Understanding Prevailing Wage Rates, Compliance And Preparing For New Regulations In 2021 – Employment and HR

What is Prevailing Wage? 

The U.S. Department of Labor (DOL) defines prevailing
wage as “the average wage paid to similarly employed workers
in a specific occupation in the area of intended employment.”
Employers can find the wage rate for their occupations by
requesting the information from the National Prevailing Wage Center
(NPWC).  

Who is Affected by Prevailing Wage?  

The requirement to pay minimum prevailing wage rates applies to
most employment-based visa programs that the DOL oversees.
Additionally, H-1B, H-1B1 and E-3 employers must pay their
employees either the prevailing wage or the actual wage paid to
workers with similar qualifications and skills, whichever is
higher.  

How are Prevailing
Wage Rates Determined?  

Prevailing wage rates are determined by the DOL using the
Occupational Employment Statistics survey, which finds prevailing
wage rates for certain occupations based on the geographic location
of their intended area of employment. U.S. employers are required
to show that they will pay their foreign workers the higher rate of
either the actual wage paid to workers with similar experience and
qualifications or the prevailing wage rate. 

Currently, the DOL uses four levels of wages that are determined
on a scale based on a position’s duties and
requirements: 

• Level I: Entry-Level Employees 




• Level II: Qualified Employees 




• Level III: Experienced Employees 




• Level IV: Fully Qualified Employees 
   

The fourth category, fully qualified employees, applies to
workers with the experience necessary to modify, plan and approve
standard procedures. 

Obtaining a Prevailing Wage Determination
(PWD)  

Employers have three options to obtain a prevailing wage
determination (PWD). First, they can obtain a PWD from the National
Prevailing Wage Center (NPWC). Employers may also obtain
a PWD through another legitimate source, such as the Online Wage
Library (OWL) system.  

A PWD may also be obtained through
a private survey conducted by an independent
authoritative source, as authorized by the DOL Appropriations Act
of 2016. The survey may be used to meet wage requirements,
even if OES survey data are available, provided the wage survey is
conducted by an authoritative, independent source. The survey may
be either a government survey that is not issued or conducted
by the DOL or a nongovernmental survey conducted
by a private organization or individual. 

Employers should note that they will have “safe-harbor
status” if they obtain a PWD from the NPWC for H-1B, H-1B1 and
E-3 employees. If the employer’s wage compliance is
investigated, the DOL’s Wage and Hour Division will not
challenge the prevailing wage’s validity, provided it was
applied correctly based on occupation, skill level and geographic
area. The new regulation allows employers to continue using
alternate wage surveys rather than DOL prevailing wage data for
labor certification and labor condition
applications (LCAs). 

The prevailing wage processing
time is usually between three to
six months. The DOL’s PWD processing times are updated each
month.  

Upcoming Changes to the Prevailing Wage Rule  

On January 14, 2021, the DOL issued a revised final rule requiring
employers to pay their skilled foreign workers higher wages. The
new rule restructures the prevailing wage system for employers who
are hiring H-1B, H-1B1 and E-3 visa workers using LCAs and
will also impact the prevailing wages for the employment based
permanent residence process. 

On March 12, 2021, the DOL confirmed that it will delay
the effective date of the final rule until May 14,
2021.  

The new rule will encompass the following changes: 

• Level I will move from the 17th wage percentile to
  the 35th percentile 




• Level II will move from the 34th wage percentile to
  the 53rd percentile 




• Level III will move from the 50th wage percentile to
  the 72nd percentile 




• Level IV will move from the 67th wage percentile to
  the 90th percentile 

The new prevailing wage rule will still be implemented
in four phases, starting on May 14, 2021. All PWDs and LCAs
issued during the first phase, which runs from May 14, 2021 through
June 30, 2021, will be subject to current prevailing wage levels
and percentiles. Phase 2 begins on July 1, 2021 and ends on June
30, 2022. The new prevailing wage minimums will be fully effective
during Phase 3, which starts on July 1, 2022 and continues from
there.  

Employers should note that special adjustments to prevailing
wage calculations will apply between July 1, 2021 and June 30, 2024
for H-1B workers who were beneficiaries of an approved I-140
immigrant petition, or who were eligible for a post-sixth year H-1B
extension as of October 8, 2020, which is when the DOL’s
interim final rule on prevailing wage was issued.  

Originally published 18 March 2021

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.