Compliance tops the list, when it comes to government contractors’ priorities. Construction contracts with the federal government are governed by the Davis-Bacon Act (DBA), so it’s best to brush up on your DBA basics. Read on to learn more about the DBA.
The primary function of the Davis-Bacon Act is to protect local communities from economic upheaval caused by federal government contracts. The DBA requires that workers employed on federal contracts be paid a local prevailing wage rate and fringe benefits. This applies to any contract valued in excess of $2,000 and levels the playing field by preventing outside contractors from coming into an area and underbidding local contractors and unions.
Compliance with the DBA
During the performance of the contract, employees must be paid at least once a week with full wages and the employers’ option of a) fringe benefits or b) cash, in lieu of those benefits. Companies are required to maintain basic records for all workers during the course of their work and for at least three years after. These records must contain:
- The basic info of each employee (name, address, social security number);
- Hourly rates of pay, including rates associated with fringe benefits and cash equivalents;
- Daily/weekly number of hours worked;
- Deductions made and actual wages paid;
- Details on the fringe benefit plans and programs and documentation that the program has been communicated in writing to the workers.
By identifying the requirements of the DBA from the outset, it’s easy to set yourself up with strategies for compliance and, by extension, maximizing your competitiveness. Knowing key information, like the wage requirements, early on allows you to capture the highest level in profitability in the bidding process.
One of the critical strategies for successful compliance is putting forth an integrated effort. Bringing in legal, human resources, accounting, and other knowledgeable professionals cuts down on the likelihood of errors and gives you the full force of a capable team to ensure your compliance. At Boon, we’re 100 percent committed to this strategy. Boon offers comprehensive, legal, licensing, compliance, and accounting services, in addition to our friendly customer service and simple enrollment methods.
Annualization is the computation strategy used to determine the hourly rate of contribution that is creditable towards a contractor’s prevailing wage obligation on DBA covered projects. The concept of annualization is incredibly important because the amount of credit a contractor may claim can be just as crucial to determining DBA compliance as the particulars of a fringe benefit plan under the DBA.
Annualization was applied in the 1970s in health insurance plans that called for the same rate of contribution for all hours worked by laborers that were employed on both DBA covered projects and other, non-covered endeavors.
In practical application, annualization limits Davis-Bacon credits to an amount equal to the hourly cost of the fringe benefit averaged across all the hours an individual works during a year. This prevents individuals from using Davis-Bacon work as the exclusive source of funding for continuous benefits and compensation for all of an employee’s work.
Penalties Associated with the DBA
The Wage and Hour Division (WHD) of the Department of Labor is responsible for administering and enforcing the DBA. The WHD is notorious for being unwilling to negotiate and quick to drop the legal hammer to punish non-compliant contractors and any subcontractors that contractor is responsible for. Some examples of those penalties include:
- Paying of back wages and fringe benefits to employees
- Termination of the contract
- Personal liability of company officials
- Prohibition from all government contracts for a three-year period
- Withholding payments due to the contractor
Developing a benefits plan that is flexible to your needs and keeps you compliant will allow you and your employees to save money, which keeps you competitive! That’s what we do at Boon.