For contractors working on Davis-Bacon Act (DBA) or state prevailing wage projects, managing their monthly Department of Labor (DOL) compliance can be a costly and difficult task.
Many DBA compliance errors go on without the contractor knowing. In 2022, the Employee Benefits Security Administration (EBSA) of the DOL recovered over $1.4 billion for plans, participants, and beneficiaries. Not all these funds were recovered from H&W plans, but many govcons were part of the population that were audited and fined. In fact, the number one cause of a DOL audit for prevailing wage contractors is an employee filing an anonymous complaint with the Wage and Hour Division. Don’t be a statistic for the DOL in 2023!
If you have a small DBA contract with one job classification per employee that is based in one locality, compliance management is not that big of a time and cost burden for your HR department.
However, when your employee population grows and there is a combination of DBA work with private or state prevailing wages involved, the compliance burden and risk of errors (and ultimately a DOL audit) increases exponentially. Eventually, the additional overhead cost associated with managing DOL compliance will have a negative impact on contract profitability.
For contractors working on non-CBA contracts, here are the top five DBA compliance errors that we have been seeing in the industry:
- Not annualizing DBA benefits, instead taking the full amount of the health benefits against the fringe.
- Applying wage and fringe rate changes either too soon or too late, according to the contract.
- For employees working on multiple contracts, not applying the specific rules for the hours worked on each contract:
- DBA vs. private work or state prevailing wage projects can have different rules for what benefits can be taken against the fringe.
- Not following limits on benefits
- Annual retirement contribution limits.
- Maximum hours allowed for benefit credits.
- Not using the actual employer benefit cost per employee. Average benefit costs cannot be used for determining the amount of premium to be taken against fringe dollars.
So, what is the solution? With many HR departments understaffed and overworked, how do you control overhead and ensure your compliance reporting is in accordance with all DOL regulations every month?
Regardless of how many employees you have on contract, DOL compliance is critical to the short and long-term success of prevailing wage contractors. As your workforce grows, the complexity and labor hours required to manage varying wages, hours, job classifications, benefits, fringe allocations, etc., also grows.
It is here that IT can step in and provide programming that eliminates human error and reduces administrative workload. With the proper technology, the role of the compliance manager should involve more oversight than heavy lifting.
At AXIM Fringe Solutions Group, we believe utilizing technology is the solution to managing the complexity of DBA compliance. Technology can improve operating efficiency, control overhead costs and eliminate the manual and outdated compliance processes that are detrimental to federal and state prevailing wage contractors.
For example, to improve efficiency, electronic integrations are available to link payroll, benefits, ERP systems, etc., to avoid the constant uploading of employee information. To reduce complexity, coding can be used to identify each employee by their contract and job specifications. Tracking their applicable hours (straight time, OT, vacation, sick leave, PTO, hours banking, etc.) by contract, by location, and job classification can also be built into the compliance programming. Fringe dollars can be tracked and allocated, to the penny, to each employee’s benefits And, at the end of every month, employees can get access to their health and welfare statements for a complete view of their hours worked, fringe dollar allocations and benefit information.
With AXIM’s compliance portal, FringeSecure, we are confident that we have developed the technology that encompasses all the above functionality, plus much more. Our goal was to provide contractors with a completely accurate, fully secure, 360 view of their employees’ benefits information to eliminate human error, lower contract G&A, and improve operating efficiency.
With FringeSecure’s technology, AXIM can provide a guarantee to our clients that our compliance services will be accurate and in accordance with all DOL regulations. If we make a mistake, it is on us. This guarantee has been a key advantage for primes that want to leverage AXIM’s technology to be sure their subcontractors are also 100% DOL compliant.
In conclusion, with many large infrastructure projects starting in 2023 and beyond, DBA contractors will be very busy competing for and winning new contracts. As businesses move forward into a technology-driven future, the days of compliance spreadsheets and manual data entry are coming to an end. It is AXIM’s goal to provide the construction industry with options that can process DBA, SCA and state prevailing wage compliance more efficiently and accurately — ensuring a successful future.
About AXIM Fringe Solutions Group, LLC
Founded in 2011, AXIM Fringe Solutions Group, LLC is a Service-Disabled Veteran Owned Small Business (SDVOSB) and the nation’s first and only H&W administration and compliance firm that is also a government contractor. AXIM specializes in Davis Bacon Act (DBA), Service Contract Act (SCA), and ATSA DOL compliance management, benefits administration, and retirement services. AXIM’s business model for supporting government contractors is built on four key principles: improving contract profitability, guaranteed DOL compliance, increasing operating efficiency with technology, and benefits consulting.