Prevailing Wage: A Contractor's Complete Guide (2026)

Prevailing wage laws require contractors on public construction projects to pay workers the local "prevailing" wage — which is typically the union wage rate for that trade in that area.

The Davis-Bacon Act (federal) covers all federal and federally funded construction contracts over $2,000. It sets prevailing wages by county and by trade classification.

State prevailing wage laws (Little Davis-Bacon): 32 states have their own prevailing wage laws that apply to state-funded projects. Some states (like California and New York) are stricter than Davis-Bacon.

Why it matters: Prevailing wage rates can be 20–80% higher than market wages. You MUST factor this into your bid — underpricing a prevailing wage job is a major and common mistake.

Federal Davis-Bacon: Any contractor or subcontractor on a federal or federally assisted project over $2,000 for construction, alteration, or repair.

State laws: Varies by state. California requires prevailing wage on any public works project over $25,000 (building work) or $15,000 (alteration/repair).

"Don't know" is not a defense: Ignorance of prevailing wage doesn't excuse violations. Before bidding any government work, determine whether prevailing wage applies.

Key trades covered: Davis-Bacon covers all trades — laborers, carpenters, electricians, plumbers, ironworkers, painters, equipment operators, and more. Each has a separate wage determination.

Finding wage determinations:
- Federal: SAM.gov Wage Determinations (formerly wdol.gov)
- State: Each state's labor department website
- Wage determinations specify: basic hourly rate + fringe benefits (health, pension, vacation, training)

Basic hourly rate + fringe benefits = total prevailing wage

Example: Carpenter in Los Angeles might have:
- Basic hourly rate: $45.00
- Fringe benefits: $25.00
- Total prevailing wage: $70.00/hour

You can pay fringes in cash (adding them to the hourly rate) or through a bona fide benefit plan. Cash fringe payments are fully taxable; benefit plan payments are not — significant difference in true labor cost.

What it is: A weekly payroll report you submit to the project owner (and in some cases the relevant labor department) certifying that you've paid prevailing wages.

Federal form: WH-347 is the standard federal certified payroll form. Many states have their own forms.

What it must include:
- Each worker's name and last 4 of SSN
- Hours worked each day and week
- Hourly rate paid (both basic and fringe)
- Deductions and net pay
- Work classification (must match wage determination)

Timing: Must be submitted within 7 days after the payroll period for federal work.

Software: LCPtracker, Wage Watch, eCPR Online, and Procore's certified payroll module are common tools. Don't try to do this in spreadsheets on large projects.

Penalties for non-compliance: Back wages owed to all affected workers, disqualification from future federal contracts, possible False Claims Act exposure.

Step 1: Get the wage determination FIRST — Before estimating labor hours, know what wage rate you must pay. Get the applicable wage determination for every trade on the project.

Step 2: Labor burden calculation — On prevailing wage work, your fully-loaded labor cost is:
Prevailing wage rate + payroll taxes (7.65%) + workers' comp + overhead allocation

Do NOT mark up a market labor rate and apply it — you'll lose money.

Step 3: Add compliance cost — Budget $500–$2,000/month for certified payroll administration, depending on project size and complexity.

Step 4: Subcontract carefully — ALL your subs must pay prevailing wage and submit certified payroll. Flow down the requirements in your subcontracts. You are liable for your subs' violations.

Step 5: Mark up appropriately — Prevailing wage work typically supports 8–15% net margin. The key is competitive bidding and efficient execution, not higher margins.

Many prevailing wage programs have apprenticeship ratios — you must employ a certain percentage of registered apprentices at apprentice wage rates.

Federal: On federal prevailing wage projects, apprentices from DOL-registered programs can be paid the apprentice rate (typically 50–90% of journeyman rate depending on level).

California: Requires a ratio of 1 apprentice for every 5 journeymen on public works. Apprentices must be registered with DAS.

Benefits of apprenticeship on prevailing wage work: Apprentice wage rates can be 30–50% below journeyman rates — significant cost savings on prevailing wage projects with apprenticeship requirements.

How to participate: Register as an apprenticeship sponsor with your state labor department OR use apprentices from an existing program (joint apprenticeship committee).