What is a Prevailing Wage?

Mary McMahon

A prevailing wage is a wage which reflects hourly wages, benefits, and overtime paid to people who work in similar industries within a particular region. Prevailing wages are usually based on data collected on people who work in a major metropolitan area within a particular county or province. This data is used to set wage requirements, and more generally to gather information about rates of pay in various fields.

Overtime is factored into determining a prevailing wage.
Overtime is factored into determining a prevailing wage.

Prevailing wages include hourly wages, overtime payments, tips, and benefits such as health care, payments into retirement accounts, childcare benefits, and paid leave. This information is gathered by a government agency which handles labor and employment issues, and it is compiled in a large database which can be used for comparisons. The prevailing wage in a particular area often reflects the cost of living, and the demand for specific types of labor.

Some nations have a prevailing wage law which is designed to protect workers. Under such laws, people must be paid the prevailing wages for their type of employment. Foreign workers must be offered a prevailing wage as part of the terms of their work visas under such a law. This requirement is designed to prevent companies from hiring foreign workers to avoid paying the prevailing wage, thereby cutting costs.

Information about the prevailing wage rate can be obtained directly from government labor agencies. Typically, a table is provided, showing the high and low wages within a particular industry, as well as an average wage range. Detailed statistics which break down jobs very precisely are very common. For example, rather than just maintaining information about “construction,” prevailing wages for carpentry, pipe fitting, plumbing, brick laying, electricians, and so forth would be kept.

In regions where a prevailing wage law is in effect, employers may be required to file for a prevailing wage determination, which tells them the prevailing wage for the types of employees they are handling. A prevailing wage form may also need to be filled out for every new project, specifying information about employees and their rates of compensation.

Falsifying information on prevailing wage forms can lead to serious legal consequences. Government agencies may challenge people who are submitting questionable forms, as can trade unions. Many unions use wage transparency as a bargaining tool, and they tend to keep a close eye on prevailing wage information in the interest of protecting their members.

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