Union Payroll vs Prevailing Wage Payroll: Complete Comparison

Two Payroll Systems People Mix Up

People outside construction use "union payroll" and "prevailing wage payroll" like they mean the same thing. They don't. Different legal sources, different people running them, different compliance rules. And if you're a union shop doing federal Davis-Bacon work, you're handling both at the same time.

Let's break down how each one works, where they overlap, and run a real calculation so you can see how they hit a paycheck together.

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How Union Payroll Works

Union payroll runs off a Collective Bargaining Agreement (CBA) negotiated between a local union and a contractor association (or an individual contractor). The CBA spells out:

• Wage schedule: Hourly rates by classification, experience level, and year
• Fringe contributions: What the employer pays into joint trust funds
• Dues: Regular dues and working dues (a percentage of gross wages)
• Apprentice ratios: How many journeymen per apprentice on a jobsite
• Overtime rules: Daily OT, double-time, shift differentials, travel pay

Dues and Working Dues

Union members pay regular dues — a flat monthly amount — directly to the local. Then the contractor also pulls working dues out of each paycheck. That's usually 1-4% of gross wages, and it gets sent to the local on the worker's behalf. Working dues are a deduction from the worker's pay, not an employer expense.

Trust Fund Contributions

Unions run joint labor-management trust funds for health & welfare, pension, vacation, apprenticeship training, and industry advancement. The contractor pays a per-hour-worked amount (not a percentage of wages) into each fund, per the CBA. These are employer expenses. Not wages, not deductions — the worker never sees them on a paystub.

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How Prevailing Wage Payroll Works

Prevailing wage payroll is driven by government wage determinations — federal Davis-Bacon rates on SAM.gov, or state prevailing wages published by state DOLs. A determination sets two numbers:

• Base rate: Minimum hourly cash wage for each classification
• Fringe: Hourly fringe benefit amount (cash or benefit contributions)

That's the whole structure. No working dues, no trust funds, no CBA. The contractor can pay fringe as cash or as contributions to a bona fide benefit plan — whichever is cheaper or easier to administer.

Union Fringes vs Prevailing Wage Fringes

When a union shop does federal work, their trust fund contributions usually satisfy the Davis-Bacon fringe obligation — as long as the total matches or beats the required fringe rate. But there are some wrinkles:

• Union contributions are per-hour-worked, but some unions pay for all hours (OT included) at straight time, others at premium
• DOL only credits contributions to bona fide benefit plans. Industry advancement funds and political action contributions don't count
• Apprenticeship training fund contributions do count toward fringe
• Vacation funds count — but only if the worker actually receives the vacation. A sham deferral won't fly

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How Union Payroll Feeds Certified Payroll

When a union shop runs Davis-Bacon payroll, the weekly WH-347 has to show:

• Column 6: Actual rate paid (the union CBA rate) + fringe
• Column 7: Gross earnings
• Column 8: Deductions, including working dues
• Column 9: Net pay
• Statement of Compliance: Either (4a) — fringes paid to funds — or (4b) — fringes paid in cash

Page 2 of the WH-347 (the Statement of Compliance) requires you to list each benefit fund and the hourly rate you contributed. Our WH-347 checklist walks through the whole thing, and our WH-347 form generator will auto-fill both pages from one set of hours.

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When an Open Shop Does Prevailing Wage Work

An open (non-union) contractor on a Davis-Bacon job has no CBA to wrestle with, which makes some things easier and some things harder. They have to:

• Pay each craft at least the prevailing base rate in cash
• Pay the fringe in cash or contribute to a bona fide benefit plan
• Resist the temptation to call skilled workers "laborers" to save a few bucks. Misclassification is the #1 DOL audit finding. Every time.
• Document bona fide benefit plans carefully. A self-insured "plan" that doesn't provide real benefits will get thrown out

A lot of open shops on public work discover their normal pay scale is below prevailing wage, so they have to bump wages up for the duration of the job. Our post on Understanding Davis-Bacon covers the coverage basics.

Apprentice Ratios: Where Union and Davis-Bacon Line Up

Davis-Bacon lets you pay apprentices below the journeyman rate, but only if:

• The apprentice is registered in a DOL-approved apprenticeship program
• Your crew meets the program's journeyman-to-apprentice ratio (often 1:1)
• The apprentice is paid at the program's step-level percentage of the journeyman rate

Union and Davis-Bacon apprentice ratios usually line up, because most union apprenticeship programs are already DOL-registered. Open shops have to enroll their apprentices in an approved program — usually state-run — to get the reduced-rate benefit.

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Practical Calculation Example

Scenario: Union carpenter, 40 regular hours + 8 OT hours in a week, on a federal Davis-Bacon jobsite in Cook County, IL.

CBA rates:

• Base: $44.25 / hour
• Fringe to funds: $28.90 / hour (health, pension, vacation, apprentice training)
• Working dues: 2.0% of gross wages

Federal Davis-Bacon Cook County carpenter rate: $42.00 base + $26.50 fringe

Pay calculation (40 reg + 8 OT):

• Regular wages: 40 hrs × $44.25 = $1,770.00
• OT wages: 8 hrs × $44.25 × 1.5 = $531.00
• Gross cash wages: $2,301.00
• Fringe contributions (employer expense): 48 hrs × $28.90 = $1,387.20
• Working dues withheld: 2.0% × $2,301.00 = $46.02
• Net check (before federal/state/FICA taxes): $2,301.00 - $46.02 = $2,254.98

Compliance check:

• Actual base rate paid ($44.25) ≥ prevailing base ($42.00) ✅
• Fringe contributions ($28.90/hr) ≥ prevailing fringe ($26.50/hr) ✅
• Total compensation ($73.15/hr) ≥ prevailing total ($68.50/hr) ✅

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Quick Recap

• Union payroll runs off a CBA. Prevailing wage runs off a government determination
• Union shops on federal work have to satisfy both — usually handled by paying CBA rates
• Union trust fund contributions usually count toward Davis-Bacon fringe, but only for bona fide plans
• Open shops can pay fringe in cash or into a benefit plan
• You need a DOL-approved apprenticeship program to pay below-journeyman rates
• Working dues go in the deductions column on WH-347. Trust fund contributions go on the Statement of Compliance