The prevailing wage is paid out through a combination of regular cash wages and contributions for fringe benefits, both of which have specific payment frequencies.
How Prevailing Wage is Paid Out
Prevailing wages, mandated on many government-funded construction projects under laws like the Davis-Bacon Act (DBA), are structured to ensure workers receive fair compensation comparable to local standards. The total prevailing wage comprises two main components: a basic hourly rate and fringe benefits.
Components of the Prevailing Wage
The total prevailing wage is not just a single hourly rate; it's a combination designed to cover both direct pay and benefits.
- Basic Hourly Rate: This is the cash portion paid directly to the employee for each hour worked.
- Fringe Benefits: These are additional benefits provided to the employee, which are considered part of the total wage package. Examples include contributions to health insurance, retirement plans (like 401k), vacation pay, or other bona fide benefit plans. Under the Davis-Bacon Act, fringe benefits are an integral component of the "prevailing wage."
Payment Frequency
Compliance with prevailing wage requirements involves strict adherence to payment schedules for both components.
- Basic Hourly Wages: Davis-Bacon prevailing wages, representing the basic hourly rate, must be paid weekly for all hours worked. This ensures workers receive their cash compensation on a regular and frequent basis.
- Fringe Benefits: If fringe benefits are paid into a bona fide fringe benefit plan (e.g., a retirement fund or health insurance provider), then contributions to these plans must be made no less often than quarterly. This allows for less frequent contributions to benefit plans compared to the weekly cash wage, while still ensuring timely funding of employee benefits.
Methods of Fulfilling Fringe Benefit Obligations
Employers have flexibility in how they fulfill their fringe benefit obligations:
- Contributions to Bona Fide Plans: The most common method is contributing the specified amount per hour into approved benefit plans (e.g., health, pension, vacation). These contributions are then made at least quarterly.
- Cash Equivalency: If an employer does not provide fringe benefits through a bona fide plan, or provides benefits that do not meet the full fringe benefit requirement, the employer must pay the equivalent dollar amount of the fringe benefit directly to the employee in cash. In this scenario, the fringe benefit portion is added to the basic hourly rate and paid weekly as part of the total cash wage.
Payment Frequency Summary
To clarify the different payment schedules:
| Component | Payment Method | Frequency |
|---|---|---|
| Basic Wage | Cash directly to employee | Weekly for all hours worked |
| Fringe Benefits | Contributions to a bona fide plan | No less often than quarterly |
| Fringe Benefits | Paid as cash (if no bona fide plan or deficiency) | Weekly (added to the basic wage payment) |
For more detailed information on prevailing wage regulations and compliance, you can refer to resources provided by the U.S. Department of Labor.
