If you secure a federally-funded construction contract, you’ll need to pay your workers the prevailing wage. The exact prevailing wage varies depending on skill level, role, and a host of other factors. It’s critical to classify your workers correctly if you want to avoid severe financial implications.

Many business owners ignore the severity of incorrect classifications. One of the most common examples of this is an employer labeling a skilled worker as an unskilled laborer. In doing so, they can often pay their employees a lower rate.

In some cases, this may be a mistake. If you have a skilled laborer working as both an unskilled laborer and tradesperson, you need to pay them according to the hours worked in each role. You must allocate the correct number of hours to each job type – you cannot simply pay them the lower wage because they fill multiple roles within your company.

You must also realize that misclassification does much more than violating the Davis-Bacon Act. It may also violate the False Claims Act.

Not abiding by correct classifications can have dire consequences. In fact, some business owners have been sued because of the misclassification of staff. The financial repercussions resulting from a lawsuit are much more significant than the savings from paying staff a lower wage.

While paying the prevailing wage can be difficult for businesses with small margins, there are avenues you can take to reduce your financial exposure. By using a Davis Bacon Pension Plan, you can offset some costs associated with higher wages.

At Davis-Bacon, we help our clients access industry-leading Davis Bacon Pension Plans. If you’re hoping to improve your business’s cash flow when you’re working on government contracts, our arrangements will help you reduce your payroll tax liabilities. Contact our team at (425) 889-8855 if you have any questions about this unique pension plan.