you report how on the certified payroll.
Do wage determinations expire?
The determination incorporated into your contract governs that project for its duration, even as newer rates publish. For a new contract you use the current determination. On some longer or optioned contracts a modified rate can apply, so read the contract clause.
How often does California DIR update prevailing wage rates?
The California Department of Industrial Relations issues general prevailing wage determinations twice a year, on February 22 and August 22, and each set takes effect roughly ten days after issuance.
Where do I look up a prevailing wage rate?
For federal Davis-Bacon work, search wage determinations by state, county, and construction type on SAM.gov. For state work, use the state labor agency site, such as the DIR determinations pages in California or the BOLI rate books in Oregon.
Match every worker to the right wage determination
Buildalytic resolves the correct classification and rate by county and craft, applies the fringe credit, and flags any payroll line that falls short before you file.