Written for: General contractors, construction company owners, subcontractors, and construction CFOs working on federal or federally-assisted projects. This guide covers the Davis-Bacon Act, prevailing wage requirements, the updated WH-347 certified payroll form, fringe benefit calculations, and the penalties you face for non-compliance.
If your construction company bids on federal projects — or any project that touches federal funding — you’re subject to the Davis-Bacon Act and its prevailing wage requirements. And compliance just got more complex.
The Department of Labor finalized the first major overhaul of Davis-Bacon regulations in nearly 40 years, released an updated WH-347 certified payroll form in January 2025, and increased civil penalties to $13,508 per violation. At the same time, the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), and the CHIPS Act are flooding the market with prevailing wage projects.
This guide covers everything you need to know to stay compliant — and avoid the consequences of getting it wrong.
What Is Prevailing Wage?
Prevailing wage is the hourly wage rate plus fringe benefits that the Department of Labor (DOL) determines is the standard for a specific type of construction worker in a given geographic area. It has two components:
- Base hourly rate: The minimum cash wage you must pay for each classification (electrician, laborer, carpenter, etc.)
- Fringe benefit rate: An additional per-hour amount covering health insurance, retirement, vacation, training, and other benefits
If you provide benefits that don’t fully cover the fringe rate, you must pay the difference in cash. You cannot pay less than the combined prevailing wage rate under any circumstances.
What Is the Davis-Bacon Act?
The Davis-Bacon Act (DBA), enacted in 1931, requires contractors and subcontractors on federal construction contracts exceeding $2,000 to pay workers no less than the local prevailing wage. Given inflation since 1931, the $2,000 threshold means Davis-Bacon applies to essentially every federal construction project.
Beyond direct federal projects, over 60 related federal statutes (Davis-Bacon Related Acts or DBRA) extend prevailing wage requirements to state and local projects that receive federal assistance — including projects funded by the IIJA, IRA, and CHIPS Act.
⚠️ Clean energy alert: If you’re working on clean energy projects seeking tax credits under the Inflation Reduction Act, prevailing wage compliance is mandatory — along with registered apprenticeship requirements. Failure to meet these requirements means losing the enhanced tax credit, which can be 5× the base credit amount.
What Changed in the 2023 Final Rule
The DOL’s updated Davis-Bacon regulations — effective October 23, 2023, and the first comprehensive update in almost 40 years — introduced several significant changes:
| Change | What It Means |
|---|---|
| Three-step wage determination | DOL now uses majority rule → weighted average → modal rate to set prevailing wages. This often results in higher rates. |
| More frequent updates | Wage determinations are updated more frequently. Contractors must check for modifications at contract award AND throughout the project. |
| Contractor accountability | Contractors are now legally responsible for DBA compliance by law — not just by contract. Prime contractors bear full responsibility for subcontractor violations. |
| Anti-retaliation protections | Workers who report violations now have explicit anti-retaliation protections. |
| Increased penalties | Civil money penalties increased to $13,508 per violation (adjusted annually for inflation). |
The Updated WH-347 Form (Effective January 2025)
The DOL released an updated Form WH-347 (Statement of Compliance for Payroll) effective January 2025, valid through January 2028. This is the form used for certified payroll reporting.
Key changes in the new form:
- Enhanced fringe benefit reporting: New fields distinguish between funded benefits (health plans, retirement) and unfunded benefits, with total fringe credit and cash-in-lieu calculations
- Clearer apprenticeship documentation: Workers must be identified as journeyworkers or registered apprentices with registration details
- Consolidated format: The old WH-348 supplemental form has been merged into the WH-347
- Gross and net pay: Both gross wages and net pay are now required fields
- Overtime calculations: Updated fields for overtime rate calculations
✅ Transition period: The previous WH-347 form remains valid until September 30, 2026. After that date, only the new form will be accepted. However, prime contractors may require the updated form sooner — check your contract requirements.
How Fringe Benefits Work Under Davis-Bacon
This is where most compliance errors happen. The prevailing wage has two parts: the base rate and the fringe rate. Here’s how it works:
| Component | Example (Electrician) |
|---|---|
| Base prevailing rate | $38.50/hour |
| Fringe benefit rate | $18.75/hour |
| Total prevailing wage | $57.25/hour |
| Your benefits cost per hour | $12.00/hour (health, 401k, etc.) |
| Cash-in-lieu owed | $6.75/hour ($18.75 − $12.00) |
| Minimum hourly cash pay | $45.25/hour ($38.50 + $6.75) |
You cannot meet the fringe requirement by paying all cash — the base rate must be paid as wages, and the fringe must be provided as benefits or cash-in-lieu above the base rate.
Worker Classification: Where Most Violations Start
Each prevailing wage determination lists specific classifications (electrician, carpenter, laborer, plumber, etc.) with their own wage and fringe rates. Common violations:
- Misclassifying workers: Paying a skilled carpenter the laborer rate to save money. Classification must match actual duties performed — not the job title you assign.
- Using “helper” classifications: The DOL has eliminated most helper classifications. If a worker is performing journeyworker-level tasks, they must be paid the journeyworker rate.
- Splitting classifications: Recording a worker as a laborer for some hours and a carpenter for others when they performed carpentry work all day.
- Independent contractor misclassification: Treating employees as 1099 contractors to avoid prevailing wage obligations. The DOL looks at the actual working relationship, not the paperwork.
Certified Payroll: Weekly Reporting Requirements
Every contractor and subcontractor on a Davis-Bacon project must submit weekly certified payroll reports (Form WH-347) to the contracting agency within 7 days after each pay date.
Each report must include:
- Employee name, address, and last four digits of SSN
- Work classification for each day
- Daily and weekly hours worked (straight time and overtime separately)
- Hourly rate of pay (base + fringe)
- Gross wages earned
- Itemized deductions
- Net wages paid
- A signed Statement of Compliance certifying accuracy
You must submit a report even for weeks when no work was performed on the project (a “no-work” report).
Penalties for Non-Compliance
Davis-Bacon enforcement is serious. The penalties include:
| Penalty | Details |
|---|---|
| Civil fines | Up to $13,508 per violation (adjusted annually for inflation) |
| Back wage payments | Full restitution of underpaid wages to affected workers |
| Payment withholding | Government withholds contract payments until underpayments are resolved |
| Contract termination | Active contracts can be terminated for cause |
| Debarment | Banned from federal contracts for up to 3 years |
| Criminal prosecution | Willful violations can result in criminal charges |
Prime contractors are liable for subcontractor violations. If your sub underpays their workers, your company faces the consequences.
State Prevailing Wage: Georgia, Florida, and Indiana
Something contractors in our markets should know: Georgia, Florida, and Indiana do not have state prevailing wage laws. This means:
- On purely state-funded projects in these states, there is no prevailing wage requirement
- On projects with any federal funding component, Davis-Bacon still applies in full
- 32 other states do have their own prevailing wage laws — if you work across state lines, you may need to comply with both federal and state prevailing wage requirements, paying whichever rate is higher
Your Davis-Bacon Compliance Checklist
✅ For every prevailing wage project:
- Obtain the correct wage determination from SAM.gov before bidding
- Check for wage determination modifications at contract award and periodically during the project
- Classify all workers accurately based on actual duties performed
- Calculate fringe benefit credits and cash-in-lieu amounts per worker
- Submit certified payroll (WH-347) weekly within 7 days of each pay date
- Transition to the updated WH-347 form before September 30, 2026
- Post the wage determination and DOL poster (WH-1321) at the jobsite
- Ensure all subcontractors submit their own certified payroll reports
- Retain all payroll records for at least 3 years after project completion
- Verify worker classification (W-2 vs. 1099) for all labor on the project
How iSolved Handles Prevailing Wage Payroll
Prevailing wage payroll isn’t something you manage on a spreadsheet — or with a consumer payroll provider. iSolved People Cloud provides:
- Job costing by project: Track labor costs by project, phase, and cost code
- Multiple pay rates per employee: The same worker can have different prevailing wage rates for different projects
- Fringe benefit calculations: Automatically calculate the difference between your benefit cost and the required fringe rate
- WH-347 reporting: Generate certified payroll reports directly from payroll data
- Workers’ comp by class code: Assign correct class codes per job function with pay-as-you-go reporting
- Multi-state compliance: If you work across state lines, iSolved handles the different tax and multi-state payroll requirements automatically
FAQ
What is the Davis-Bacon Act?
The Davis-Bacon Act (1931) requires contractors and subcontractors on federal construction contracts exceeding $2,000 to pay workers no less than the locally prevailing wages and fringe benefits. It applies to direct federal projects and extends to state and local projects receiving federal assistance through over 60 related statutes.
What is prevailing wage?
Prevailing wage is the hourly wage rate plus fringe benefits that the DOL determines is standard for a specific type of construction worker in a given area. It includes a base hourly rate plus a fringe benefit rate. Any shortfall between the fringe rate and your actual benefits cost must be paid in cash to the worker.
What is certified payroll?
Certified payroll is a weekly report (Form WH-347) documenting every worker’s classification, hours, wages, and fringe benefits on a prevailing wage project. It includes a signed Statement of Compliance. Reports must be submitted within 7 days of each pay date, even for weeks with no work performed.
What are the penalties for Davis-Bacon violations?
Penalties include civil fines up to $13,508 per violation, back wage payments, contract termination, payment withholding, debarment from federal contracts for up to 3 years, and potential criminal prosecution for willful violations. Prime contractors are liable for subcontractor violations.
What changed with the WH-347 form in 2025?
The DOL released an updated WH-347 effective January 2025 with enhanced fringe benefit reporting, clearer apprenticeship documentation, consolidation of the old WH-348 form, and new gross/net pay fields. The old form is accepted until September 30, 2026.
Do state prevailing wage laws apply in addition to Davis-Bacon?
Thirty-two states have their own prevailing wage laws. On dual-funded projects, contractors must pay whichever rate is higher. Georgia, Florida, and Indiana do not have state prevailing wage laws, but Davis-Bacon applies to any project with federal funding in those states.
Need Help With Prevailing Wage Payroll?
BlueWave HR specializes in construction payroll — certified payroll (WH-347), prevailing wage calculations, job costing, workers’ comp by class code, and multi-state compliance. Everything runs on iSolved People Cloud, and you get a dedicated team that understands construction.
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