Navigating Prevailing Wage Laws in Construction Payroll

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Prevailing wage laws are vital to the construction industry. They ensure that workers get paid a fair rate for their work and promote quality, stable employment in specific geographic areas.

Understanding state and federal prevailing wage laws is crucial for procedural compliance and safeguarding employees and regional economies. However, with complex reporting requirements and certified payrolls, this can be challenging for contractors.

Payroll and Taxes

Payroll is about more than just cutting employee’s checks every two weeks. It’s about managing employee benefits, calculating taxes, and ensuring compliance with regulations. That is especially true for construction payroll, which can be a minefield of contractors, subcontractors, unions, state and local wage rates, federal tax codes, and government contract terms.

Prevailing wage laws are vital to government-funded roadwork and other construction projects. They help to promote equity in compensation and quality work by ensuring that workers on these jobs are paid the minimum hourly rate set by a specific geographical area. In addition, they help to level the playing field by preventing low-road businesses from undercutting high-road companies with lower bids for contracts.

When it comes to prevailing wage payroll, it’s essential that all hours worked are accurately tracked and reported, including overtime and holiday pay. These reports are then used to create a payroll record known as “certified payroll,” which is required for prevailing wage projects. This certified payroll report is then submitted to the project’s governing body to ensure that prevailing wages are met.

This process requires significant care and attention to detail, as failure to submit these reports can result in fines or even industrial action. Fortunately, many resources are available to assist contractors in meeting these requirements. One helpful tool is WDOL, which provides detailed wage tables for different regions nationwide.

Forms and Filings

Payroll isn’t just about cutting a check to employees every two weeks. It’s a vital business process that manages employee benefits, calculates taxes, ensures compliance with government regulations, and improves efficiency and employee retention. In construction, payroll is highly complex, including time-tracking complications, unions, and unique concepts like prevailing wages and certified payroll.

Prevailing wage laws require that general contractors and subcontractors on federal projects pay laborers and mechanics the average hourly rate of workers on similar jobs. To be compliant, you must submit certified payroll reports—also known as Form WH-347—to the appropriate agency for each worker. These forms must include personally identifiable information, worker classifications, hourly rates, daily and weekly numbers of hours worked, deductions made, and actual wages paid.

In addition to calculating gross wages, the certified payroll forms must also contain details of fringe benefits that your company offers its employees. It includes things like vacation days, holiday pay, and insurance policies. Finally, the forms must be filed by the last day of the payroll period and submitted with a signed statement that confirms all wages, hours, and amounts have been reported correctly. The consequences of not complying can be severe; thus, it is crucial. A single error might cost your company between 2% and 15% of its payroll. Use a payroll service like Roll by ADP, which takes care of these challenging computations and filings for you, to avoid these fines.


Prevailing wage laws set hourly rates that contractors on public construction projects must pay their workers. They are based on the wages earned by union workers in the local area for similar work. Prevailing wages are intended to level the playing field for construction workers and to prevent the use of lower-paid non-local labor to undercut local craftspeople and businesses.

A violation of prevailing wage law can have severe financial ramifications and can even debar contractors from future government contracts for up to three years. Therefore, contractors must understand how these laws work and how to comply with them.

To determine whether prevailing wage requirements cover a project, contractors can look to several resources. They can contact the Wage and Hour Office by phone or email or visit a local office for federal projects. State resources vary, but most have their hotlines or websites for inquiries.

In Maryland, registered contracting public bodies and their procurement officers can request a prevailing wage determination for each worker classification before advertising bids or proposals on building and highway projects that exceed $250,000 in contract value and receive state funding of 25% or more, including school construction. Work classifications are determined by analyzing data from available wage surveys and data from other active construction projects in the same geographic area.


Subcontractors provide additional flexibility for workers and present challenges when navigating prevailing wage laws. Unlike employees, contractors are responsible for paying their taxes. For those used to seeing money taken out of their paychecks, it can take time to adjust to being in charge of removing the funds from their earnings. It can be challenging for those new to the workforce and may have yet to have a chance to save money during their early years in construction.

Also, subcontractors must pay for their tools and other work equipment. It can increase the overall cost of a project and limit its competitiveness. Furthermore, when it comes to insurance, a subcontractor must be insured as an independent contractor and not the general contractor.

As a result of these issues, project owners must vet any subcontractors they consider hiring carefully. In addition, some states have prompt payment laws that dictate how long a general contractor must pay its subcontractors or risk violating legal statutes. It is also prudent for general contractors and others to carefully craft indemnification language into contracts with subcontractors to decrease their potential statutory liability for employee wage claims. In addition, project owners can use prequalification databases and other methods to help determine whether a subcontractor will be trustworthy and reputable.

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