What is Prevailing Wage?
Prevailing wage explained in plain English. Learn what prevailing wage laws mean for freelancers and contractors working on government or public projects, and how it affects your rates.
What Is Prevailing Wage?
Prevailing wage is a legally mandated minimum hourly wage rate for workers on certain government-funded or publicly regulated construction, maintenance, and service projects. These rates are determined by the U.S. Department of Labor (for federal projects) or state agencies (for state and local projects) based on surveys of what wages are actually paid to workers in specific job classifications in specific geographic areas. The most well-known application of prevailing wage is the Davis-Bacon Act of 1931, which requires contractors and subcontractors working on federal public works projects (buildings, highways, infrastructure) costing $2,000 or more to pay workers at least the prevailing wage — including fringe benefits — for the corresponding classification of work in the locality. For freelancers and independent contractors working on government projects, prevailing wage requirements can significantly affect how you price your services and what you must pay any employees or subcontractors you bring on.
How Prevailing Wage Rates Are Determined
The Department of Labor conducts surveys of employers in a given area and trade to determine the prevailing wage. The result is a prevailing wage determination (PWD) — a table of wage rates by: - Classification: The type of work (electrician, carpenter, plumber, laborer, etc.) - Location: The county or metropolitan statistical area - Rate type: Base wage vs. fringe benefits (or total package) For example, a prevailing wage determination for a Dallas electrician might specify: - Base hourly rate: $38.50 - Fringe benefits: $12.40 - Total: $50.90/hour Prime contractors on federal projects must pay at least the total ($50.90) — though they can provide some portion as bona fide fringe benefits rather than cash wages.
Davis-Bacon Act: The Main Federal Prevailing Wage Law
Covered Projects: - Federal construction projects (buildings, highways, bridges, public works) over $2,000 Who Must Be Paid: - laborers and mechanics employed by contractors and subcontractors - Some service workers under the Service Contract Act Requirements: - Pay at least the prevailing wage for the applicable classification - Pay weekly (not monthly) - Keep certified payroll records - Submit weekly payroll reports to the prime contractor Exemptions: - Projects under $2,000 - Minor repairs and maintenance - Some public utilities work
How Prevailing Wage Affects Freelancers and Contractors
If you're a freelancer or independent contractor bidding on or working on a federal or state project: 1. Check the prevailing wage requirements in the solicitation or contract 2. Include prevailing wage rates in your pricing — these may be higher than market rates in some areas 3. If you have employees, you must pay them at least the prevailing wage 4. As a self-employed person, you're not required to pay yourself a prevailing wage — but the contract may specify a minimum rate for your classification 5. Certified payroll: if required, you must submit weekly payroll records documenting compliance Example: Freelance Electrician on Federal Project A freelance electrician (sole proprietor, no employees) bids on federal courthouse electrical work in Chicago. The prevailing wage determination for Chicago electricians specifies: - Base rate: $65.00/hour - Fringe: $22.50/hour - Total required: $87.50/hour His market rate for commercial electrical work is $95/hour. He bids the project at $87.50/hour — which covers the prevailing wage requirement — plus a 10% markup for his self-employed overhead and profit = $96.25/hour. This is above his market rate, so the prevailing wage requirement actually makes the project more profitable.
State Prevailing Wage Laws
Many states have their own prevailing wage laws — often applying to state-funded projects above certain dollar thresholds. State rates can differ from federal rates, and some states have broader coverage (including service workers). If you work on state or local public projects, check your state's labor department for current rates and requirements.
Key Takeaways for Freelancers
1. Prevailing wage laws apply to certain federal and state government projects 2. Davis-Bacon Act covers federal construction projects over $2,000 3. You must pay at least the prevailing wage rate to covered workers 4. Certified payroll records must typically be submitted weekly 5. Failure to comply can result in debarment from future government contracts Related reading: - Independent Contractor: Definition and Requirements → - Subcontractor: Hiring and Managing → - Government Contract: Freelancer's Guide → Bid on government contracts with confidence — Try Eonebill Free