Understanding Prevailing Wage Rates, Compliance and Preparing for New Regulations in 2021

Last Updated on February 23, 2023

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.  

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.  

Envoy is pleased to provide you this information, which was prepared in collaboration with Catherine Gillespie, who is a Supervising Attorney at Corporate Immigration Partners, LLP (www.corporateimmigrationpartners.com), Envoy’s affiliated law firm. 

Content in this publication is not intended as legal advice, nor should it be relied on as such. For additional information on the issues discussed, consult an Envoy-affiliated attorney or another qualified professional.