Featuring Cody Orr, Sales Consultant at HR Butler
Cody spends most of his week working with construction, mechanical, and trades operators across Ohio. We asked him to answer the questions that come up most when talking about HR issues, such as prevailing wage and local taxes.
Q: What’s the one mistake you see contractors make on prevailing wage jobs?
Coding. Not the IT kind. The pay-code kind.
Every hour of every worker on a prevailing wage job has to be tied to the right classification. If you’ve got a journeyman electrician and he’s classified as a “helper” to save twelve bucks an hour, that’s a situation that can lead to back-wage orders, penalties, and audits. The rules live in Ohio Revised Code Chapter 4115, and the Ohio Department of Commerce enforces them. Every trade has set classifications and set rates by county.
The bigger trap is the mixed day. Say your crew is on a school district remodel in the morning and a private warehouse buildout in the afternoon. The schoolwork is a prevailing wage job and the warehouse is not. If your timecard just says “8 hours,” you’re already wrong. Those hours have to be split by job, by code, and by rate. Most payroll systems can’t do that out of the box. The shops that get this right have a pay code set up for every prevailing wage project before the first hour gets worked.
For context, prevailing wages generally apply on most public projects over thresholds of $250,000 for new construction or $75,000 for reconstruction, but these are not set in stone numbers. If you’re biding for public work in Ohio, you’re likely in scope, but always try to confirm with the Ohio Department of Commerce before submitting a bid if possible.
Q: Where does the fringe benefit piece get people confused?
The word “fringe” is the problem. People hear it and think “extra.” It isn’t extra. It’s part of the built-in wage.
The prevailing wage rate is made up of two major components, Base hourly wage and the Fringe benefits. You can pay the fringe in cash, or you can pay it as a bona fide benefit, meaning real health insurance, real retirement, real training contributions. If you pay it as a benefit, you have to annualize the math per hour and document it. If you pay it as cash, it now becomes taxable wages, and you owe payroll tax on it.
Where shops lose money, they pay benefits and forget to take the credit. Or they take the credit but can’t support the math with documentation. Both create exposure to the company.
Q: Let’s switch to local taxes. Why is Ohio so confusing?
Ohio has over 600 municipalities with their own income tax rules. No other state comes close. Most withholding flows through RITA or the CCA, but plenty of cities run their own collection. Every one of them wants their cut when work happens inside their limits.
For a roofer or an electrician with crews jumping from job to job, you can hit five or six tax jurisdictions in a single pay period.
Q: What’s the 20-day rule and why does it trip people up?
It’s in Ohio Revised Code 718.011. If your employee works in a city other than your principal place of business for more than 20 days in a calendar year, you have to withhold tax for that city starting on day 21.
The trap is that people think day one is free. Day one is not free. Day one counts toward the 20. And once you cross the threshold, the rules around those first 20 days get messy.
Travel days count. Training days count. A two-hour service call counts. I’ve had clients who didn’t realize they were three weeks behind on a city until the bill showed up.
Q: What’s a small contractor/business supposed to do about all this?
Three things, in this order.
First, get the wage determinations from the Department of Commerce before you bid. Don’t guess. Don’t use last year’s rates. Pull them for the county the project is in, for the right trade classification.
Second, set up your payroll system to handle it. Separate pay codes for each prevailing wage job. Daily location tracking for tax purposes. If your software can’t do that, your software is the problem.
Third, find somebody who lives in the space so you don’t have to. That’s our job. We run certified payroll, multi-city withholding, school district tax, and apprenticeship tracking for trades clients across the state on the isolved platform. One system, one point of contact, and the integrity to support your interests.
If you want a sanity check on what you’ve got in place right now, give me a call. The first conversation is free and usually shorter than people expect.
Cody Orr is a Sales Consultant at HR Butler. Reach the team at hrbutler.com or call our Dublin office.