What is prevailing wage and how do I track it?
Prevailing wage is the minimum hourly rate you must pay workers on public works projects. The federal government sets rates for federally funded projects under the Davis-Bacon Act. States set their own rates for state and local public work. In California, the Department of Industrial Relations publishes prevailing wage rates broken down by trade, county, and project type.
If you’re bidding public work in San Diego, prevailing wage requirements almost certainly apply. California’s thresholds are low. Most public projects over $1,000 for alterations or $15,000 for new construction trigger the requirement. This includes school construction, municipal buildings, publicly funded affordable housing, and even some private projects that receive public money.
The rates differ by trade and location. A carpenter working on a commercial project in San Diego County has a different prevailing rate than an electrician or laborer on the same job. Each rate includes a base hourly wage plus fringe benefits. You can pay the fringe portion as cash wages or through actual benefits like health insurance and pension contributions.
Tracking prevailing wage means separating public works hours from private work hours for every employee. If a worker spends 20 hours on a prevailing wage job and 20 hours on a private job in the same week, you pay two different rates and document both. Your payroll system needs to handle this split cleanly.
California requires certified payroll reports submitted to the awarding body throughout the project. These reports show each worker’s classification, hours worked, wages paid, and fringe benefits provided. The reports must match your actual payroll records exactly. During an audit, the DIR will compare your certified payroll to bank statements and payroll registers looking for discrepancies.
Proper construction job costing makes prevailing wage tracking possible. You need labor hours tracked by project, not just by employee. When your books connect labor costs to specific jobs with accurate trade classifications, generating certified payroll becomes straightforward instead of a scramble.
Most payroll software offers prevailing wage features, but setup matters. Each job needs its own cost code. Workers need correct trade classifications assigned. Overtime rules are different in California for prevailing wage. It calculates based on daily hours, not just weekly totals. Mistakes here result in back wage liability plus penalties that can reach 200% of the underpayment.
The consequences of getting this wrong are serious. California can debar contractors from public work for up to three years. Back wage claims can span the entire project duration. Audits happen through worker complaints, prime contractor reviews, or random DIR investigations.
Working with a San Diego bookkeeper who understands construction accounting helps you build tracking systems that produce clean certified payroll and catch problems before they become expensive. Setting it up right costs far less than fixing it after an audit.
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