The contents of the following blog come from our YouTube video.
For firms that are new to prevailing wage, understanding the terminology used on public works projects is an important first step toward compliance. One of the most common terms contractors encounter is classification. But what exactly does a classification mean, and how does it determine the wage rate an employee should receive?
A classification, sometimes called a “craft” or a “trade,” identifies the specific type of skilled work being performed on a public works project. Understanding how classifications work can help contractors determine the correct prevailing wage rate and avoid potential compliance issues.
What is a Classification?
A classification is the specific type of work being performed by a worker on a prevailing wage project. Common classifications include Laborer, Electrician, Carpenter, and Operating Engineer.
When determining the appropriate prevailing wage classification, the work being performed is more important than an employee’s job title. Prevailing wage is generally based on the actual work being performed rather than what appears on an employee’s business card, job title, or paycheck stub.
This distinction is important because two workers with the same job title may need to be paid under different classifications depending on the work they perform.
For example, consider a worker who is digging trenches and moving materials by hand. That work may typically fall under a Laborer classification. If that same worker operates an excavator to perform the digging, the work has changed and may instead fall under an Operating Engineer classification.
The tasks being performed determine the classification.
Classifications Can Be Further Divided by Work Performed
Some classifications may be divided into additional groups based on the specific type of work being performed within a trade.
For example, a Laborer who is shoveling asphalt may fall under a different group than a Laborer performing traffic control. Although both workers may generally be considered Laborers, the specific duties they perform can affect the applicable classification.
This is why it is important to look beyond an employee’s general job title when determining the appropriate classification for a prevailing wage project.
Why Do Classifications Matter for Prevailing Wage Compliance?
Correctly classifying is an important part of determining the correct prevailing wage rate for a worker.
A prevailing wage determination generally provides wage rates for different classifications of laborers and mechanics. Contractors must identify the classification that corresponds with the work their employees are actually performing in order to determine the applicable wage rate.
A mismatch between the work being performed and the classification being reported can create compliance issues. For example, if an employee is paid under a lower-tier classification while actually performing higher-skilled or differently scoped work, the employee may not be receiving the appropriate wage rate.
Misclassification is one of the issues that can arise during certified payroll audits.
Accurate classification also plays an important role in payroll reporting and recordkeeping. Maintaining documentation that supports the work employees performed can help demonstrate why a particular classification was used.
Classification and Certified Payroll
Classification is also reflected in certified payroll reporting. When employees work on projects subject to prevailing wage requirements, their classification is part of the information used to document their wages and hours.
Keeping accurate timecards and descriptions of the work performed can help support proper classification. This becomes especially important when an employee is capable of performing work across multiple trades or classifications.
For example, an employee may perform work exclusive to a Laborer classification on one day and work exclusive to a Carpenter classification on another day. The employee may therefore be reported under the applicable classification for the work performed on each day.
Accurate records provide supporting documentation for the classifications reported on certified payroll.
What Is the Connection Between Classification and Wage Rates?
Once the appropriate classification has been identified, it becomes a starting point for determining the correct prevailing wage rate for the project.
Prevailing wage determinations can include different rates for different classifications. The applicable rate may also include additional requirements, such as fringe benefits or other provisions associated with the classification.
Because of this, selecting the correct classification is more than simply choosing a job title. It is an important step in determining the amount an employee may be owed.
Conclusion
A classification is defined by the work being performed, not simply by the worker’s job title. Sometimes referred to as a craft or trade, a classification identifies the type of work being performed and serves as a starting point for finding the correct prevailing wage rate for a project.
Understanding classifications is an important part of prevailing wage compliance. Contractors should evaluate the actual tasks, tools, skills, and materials involved in the work to help determine the appropriate classification and maintain accurate payroll records.
Have questions about prevailing wage classifications or compliance? Let’s get in touch.
