Prevailing wage compliance can be a challenging task. You can ask the contractors that had to repay millions of dollars in back wages since Davis-Bacon and its Related Acts came into effect. Better yet, ask the prime contractors who had to pay for the mistakes of their subcontractors.
What is Prevailing Wage?
Prevailing wage is the rate for wages and fringe benefits set by the Department of Labor. Foreign workers or employers with government contracts must pay the prevailing wage to their employees.
Prevailing wage rates vary by location. They are based on the average wages employees with similar positions get in the area. Employers with federal contracts must pay the prevailing wage rate. Several states have laws that require employers with state contracts to pay the prevailing wage rate.
Prime Contractors Acting Like Mini Compliance Enforcement Agencies
County agencies and other local authorities must regulate certified payroll reports when any state, federal, or other agreement-specific funds are applied to projects. It's their job to regulate certified payroll reports.
They should ensure that every contractor is compliant. Prime contractors may be surprised to find that they can benefit from operating the same way as mini compliance enforcement agencies. Contractors don't have to only worry about their employees' payroll.
Prime contractors should also ensure that every worker on the project is compensated properly. The harsh truth for prime contractors is that they can be held responsible for any underpayment that a subcontractor commits on the project.
It's the subcontractor's responsibility to pay their employees. But, if for some reason they don't, the prime contractor is responsible for compensation and other possible consequences. It is one of the many reasons why prime contractors should monitor compliance.
Your Responsibilities As A Prime Contractor
Anyone can create and submit a certified payroll report. You don't have to be certified with a license to submit a certified payroll report. Certified payroll reports that are created manually are prone to human error. Mistakes happen more often than you think.
They happen specifically in an industry where rules seem rather complicated to people. As a prime contractor, managing compliance for your employees is hard enough. And making sure all subcontractors are also doing the same can be more challenging.
But what about the smaller subcontractors that the larger subcontractors work out to? All of a sudden, you've layer upon layer of contractors with tens of workers. As a prime contractor, you are responsible for ensuring all workers are getting paid appropriately.
What Are The Pitfalls Of Monitoring Certified Payroll Reports?
If you're experienced with public works projects, you have probably realized that you can't rely on your payroll provider to:
- Create your certified payroll reports
- Apply a universal form that meets all state, local, or federal requirements
But, this is not how it works. Many local agencies and states have their own separate requirements. Also, the goal of a payroll provider is not to make sure you are compliant. The payroll providers only facilitate payments.
Even if they did, it still would not solve the main problem of monitoring every contractor on the project. Monitoring every other contractor is one of the biggest administrative struggles that prime contractors face today.
Top 4 Ways To Overcome The Prevailing Wage Compliance Hurdle
Here are some ways to overcome the prevailing wage compliance hurdle:
1. Having A Basic Understanding Of The Compliance Laws
If you're new to public works projects, start at square one. Familiarize yourself with Davis-Bacon and prevailing wage laws to have a better understanding of what's at stake. Violations have very real consequences, such as:
- Prosecution
- Payment of back wages
- Additional penalties and fines
- Other possible consequences like disbarment
These punishments are usually given at the discretion of prevailing wage investigators. These are given depending on the severity and whether prevailing wage investigators consider it a criminal intent.
It brings us to a crucial point: if you're audited, work with the auditors - not against the auditors. In many cases, you are at the mercy of the auditors. If you're cooperative, they might even be able to help you. Remember that they can help you - not do your work for you.
2. Keeping An Archived Record Of Compliance Documents
There is an additional hassle of keeping a clean and organized record of certified payroll reports and compliance documents. Contractors must keep an archived record of compliance documents and certified payroll reports in the case of an audit.
Cloud-based and online storage of archived records is recommended. It will facilitate easy access for contractors, auditing organizations, or agencies. It also means the elimination of physical storage and paper waste.
3. Collecting, Reviewing, And Accepting Certified Payroll Reports
Another hurdle that prime contractors have to overcome is the facilitation of getting all the compliance documents from contractors. The old method of collecting and reviewing certified payroll reports and other requirements is a waste of space and time.
It results in an ineffective way of communicating between prime contractors and subcontractors. It's crucial to rectify the potential mistakes. An optimal solution will be an integrated system that provides a centralized place where:
- All parties can communicate efficiently
- Contractors can create and submit pre-validated certified payroll reports
- Project administrators can review and accept/reject certified payroll reports
4. Helping Contractors And Subcontractors With Prevailing Wage Compliance
The success of your subcontractors is your success. If subcontractors continue to struggle with the manual process of generating certified payroll reports, they'll remain prone to errors. It results in exposing the prime contractor to the same liabilities.
That's why it is so essential that every contractor on the project cuts down on the manual processes. In this digital age, contractors don't have to keep repeating mundane tasks and double-check their work to ensure accuracy.
Contractors can leverage the power of technology to do it. Contractors don't have to enter the same data several times on different certified payroll report formats for separate requesting bodies.
The Bottom-line
If every contractor is efficient at remaining compliant, the entire process becomes more effective for prime contractors regulating the prevailing wage compliance.
The navigation of prevailing wage laws doesn't have to be as complicated as it has been for contractors. It doesn't have to be a headache like it's for several prime administrators.
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