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Friday, March 26, 2010
Complying With Prevailing Wage Laws
As the economy languishes, public works projects – which in good times, many contractors wouldn’t touch with a 10-foot length of red tape – are starting to look better and better. If you’re among the contractors who find themselves holding their noses and bidding on government-funded jobs, be aware of the prevailing wage hoops through which you’ll be required to jump. In fact, even if you’re a public works construction veteran, it couldn’t hurt to review the appropriate measures for complying with prevailing wage procedures and requirements.
The Davis-Bacon Act sets forth pay and benefit rules that contractors must follow on projects which are funded by federal money. State prevailing wage regulations do the same for state-funded jobs and vary slightly depending upon the jurisdiction. And, because building projects that use both federal and state money usually are subject to more stringent requirements, the first step when bidding and completing infrastructure projects is to get your hands on the appropriate rules.
Still, most projects will be governed by similar prevailing wage laws. Here is a primer to keep you in compliance:
• Fully one-half of your workforce must be designated as journeymen and be paid at least the full prevailing rates as denoted on the project’s wage. Workers designated as laborers may be subject to lower wage rates. The other half of the workforce can be apprentices and receive a percentage of the full rate, depending upon their level of training. Only those enrolled in a qualified apprenticeship program can be designated as apprentices. “Helpers” have no place in federal projects. Check your state’s law to see if it allows the use of helpers at lower wage rates. Apprentices assigned to a job before or in favor of a journeyman must be paid at the journeyman rate. For instance, if you employ eight electricians on a site four must be journeymen and the other four can be apprentices. But if you assign two journeymen and six apprentices, the four “unpaired” apprentices must get the full journeyman rate.
• All workers on public works projects must be paid weekly. Certified payroll records must be turned in to the designated state or federal agency.
• The wage decision also will tell you the value of the fringe benefits you must provide workers on a prevailing wage project. ALL workers – apprentices, as well as journeymen – get the whole enchilada when it comes to these benefits.
If you don’t offer enough qualified benefits, or if an employee chooses not to participate in some benefit programs, you must pay the difference in cash to each employee. Your benefit program probably is qualified if it’s managed by a third party, but check with a consultant or your human resources professional to be sure. If you offer paid holidays and vacations, you can deduct the fair value of those benefits from the fringe package. Note that worker’s compensation is not considered a fringe benefit, and it cannot be deducted from the package.
• You’ll probably also have to pay into a qualified training program for every hour worked on the job. Some of these programs, notably those run by the Associated Builders and Contractors, apply the contributions to an employer’s account. The employer can draw on this account to pay for training for his apprentices. Others, such as those run by many states, pool the contributions from all contractors on public works projects and divide them among apprenticeship training programs in the state based on the number of apprentices they graduate.
• Projects in rural areas or located far from your base of operations may require you to pay workers extra to account for excess travel time to the jobsite or, in rare instances, to pay for temporary housing if commuting would be impractical.
The addition of Davis-Bacon and state prevailing wage regulation adds a few layers of complexity to the plunge into public works construction. But with a systematic approach to compliance, these hurdles can be easily overcome with minimal headaches. If you’re new to the public works arena, I suggest you consult a labor attorney and accountant to help set up your compliance assurance or contract with an established monitoring and compliance consultant or provider. Your local chapter of the Associated Builders and Contractors can offer tips and recommend sources of assistance.
Whether you keep your compliance team in house or use a consultant, make sure your team reviews your project’s payroll often and communicates any concerns to you. These reviews, including interviews with workers on site and coordination between the general and subcontractors, should begin even before construction commences. Insist your team has a plan in place to catch errors early and correct them with full disclosure to the state or federal agency overseeing prevailing wage compliance on the project. Make sure the team keeps impeccable records of its findings, reviews and payroll and compliance reports.
The Davis-Bacon Act sets forth pay and benefit rules that contractors must follow on projects which are funded by federal money. State prevailing wage regulations do the same for state-funded jobs and vary slightly depending upon the jurisdiction. And, because building projects that use both federal and state money usually are subject to more stringent requirements, the first step when bidding and completing infrastructure projects is to get your hands on the appropriate rules.
Still, most projects will be governed by similar prevailing wage laws. Here is a primer to keep you in compliance:
• Fully one-half of your workforce must be designated as journeymen and be paid at least the full prevailing rates as denoted on the project’s wage. Workers designated as laborers may be subject to lower wage rates. The other half of the workforce can be apprentices and receive a percentage of the full rate, depending upon their level of training. Only those enrolled in a qualified apprenticeship program can be designated as apprentices. “Helpers” have no place in federal projects. Check your state’s law to see if it allows the use of helpers at lower wage rates. Apprentices assigned to a job before or in favor of a journeyman must be paid at the journeyman rate. For instance, if you employ eight electricians on a site four must be journeymen and the other four can be apprentices. But if you assign two journeymen and six apprentices, the four “unpaired” apprentices must get the full journeyman rate.
• All workers on public works projects must be paid weekly. Certified payroll records must be turned in to the designated state or federal agency.
• The wage decision also will tell you the value of the fringe benefits you must provide workers on a prevailing wage project. ALL workers – apprentices, as well as journeymen – get the whole enchilada when it comes to these benefits.
If you don’t offer enough qualified benefits, or if an employee chooses not to participate in some benefit programs, you must pay the difference in cash to each employee. Your benefit program probably is qualified if it’s managed by a third party, but check with a consultant or your human resources professional to be sure. If you offer paid holidays and vacations, you can deduct the fair value of those benefits from the fringe package. Note that worker’s compensation is not considered a fringe benefit, and it cannot be deducted from the package.
• You’ll probably also have to pay into a qualified training program for every hour worked on the job. Some of these programs, notably those run by the Associated Builders and Contractors, apply the contributions to an employer’s account. The employer can draw on this account to pay for training for his apprentices. Others, such as those run by many states, pool the contributions from all contractors on public works projects and divide them among apprenticeship training programs in the state based on the number of apprentices they graduate.
• Projects in rural areas or located far from your base of operations may require you to pay workers extra to account for excess travel time to the jobsite or, in rare instances, to pay for temporary housing if commuting would be impractical.
The addition of Davis-Bacon and state prevailing wage regulation adds a few layers of complexity to the plunge into public works construction. But with a systematic approach to compliance, these hurdles can be easily overcome with minimal headaches. If you’re new to the public works arena, I suggest you consult a labor attorney and accountant to help set up your compliance assurance or contract with an established monitoring and compliance consultant or provider. Your local chapter of the Associated Builders and Contractors can offer tips and recommend sources of assistance.
Whether you keep your compliance team in house or use a consultant, make sure your team reviews your project’s payroll often and communicates any concerns to you. These reviews, including interviews with workers on site and coordination between the general and subcontractors, should begin even before construction commences. Insist your team has a plan in place to catch errors early and correct them with full disclosure to the state or federal agency overseeing prevailing wage compliance on the project. Make sure the team keeps impeccable records of its findings, reviews and payroll and compliance reports.
Labels: Commercial, Construction Industry, Industrial
Thursday, March 11, 2010
Stimulus Package Revisited
President Obama’s administration and his allies in Congress are touting the benefits of the year-old federal stimulus package. While blithely tossing out estimates of 2 million jobs created or saved by the $787 billion American Recovery and Reinvestment Act – a figure disputed by most Republicans, many economists and just about anyone who examines or works in the construction industry – they hedge their bets by heralding the stimulus’s other accomplishments.
The stimulus has helped by “providing a $250 check last year to seniors and disabled veterans,” Congresswoman Debbie Wasserman-Schultz (D-Fla.) wrote in an essay to Broward.net defending the package.
“A cut in personal income taxes through a ‘Making Work Pay’… totals up to $400 per year for an individual…in 2009 and 2010,” noted Senator Ben Nelson (D-Neb.). I hope you socked away that $7.69 a week. Just think how bad things would be without that extra $1.10 coming in every day!
These measures may look good, but they are tantamount to giving a cardiac arrest victim a facelift. Jobs are the only CPR that will save the patient, and the construction industry’s defibrillator has yet to be plugged in.
Mike Pickett, CEO of Seattle-based consultant Onvia, said once the final stimulus installments are released, the real number of jobs created or saved will number around 1.6 million. That’s $787 billion for 1.6 million positions, or $492,000 per job. Given the choice, I think many American workers would take the lump sum option and take their chances with the Sunday want-ads rather than relying on the federal government to create or save their jobs.
Construction – the life blood of the economy – is seeing only 5 percent of its jobs affected by the stimulus package Ken Simonson, chief economist for the Associated General Contractors of America, told USA Today. The simple truth is a jobless recovery cannot be sustained, and ARRA is not doing enough to create jobs. Every U.S. state but one lost jobs in 2009, while the national debt piles up and the mortgage on the country’s future builds. That isn’t to say the stimulus program hasn’t helped at all. Throwing nearly a trillion dollars at any program can’t help but foster some improvement. The discrepancy is one of impact and focus. The stimulus is inefficient and nibbles around the edges of the problem.
Public works projects – especially road construction and repair – remains one of the few bright spots ARRA has provided the construction industry, infusing more than $20 billion into the economy and putting 280,000 workers on the payrolls. Perhaps the best part of these projects is that they result in tangible assets for communities, assets that will streamline commerce once the economy hits its stride. Still, stimulus-funded capital improvement projects are mere Band-Aids, and without tangible, long-term solutions, there benefits will evaporate along with the federal funding – setting the stage for yet another round of construction firm bankruptcies and layoffs in an industry already mired in 25 percent unemployment.
It’s not too late, according to equipment manufacturer Caterpillar, but it will require a retooling of the stimulus package to focus on the infrastructure projects that will create construction jobs.
Caterpillar supported the Obama plan in 2009, and believes it has helped.
“A year ago there was a tremendous amount of economic uncertainty, and it was something we needed…but felt it needed more of an emphasis on infrastructure, including highways and airport runways and ports,” Caterpillar spokesman Jim Dugan explained.
China adopted that strategy and has emerged from the worldwide slump thanks largely to a $468 billion investment in roads, rail, seaports and other capital projects. Compare that to the $70 billion earmarked for infrastructure in the U.S. stimulus package.
“Continued investment and reinvestment in infrastructure is very important. It makes us more competitive as a country. That's the reason why today we advocate a robust highway spending bill, which is up for appropriation by Congress again,” Dugan said.
In my last look at the American Recovery and Reinvestment Act a few months ago, I agreed with AGC’s Simonson that America’s comeback won’t start until the construction industry heals itself: “The problems facing the construction industry aren’t just devastating construction firms and construction workers. These problems are crippling our broader economy. That is because construction spending accounts for 8 percent of gross domestic product. Simply put, you can’t fix our economy until you fix the construction industry.”
I predicted the construction industry will see real long-term recovery only when the unemployment rate eases and state tax revenues rise as a result of sales taxes on construction materials and a boost in the industry’s workers’ disposable income.
I see no reason to amend those predictions. And, sadly, I see no reason to be optimistic about their realization before the end of the year.
The stimulus has helped by “providing a $250 check last year to seniors and disabled veterans,” Congresswoman Debbie Wasserman-Schultz (D-Fla.) wrote in an essay to Broward.net defending the package.
“A cut in personal income taxes through a ‘Making Work Pay’… totals up to $400 per year for an individual…in 2009 and 2010,” noted Senator Ben Nelson (D-Neb.). I hope you socked away that $7.69 a week. Just think how bad things would be without that extra $1.10 coming in every day!
These measures may look good, but they are tantamount to giving a cardiac arrest victim a facelift. Jobs are the only CPR that will save the patient, and the construction industry’s defibrillator has yet to be plugged in.
Mike Pickett, CEO of Seattle-based consultant Onvia, said once the final stimulus installments are released, the real number of jobs created or saved will number around 1.6 million. That’s $787 billion for 1.6 million positions, or $492,000 per job. Given the choice, I think many American workers would take the lump sum option and take their chances with the Sunday want-ads rather than relying on the federal government to create or save their jobs.
Construction – the life blood of the economy – is seeing only 5 percent of its jobs affected by the stimulus package Ken Simonson, chief economist for the Associated General Contractors of America, told USA Today. The simple truth is a jobless recovery cannot be sustained, and ARRA is not doing enough to create jobs. Every U.S. state but one lost jobs in 2009, while the national debt piles up and the mortgage on the country’s future builds. That isn’t to say the stimulus program hasn’t helped at all. Throwing nearly a trillion dollars at any program can’t help but foster some improvement. The discrepancy is one of impact and focus. The stimulus is inefficient and nibbles around the edges of the problem.
Public works projects – especially road construction and repair – remains one of the few bright spots ARRA has provided the construction industry, infusing more than $20 billion into the economy and putting 280,000 workers on the payrolls. Perhaps the best part of these projects is that they result in tangible assets for communities, assets that will streamline commerce once the economy hits its stride. Still, stimulus-funded capital improvement projects are mere Band-Aids, and without tangible, long-term solutions, there benefits will evaporate along with the federal funding – setting the stage for yet another round of construction firm bankruptcies and layoffs in an industry already mired in 25 percent unemployment.
It’s not too late, according to equipment manufacturer Caterpillar, but it will require a retooling of the stimulus package to focus on the infrastructure projects that will create construction jobs.
Caterpillar supported the Obama plan in 2009, and believes it has helped.
“A year ago there was a tremendous amount of economic uncertainty, and it was something we needed…but felt it needed more of an emphasis on infrastructure, including highways and airport runways and ports,” Caterpillar spokesman Jim Dugan explained.
China adopted that strategy and has emerged from the worldwide slump thanks largely to a $468 billion investment in roads, rail, seaports and other capital projects. Compare that to the $70 billion earmarked for infrastructure in the U.S. stimulus package.
“Continued investment and reinvestment in infrastructure is very important. It makes us more competitive as a country. That's the reason why today we advocate a robust highway spending bill, which is up for appropriation by Congress again,” Dugan said.
In my last look at the American Recovery and Reinvestment Act a few months ago, I agreed with AGC’s Simonson that America’s comeback won’t start until the construction industry heals itself: “The problems facing the construction industry aren’t just devastating construction firms and construction workers. These problems are crippling our broader economy. That is because construction spending accounts for 8 percent of gross domestic product. Simply put, you can’t fix our economy until you fix the construction industry.”
I predicted the construction industry will see real long-term recovery only when the unemployment rate eases and state tax revenues rise as a result of sales taxes on construction materials and a boost in the industry’s workers’ disposable income.
I see no reason to amend those predictions. And, sadly, I see no reason to be optimistic about their realization before the end of the year.