Prevailing wage work can open the door to larger, more profitable projects, but it can also expose contractors to serious risk when certified payroll, fringe calculations, and documentation are handled inconsistently. In this episode of The Cost Codes Show, Ryan Gilmore sits down with Jack Biltis, President and Co-founder of eBacon, to break down what trade contractors and their accounting partners need to know to stay compliant and protect margin on prevailing wage jobs.
Drawing on years of experience helping contractors navigate certified payroll, Jack explains why even minor administrative mistakes can trigger outsized penalties, how strong contractors build a repeatable process from job setup through payroll reporting, and why accurate time collection is the foundation for everything that follows. He also unpacks the moving parts behind classifications, wage determinations, fringe credits, apprenticeship requirements, and the documentation needed to survive an audit.
Whether you are taking on prevailing wage work for the first time or trying to tighten up an existing process, this conversation offers a practical look at how better systems can reduce risk, save time, and give both field and office teams more confidence.
Knowify is financially focused job management software for trade contractors. Schedule time to talk to us: https://knowify.com/request-demo/
Learn more about eBacon’s certified payroll solutions: https://www.ebacon.com/
Hello, everyone. Welcome to the Cost Code Show presented by Knowify. This is a podcast where we focus on helping trade contractors run and grow their business. Today, I'm excited to be joined by Jack Biltis. He's the CEO and one of the founders of eBacon, a payroll technology and service provider focused on prevailing wage and certified payroll for the construction industry. Jack has a ton of experience helping contractors stay on top of the complexities of prevailing wage work, and he's gonna share that stuff with us today. So how are we doing today, Jack? Great. How are you doing? Very, very good. A little bit cold here in upstate New York, but I'm hanging in there. So holidays are right around the the the quarter. You should try Phoenix. Yeah. So for folks who don't know you yet, Jack, can you give us a quick, look at your background? How'd you kinda get into the the prevailing wage certified payroll world? Sure. Our company, eBacon, we've always been in the payroll space for twenty something years. And about ten years, we and we've always done a certain amount of prevailing wages, certified payroll, and they're all kind of synonymous terms for for today's conversation. And so we had government contractors, construction companies doing some kind of government work. They did a little bit of certified payroll, and we did what most other payroll companies would do. We would print out the main reports and things like that. Not too heavy. We had a client in twenty seventeen reach out to us and needed a whole bunch of additional features. They were doing a great amount of prevailing work, and it was taking them seventy, eighty hours a week just to get payroll done and all the reports and all the calculations and everything. And we always like the challenge, so we already developed our own software. So we made a couple changes and realized that we do a whole bunch for them. And from that, we said, what we do for them, this is just an Arizona project. And we said, oh, this is, you know, easy enough. And from there, we said, this this isn't that terrible, so let's let's get a little bit bolder and go into California. And that how much worse can that be? And then we found that the California is a couple orders of magnitude more interesting than every other place in the world. So we decided to take all the pieces of our software, the payroll, the time and attendance, the benefit calculations, four zero one k, all these pieces that we already independently created. And by modifying them, having them fit together a little different, we felt we were in a unique position to just solve everybody's problems. And on average, a client that goes from fifty, sixty hours a week dealing with payroll and all that stuff, We get it automated. We get it shrunk down to about twenty minutes a week. So we've completely headed into that in the last ten years and focused on making people's lives a lot easier. That's amazing. That's a that's a serious reduction in in admin time time spent. I'm sure you have a lot of made a lot of folks very happy with that. Yeah. It's been great. So what kinda yeah. So what kinda contractors do you typically work with? Like, what kinda trade sizes, that kinda thing? Is it specialty trades or GCs or all of the above? It's a little bit of all of the above, but, really, it's people actually performing their own work. We have two products. We actually have three products. Ninety percent of our clients are specialty contractors where we're doing everything from soup to nuts where their employees are punching in to our system. We know based on the job that the employee is working and the task that they're doing and where the where the county where what county the job's in and all those things, what rates to use. So from the punches, it automatically goes into we calculate all the required rates out of the hundred and eighty thousand different rate determinations that are out there. We calculate all that. We know all their benefits and what they're offering employees from their from health insurance, four zero one k, to time off, to all those things. So we automatically calculate what the credits against those rates should be. So that automatically happens in right from time and attendance, you hit a button. The net rate from all that stuff for each employee, for each punch goes right into our payroll system. We run the payroll. And then when payroll's done, we generate all the certified reports, California one thirty ones, WH three forty sevens, LCP uploads, all that stuff. So we do everything soup to nuts for ninety something percent of our clients. The other ten percent are GCs where they need to stay compliant, and so they have their subs submitting into our system and so to make sure that they're getting paid all the right rates and all that stuff. So ninety percent of the time, we're doing all the work. Ten percent of the time, we're a submission system to help track and make sure everyone's getting paid the right rate. And then our third product is a trust system to save employ clients money, but we can talk about that later. Well, it's, yeah, it's a very comprehensive kind of end to end solution, which leads me into my next question. You mentioned this time savings when we got started, but, when a contractor comes to you, what are they really trying to solve for the most part as far as certified payroll is concerned? Like, what's the kind of the big challenge? What are they trying to improve? Biggest thing is compliance. Besides the amount of time it takes them to just go through all the steps before they come on with us, it's compliance. We had a client that made some very, I would describe, innocent administrative mistakes in calculating some rates before they came on with us. They had hundred employees, and because of a couple of mistakes that added up to about seventy thousand dollars of underpayments across two years, state of California fined them seven million dollars. So the penalty that the government likes to get you for is huge. Making small mistakes adds up huge. They got that down by dealing with lawyers over a couple years from seven million dollars to seven hundred thousand dollars. But then when we met them, it wasn't a hard sell because they recognize that not only is it easy to make a lot of mistakes, the calculations are so complex, the, between the rates and the credits and all that stuff, but there's so many people out to get you. You got the government regulators. You got the unions. You got the whistleblowers. You got the in California, all the PAGA lawsuits. It's just too many ways, too many people trying to get you to fail. So you they need someone to stay in compliance. And, also, a lot of companies are getting into this for the first time, and they just don't know what they don't know. So they use us to help them get up and running in the prevailing wage world. Got it. So with those kind of penalties, it sounds like having a really strong kind of process is a key kind of component to stay in compliant compliant, I should say. Could you kinda break down, like, thinking about your best run kinda clients, what an ideal certified payroll process might look like, you know, week over week or or month over month? It'd just the, like, the mechanics of how it should work? Yeah. Yeah. Sure. Yeah. Absolutely. We've got it down where every time a client sets up a new job, let's say they're using QuickBooks or whatever accounting system they use, the job automatically funnels into our system. Our system then asks a couple extra questions like, okay. When was this job advertised or awarded? We already know the kind of work the client does. We need to know the county. And then from that, we direct the client into, okay. It's one of these three, determinations that, wage determinations that the government publishes that you'll need to use. The client looks at it and says, okay. This is the right one. But a lot of times, don't get guidance from the GC or from the government agency of what to use. So we help them figure out what determination to use. They pick it. They have multiple types of work they do. They they pick a couple determinations. At that point, they're done with their job setup, and that could be done well before they ever get into the job. As far as employees, they set their employees up well in advance because that's just kind of part of the normal payroll and benefit management function. And then, you know, naturally, they're gonna manage who has what insurance and who gets PTO just because, again, just part of the normal flow of paying your employees. So all of those things we try to keep as as low touch as possible where just organically, we already have the information with just a couple questions. At that point, employees based on their GPS location are when they're at a job or based on their schedule or limiting what they set up in their schedule. When they're at their job, they can pick they can clock in, clock out their tasks. Just we really try to make it for a client to look like just regular old payroll. You just have employees just self reporting, switching between one task and another. At one point, you're excavating a hole, and then ten minutes later, you might be putting a conduit in. So just change a task and do that. So you wanna get the employees get the information accurate as possible when they're punching. And then the managers or supers approve that. And at that part, all the hard work's done. The system then by the time the administrator is ready to run payroll, all the rates and calculations and fringe benefits and all those things are done. So unless they have bonuses or commissions to pay, it's really just, okay. Everything's got approved. Run payroll. And then gives you all the reports because when you set up the jobs, you told the jobs which jobs need what reports. So it just generates all the reports, and then they can just submit them off, and that's done. So we really try to make it where they're not having to think about this stuff. It's really set it and forget it. Nice. I like that. It sounds like there's a fair amount of coordination between, either the field guy or the field team and the in office team to kind of make these jobs run smoothly. Is there any kind of tips you might be able to offer based on what you've seen as far as kind of keeping these two different groups, like, in sync with one another, making sure the field guys are entering time or the job classifications properly and making sure that gets back to the the folks running payroll, you know, accurately and and properly and things like that. Yeah. In most situations, that coordination's a little bit tougher than than the way we focused it because there are two different groups, two different timelines trying to go back and forth, and you never get good information as far as what rate if this job was even a prevailing job, all that stuff. We've tried to revisit the whole way it works and just when the job's set up, it pretty much limits the the field people on what, know, what tasks the person can do. And we don't have them get complicated until this is a labor group four category or labor group two. At that point, those decisions should have already been made. So we just say, what are you doing? Is there a task for, you know, painting? Is there a task for cleaning debris? Whatever the person's tasks are, we then work with the field off or with sorry, with the office who has to deal with the compliance side. We've mapped out the simple tasks to actual the classifications and the groups and all those things. So we really try to make it for the field guys just simple. Just tell us what you did at the times that you did it. Just punch in like normal. You don't have to know how the sausage is made behind after that. And then as long as the hours are accurate, then the punches are relatively accurate. All the hard work gets done by our system and as function of processing payroll. The biggest area where that becomes contentious in a lot of times is when information wasn't right the first time, and they find out after, oh, when they bid the job, they didn't realize it was a prevailing job. They no one mentioned it. Or the guy punched in hours the guy forgot to punch in his hours, or someone punched in that they were doing this type of task, but they're really doing a different type of task, or the rates were wrong or something like that. The biggest conflict that those two departments have is information changing after the fact, and it the construction world, it just does. He that's just a reality. So it took us a little while to understand that dynamic, and we built the whole restitution system where, okay, if anything changes, maybe it's just your general contractor saying, hey. We don't want this to be labor group two engineering. We think it's labor two crew labor group two building, and that gets changed. So it's as simple in our system as when it go in after the fact, after everyone's paid, the report's been submitted, just change it. Let the system reprocess. The system will tell you what it originally paid, what it now needs to pay, what the difference is. Hit a button. It'll pay the difference, run new reports, and that's it. So you really wanna get the people out of the whole back and forth thing and saying, okay. If something changes, let the system just do the hard work for you. And that right there, we had a client where the state came in. They decided that they wanted to change something arbitrarily just to show that they could, and they changed everybody's punches for a day. And it would have normally taken the client three days to recalculate and reprocess and figure out taxes and all that stuff, and we got it down to about fifty seconds where they just mass change everything, hit go, they redid everything, and no work to be done. So that the automation is the main thing that'll keep the two different divisions in tow with each other. Got it. Okay. I wanted to also talk about we've been talking a lot about, I think, folks who are already kinda doing this work and and and kinda, like, common mistakes and things like that. For someone who might want to like, a contractor that might wanna get into prevailing wage work for the first time, what are some kinda things they should know to set themselves up for, you know, success off the jump? The main thing everyone says is documentation. You gotta make sure that, for instance, the employee's hours are are properly documented that if you have an audit and when you have an audit after the fact that you can show proof that's exactly what the employees punched in for, that in California, they took their required breaks, that they worked where they needed to work, that if you had apprentices, that they they show that there was a journeyman on staff at the same time. So all these things you have to properly document. Nowadays, it's be the government's made it so difficult that you really need an automated system to help with that. I would say for a new company coming in, we usually do a walk through. If they've done enough to at least bid the job and they bid it properly, then we really help them with, okay, what determinations you need to use? Are your classifications actually accurate? Should this be a a labor group two or a labor group four? Let's take a look at the determination and see what the scope of work is. So that's the kind of stuff where you really wanna set your groundwork on if you're using the right classifications, right determination? And, again, most importantly, do you can you trace back what you pay the guy to what he actually punched in, how you calculate the rates, and can you show proof that you paid him everything you need to pay him and that all the other things you need to pay to calculate your fringes, your four zero one k, and all that stuff went to the various places. So those are all fall into the category of recordkeeping. That's really what we've focused, solve that problem, especially for new companies that, you know, being able to prove that the two dollar and eighty seven cent credit you took for health insurance for this guy, how did you justify it? Okay. He gets four his insurance is four hundred dollars a month times twelve divided by twenty eighty. Okay. You come up with a number. This guy's employee plus spouse. His insurance might be more expensive. Being able to back into all those calculations and show to your GC or anybody else how you calculate, that's the your biggest thing, being able to prove every number that you have is right. Got it. Is there a way do you guys kinda recommend, like, sort of a path to kinda ease into this type of of work at all? Or I'm I'm wondering if it's easier to get started with, like, maybe a small like, a smaller job or or if, you know, it's with something like eBaking, it's possible to kinda, like, just jump in onto into a huge project, or do you kinda have, like, an on ramp you recommend for folks? Yeah. The on ramp, the difficulty of the certified stuff doesn't really change with size. If you can physically do the work for a large job and it's not gonna overwhelm your resources, then do as big a job as you can as you think operationally can handle. In some place like California, you have to the only change to your operations is that you have to deal with, like, apprenticeship and all that kind of stuff and talk about that in a second. You gotta make sure you either have apprentices working, which if you've only done private up to now, you might not have ever used apprentices, or you at least have to go through the process of requesting apprentices so that way you don't penalize even if you know apprentices ever show up. So, there's that's one example of an actual change to the operations of your construction site, making sure that you've bid enough to to cover the costs. An electrician in Arizona might make fifteen bucks an hour. Electrician in California might make twenty five bucks an hour. An electrician doing a prevailing job in California is gonna make fifty dollars an hour plus another thirty dollars of fringe. So that's eighty dollars of cost plus taxes and all that stuff. So you just gotta your biggest thing is if you bid it correctly and you and there's enough money in the job, then operationally, you'll be fine. All the compliance stuff, I would say, call us up, we'll walk you through it, and we can ramp you up pretty quickly. So I wouldn't worry about the size. Got it. You mentioned California and needing to have apprentices on-site. Could you maybe get into that a little bit more? Sure. So California is one of the harshest states that has an apprenticeship requirement if you're doing prevailing wages. And you gotta realize that prevailing wages, especially in the bluer states, are something that the unions think that they own. And so if you're a, a merit shop, a nonunion shop, and you're getting to the prevailing wage space, you're dealing in the union's territory, and they have lobbied the rule so that the rules make you pretty much comply with all things that the unions already could do. In terms of apprentices, in terms of paying these really high prevailing rates, in terms of skilled and trained workforce, all these things. So one example in California is, on average, you have to for every they wanna encourage apprenticeship. So for every five journeymen that you have a site or working a job, you have to have at least one apprentice. And then the ratio changes a little bit, but that's the general thumb. It's a five to one ratio. And if you don't, you get fined or you have to pay that apprentice a higher rate, and there's all kinds of trouble you can get into if you don't do that. The issue, though, is you can't always necessarily get an apprentice that might not be available, and you could either have your own if you're big enough company, you could either have your own apprenticeship program where you train them and or put them to an ABC or some of that and go through their training program, and ABC does a wonderful job with that. Or you could just dispatch apprentices, which means that you have to fill out a form called the DAS one forty and then a DAS one forty two, and you have to request apprentices. And even if the unions don't send you any apprentices, at least you filed your forms on time, and then you have a get out of jail free card. You said, I filed, and and I and whether I have apprentices or not for a particular job, I've met my requirement. If you didn't file, you didn't fill out one silly piece of paper, then all of a sudden, you're in for tens of thousands of dollars of fines on that same job. So just one example that we did probably back in twenty twenty, we just automated it where every time a California client starts a new job, it's automatically gonna email all the apprenticeship shops in that county, and then the client has proof that, yep, they did it. Now ninety nine times out of a hundred or ninety five times out of a hundred, they'll hear crickets. They won't get any apprentices, but at least they can show that they've met their requirements. If they do get an apprentice, then they gotta maintain ratios and stuff like that. It's not terrible, but it's definitely something that you can get in trouble if you don't do it right. Got it. Okay. Could you break down as well the concept of, like, job classification? Since we're talking about someone who's trying to get into this this type of work, I think that can be rather overwhelming. So maybe you can kind of break that down a little for folks. Sure. So Again, if that's possible. Yeah. Yeah. Job classifications, again, they tend to follow the union nomenclature in in that area. So what kind of trade are you? Are you a cement mason? Are you a laborer? Are you electrician? Multiple classifications. You do a lot of different things, a carpenter, all that stuff. To the extent, let's say, that you have employees doing laborers. So if you're doing things like carpentry, there's not a lot of subclassifications within there. It's, okay, you're a carpenter. You're a carp. You pull up the determination, and it'll list one type of carpenter, and maybe, like, bridge carpenter and other things that are a little bit more exotic, But one type of common carpenter that most people do for buildings, and then you're like, alright. That's it. You read the scope section. You're like, yeah. That sounds like what I do. Pretty straightforward, pretty easy. To the extent you're doing things like an operating engineer having running any of machinery, backhoes, and forklifts and that, or to the extent that you're a laborer, then they, if you look at any the determinations, it'll say, it'll have labor group one are these rates. Labor group two is this rate. Labor group three is this set of rates. And it'll go up to, let's say, labor group eight sometimes. And you look at the back of the termination that says, okay. Labor group ones are anybody that's and it'll give you a lot of different things that somebody could be doing that falls in labor group one. Labor group two is stripers and painters and this. Labor group three is and it'll give you and you need to basically look at out of all the things that fall into the different groups, okay. My people are generally doing this. And if they do a little bit of both, then if you can specify, okay, for this job, for this time, they're doing these things, which are maybe a cheaper labor code, and during this time, they're doing the more expensive stuff, and you can keep good records and split their time by the different tasks they're doing. Okay. Easy. Great. You get you pay the lower rate for some and the higher rate for others. If on the other hand, it's murky and a guy does a little bit of both and you can't really split out the hours, then you just gotta pay the higher code. And it's a couple bucks an hour one way or the other. So that's one thing we encourage our clients to do. Set up as many tasks in our system as possible. Use just normal English names that your employees would understand, and they'll pick what they're actually doing. And then let us set up the mappings of this goes to that goes to that, and keep it simple. The important thing is for your employees, keep it really simple. And let all the classifications and the rates and all that stuff just happen, all the complicated stuff happen on the back end. Got it. And where where can where do you actually get the wage classification or or wage determination, I should say, like, information, like all those rates? Is that something your GC would typically provide, or do have to go to, like, a third party or government website to get that kind of info? Government websites. They're pretty much all Got it. Published. In some cases, we have to actually call the government websites for some scheduled increase allocations, stuff like that. We actually have to call the California DAR or whatever. But for the most part, if it's a federal job, it's gonna be published Davis Bay Federals called Davis Bacon, which is where we get the name eBacon. We decided to do something fun from from an otherwise boring subject. But the federal stuff is published on the federal Department of Labor websites and then each state publishes their rate schedule. So, it's a federal job, you use the federal rates. If it's a state job, you use the state rates. If it's a joint job, you have to load them both in and pay the higher the two. And if there's a job that's a it only gets extremely complicated when it's what's called a PLA job, private labor agreement job, that where that one job has to be paid at union rates. So then you have to also load it in union rates or an apprenticeship situation where you have to load in apprenticeship rates. So in our case, our system just takes all four different rates and compares and calculate combines them, but that's just, you know, one thing. Those are the areas where you'd have to call and ask if it's a PLA job or a apprent or a job requiring special apprentice rates. Otherwise, yeah, the rates are published by the state or by the federal government. Got it. You talked about it a little bit before, the concept of of paying fringe. Could you maybe get into that a little bit explain what that is, get into that a little bit more? Yep. Any best practices related to that? Yeah. So typical determination. Let's say if you're a laborer, it'll say you have in in in San Diego County for a job that got awarded relatively recently, you might have a twenty five dollar base pay rate. You gotta pay your employee at least twenty five dollars plus a fringe rate of another twenty dollars. So a total of forty five dollars an hour. Now for your union, no problem. You you the employee's gonna get paid twenty five dollars. That extra twenty dollars is just gonna go to the union, and the union in their infinite wisdom is gonna decide what benefits they're paying their employees and what they're keeping for themselves for profit, but it just goes to the union and that satisfies the requirements. If you're a merit shop, you're gonna find that you might be very generous in what you're offering health insurance, and you but you do the math, and you're like, health insurance, I'm paying, let's say, four hundred dollars a month to my employees. That's five thousand a year divided by two thousand hours a year, so two dollars and fifty cents. So you say, okay. I've got a twenty dollar fringe requirement, and my health insurance gives me a two dollar and fifty cent deduction. Maybe I'm doing a four zero one k match. That gives me another dollar deduction. Maybe my PTO sick vacation is another buck fifty. And you add all these things up and like, alright. Maybe that's four dollars a credit. So you got a twenty dollar requirement, and you add up the benefits you're naturally offering this individual employee. And I gotta mention that the credit you could take for each person is based on the benefits that individual take gets. So his PTO, his health insurance, you can't do a generalized credit across all your employees. But and then you gotta some benefits, you gotta what's called annualized where you get divided by all the hours worked, both prevailing and private. Some benefits you can do just over the private rate. So you do all that, and you figure out what's a four dollar credit. Get a twenty dollar requirement, four dollar credit, and they got sixteen dollars left that you gotta pay or that you owe your employee. So the government says, if that's all the benefits you're offering, then you could give them that sixteen dollars in cash, meaning add it to their paycheck, add it to their wages. And in some states, you have to then apply that to overtime as well. So you're now paying time and a half on that as well. And since you're paying wages, now you gotta pay FICA and Medicare and SUI and FUDA. You gotta pay workers' comp. Sometimes you gotta pay GL and all that. So you're paying, let's say, another fifteen percent on top of that. So that sixteen dollars adds up, you know, it's gonna cost you an extra three bucks an hour in taxes and workers' comp and whatever. So what we do is we figure out their credit. We make sure that we're our system is taking the maximum credit available for each employee, and companies are really scared to take credits because they don't wanna do it wrong. So a lot of times, they don't take credit for things that they should be. So one thing we do right off the bat is we make sure they're getting a credit for every penny they can, and we automate it so it's not a big deal for them. And then if we in that case, we say there's sixteen dollars left to pay, instead of having to pay that in cash and have it subject to taxes and Medicare and all or taxes and workers' comp, we then give the employer the option of putting that into a fringe benefit trust where the employee still has access to all that money. They can do all kinds of really great things with it. They can take distributions from it. Now the employee and the employer are protected from a lot of those taxes. So it's a win win for everybody situation. Got it. Very cool. So it's a very it's a way to kind of simplify that side of things for for the client and the workers get some additional benefits as well. Cool. So I wanted to maybe just get into any kind of like measurement or metrics. You know, Nullify is like a pretty data driven company. That's one of the things we like to empower our clients with. Is there any kind of like metrics or measurements or KPIs that a client could look at to make sure they're on the right track with with a prevailing wage job or or kind of be like a, you know, big red flag, like we're, we're going down the wrong road, we need to make some changes. It really comes down to your margin. The, each client runs at their own, but typically sixteen to twenty percent profit is what most clients are looking for. So when they're bidding, they bet best KPIs say, alright. Whatever you're bidding for, you need to make sure you're starting with the right rates, right fringe, and all that. You gotta make sure you because I've had clients bid off the wrong termination and they just screw themselves. They underbid by two bucks an hour and that kills all their margin. But, yeah, you start with the right determination. Make sure you're and the right classification, how much it's gonna, how many hours in every classification it's gonna cost, do the job, and then make sure you're bidding. And if you find there there's really two metrics. One is just sheer dollars. Make sure that the they're making their expected margin and that their actual wages and actual fringes are what they planned on. The other KPI that we encourage our clients to use is as we're tracking their real time and this is not purely for prevailing, but it's construction in general. As they're now whether they use our time and attendance system or NoFi's time and attendance, we don't care. We're agnostic about that. That that's just time collection. But and we import NoFi's information with a really good integration with it. But as those hours are coming in, we'll track those hours against whatever's budgeted and whatever percent completion the job's done. And I know NoFi does that already, a lot of that already. We and their system's much more sophisticated in terms of that part of the tracking. So that's the kind of the biggest KPI. So whether you're already using NoFi and they're doing it or one of our existing clients that isn't using NoFi but hopefully might be using Notify someday, you know, tracking your percent completion versus your percent budget, knowing which jobs are in the red, green, and yellow because the you gotta if you're not paying attention to your job and they're going over budget, then hard to recover from that. Yeah. Absolutely. So we're getting sort of close to the end of end of the interview. So I wanted to have I have two more questions for you. I'm hoping you can answer. The first one, so looking forward, you know, to the to the year ahead, do you see any kind of, like, big picture changes happening with prevailing wage work that folks who are, you know, in the trenches doing this type of stuff might wanna know about and anticipate or, you know, same thing for folks who are new or trying to get into this work they might need to kind of accommodate at the last minute there? There's always new regulations that pop out. The two big ones that were effective this year and are gonna be effective next year both involve fringe calculations. So California, they passed AB eight eighty nine, which limits requires annualization on things that didn't require annualization before, which means that if you were paying a buck fifty to a dollar fifty an hour to on your journeyman for your training fund, All of a sudden, if that journeyman's only doing fifty percent prevailing work, even though you're paying a dollar fifty an hour, you're gonna only get seventy five cents credit on that. So that's a big thing happening January first, and we've already programmed our system to manage all that, but contractors definitely need to know how the mechanics of that work. Another thing that's popped up recently is the Department of Labor has clarified their rules related to PTO, and they strongly are doing things to disencourage companies from taking easy credit on their PTO policies, vacation and sick, and they've introduced a whole funded versus unfunded. So if you have a normal vacation policy that every contractor has says, alright. After you've been a year, you get a week. You have two years, you get two weeks, whatever it is. That's called an unfunded policy because you're not taking that money and stocking it away somewhere else. So you gotta get prior department labor approval. It's not practical for a lot of clients, a lot of contractors. So we've created a product for that, which is a funded PTO policy where you can operate it very similar, but we hold administrative funds. And that way, you don't require Department of Labor approval. So those are probably the two big things that have popped up that a lot of contractors are talking about right now. Got it. Good stuff to know. On a similar note, we like to try to make this podcast, like, as kind of actionable or action oriented as we can for folks. So if there was, like, one big thing you would recommend to a trade contractor that's looking to be in a better place as far as cert certified payroll prevailing wage work is concerned, what would that be? I'd probably say use an electronic time and attendance system. Okay. Obviously, I don't wanna make this an advertisement for us. There's a lot of time and attendance systems that are all equally good out there. But the old days of keeping track of the stuff by paper, it doesn't hold up when you get audited. It's makes your life harder, and it's just it's hard when you're running a regular construction business. It's almost near impossible for prevailing wage. So that's the first big action item, I would say. Make the jump to an electronic time and ten system. If you then also wanna have something where it does all the other work on top of that, great. We'd love to talk with you. But at the very least, you know, on your own, get a time intensive system and have your employees clock in because it's too complicated to keep track of all this stuff and do all the calculations on paper. That makes sense makes sense to me. Good good stuff. If someone wanted to learn a little bit more about eBaking and and what you guys offer, where could they, you know, go to go to take action there? Yeah. Real simple. I they can email sales at eBacon dot com, and I'd love to love to chat with them. They can also, if they prefer calling, two three five eight zero forty nine hundred, and just ask for somebody in sales, we'd be thrilled to just walk them through it. And one thing about us is we'll walk you through your situation. We'll give you as much free advice as you want. And if it makes sense for us to do something, we do fantastic. If you just need a little bit of confidence building and just make sure some of the decisions you're making, we're also happy to just talk through with you. And if it makes sense to do something with us as a client long term, great. If not, we're happy to just build a relationship and and give you some free advice and maybe you'll revisit us at some point in the future when that makes sense for you as well. Fantastic. Well, thanks Jack for for joining us and sharing all this awesome knowledge about the prevailing wage and certified payroll. And if you need help managing your construction projects or construction finances, please visit Knowify dot com to learn a little bit more about Knowify. We will be back with another episode of the Costco show soon. Thank you for tuning in. Take care.
Ryan Gilmore:
Hello, everyone, and welcome to The Cost Code Show, presented by Knowify. This is a podcast where we focus on helping trade contractors run and grow their businesses.
Today, I’m excited to be joined by Jack Biltis, CEO and one of the founders of eBacon, a payroll technology and service provider focused on prevailing wage and certified payroll for the construction industry.
Jack has a ton of experience helping contractors stay on top of the complexities of prevailing wage work, and he’s going to share some of that with us today. So how are you doing today, Jack?
Jack Biltis:
How are you doing?
Ryan Gilmore:
Very, very good. It’s a little cold here in upstate New York, but I’m hanging in there. The holidays are right around the corner.
Jack Biltis:
You should try Phoenix.
Ryan Gilmore:
For folks who don’t know you yet, Jack, can you give us a quick look at your background? How did you get into the prevailing wage and certified payroll world?
Jack Biltis:
Sure. Our company, eBacon, has always been in the payroll space for more than 20 years. About 10 years ago, we started doing more prevailing wage and certified payroll work. For today’s conversation, those terms are all pretty synonymous.
We had government contractor construction companies doing public work, and we handled certified payroll the way most payroll companies would: printing the main reports and helping with the basics, but not going very deep.
Then, in 2017, we had a client reach out who needed a whole bunch of additional features. They were doing a large amount of prevailing wage work, and it was taking them 80 hours a week just to get payroll done, along with all the reporting and calculations.
We like a challenge, and because we had already developed our own software, we made a few changes and realized we could do a whole lot more for them.
That led to a bigger realization: if we could solve it for one client, we could solve it for others. We started in Arizona and thought, “This seems manageable.” Then we expanded into California and quickly discovered California is several orders of magnitude more complicated than just about anywhere else.
That pushed us to take all the components we had already built—payroll, time and attendance, benefit calculations, 401(k), and more—and adapt them into one system that could solve the full problem.
On average, a client that used to spend 50 to 60 hours a week dealing with payroll and certified payroll admin can now get that down to about 20 minutes a week. Over the last 10 years, that’s where we’ve really focused: making people’s lives a lot easier.
Ryan Gilmore:
That’s amazing. That’s a serious reduction in admin time. I’m sure you’ve made a lot of people very happy with that.
What kind of contractors do you typically work with? What trades and sizes? Is it specialty trades, GCs, or all of the above?
Jack Biltis:
It’s a little bit of all of the above, but really it’s focused on people actually performing their own work.
We actually have three products. About 90% of our clients are specialty contractors, where we’re doing everything from soup to nuts. Their employees are punching into our system.
We know, based on the job the employee is working on, the task they’re doing, the county the job is in, and all those details, what rates to use. From the punches, the system automatically calculates all the required rates from roughly 180,000 different rate determinations.
We also know what benefits the contractor offers employees, from health insurance and 401(k) to paid time off and other items. So we automatically calculate what the credits against those rates should be.
Then right from time and attendance, you hit a button, and the net rate for each employee and each punch goes right into our payroll system. We run payroll, and once payroll is done, we generate all the certified reports: California 130s, WH-347s, LCPtracker uploads, and all the rest.
So for the vast majority of clients, we do everything soup to nuts. The other 10% are GCs that need to stay compliant, so their subs submit into our system to make sure they’re getting paid the right rates and everything is in order.
Our third product is a trust system designed to save clients money, but we can talk about that later.
Ryan Gilmore:
So it’s a very comprehensive end-to-end solution.
That leads into my next question. You mentioned time savings when we got started, but when a contractor comes to you, what are they really trying to solve as far as certified payroll is concerned? What’s the big challenge?
Jack Biltis:
The biggest thing is compliance.
Besides the amount of time it takes them to go through all the steps before they come on with us, it’s compliance. We had a client that made some very innocent administrative mistakes in calculating rates before they started working with us. They had 100 employees, and because of a few mistakes that added up to about $70,000 of underpayments over two years, the state of California fined them $7 million.
The penalties can be huge. Small mistakes add up fast. They got that down—from $7 million to $700,000—after a couple years of dealing with lawyers. But by the time we met them, it wasn’t a hard sell.
They recognized that not only is it easy to make mistakes, but the calculations are so complex. Between the rates, the credits, and everything else, there are also so many people looking to catch those mistakes: government regulators, unions, whistleblowers, and in California, PAGA lawsuits.
There are just too many ways to get in trouble. So they need help staying compliant. And a lot of companies are getting into this for the first time and simply don’t know what they don’t know. That’s where we help them get up and running in the prevailing wage world.
Ryan Gilmore:
With those kinds of penalties, it sounds like having a really strong process is a key part of staying compliant. Could you break down what an ideal certified payroll process might look like week over week or month over month?
Jack Biltis:
Sure.
We’ve gotten it to the point where every time a client sets up a new job—let’s say they’re using QuickBooks or whatever accounting system they use—that job automatically funnels into our system.
Our system then asks a couple extra questions like when the job was advertised or awarded. We already know the kind of work the client does, and we need to know the county. From that, we direct the client to the relevant wage determinations the government publishes.
The client looks at those and says, “Okay, this is the right one.” A lot of times they don’t get enough guidance from the GC or the government agency about what determination to use, so we help them figure it out. If they have multiple types of work, they can assign multiple determinations. At that point, their job setup is basically done, and that can all be completed well before the job starts.
As far as employees, they’re set up well in advance because that’s just part of the normal payroll and benefits management function. Contractors are already managing who has which insurance, who gets PTO, and so on. We try to keep all of that as low-touch as possible.
Then employees, based on GPS location, schedules, or job restrictions, can clock in, clock out, and select their tasks. We try to make it look and feel like regular payroll. Employees just self-report and switch between tasks as needed. One minute they might be excavating a hole, and 10 minutes later they might be installing conduit. They just change tasks and keep going.
The goal is to get employees to enter the most accurate information possible when they’re punching. Then managers or supers approve those punches, and at that point, all the hard work is basically done.
By the time the payroll administrator is ready to run payroll, all the rates, calculations, fringe benefits, and related items are already figured out. Unless they need to add bonuses or commissions, it’s basically: approve payroll, run it, and the system generates the reports because the jobs were already set up with the right reporting requirements.
So we really try to make it set it and forget it.
Ryan Gilmore:
It sounds like there’s a fair amount of coordination between the field team and the office team to make these jobs run smoothly. Do you have any tips for keeping those two groups in sync and making sure time or job classifications are entered accurately and promptly?
Jack Biltis:
Yeah. In most situations, that coordination is tougher than it needs to be because you’ve got two different groups on two different timelines going back and forth, and the information often doesn’t flow well.
We tried to rethink the whole process. Once the job is set up, it pretty much limits what field employees can do. We don’t ask them to get into complicated questions like whether this is Labor Group 4 or Labor Group 2. Those decisions should already have been made.
We just ask: what are you doing? Is there a task for painting? Cleaning debris? Installing conduit? Whatever the person’s tasks are, we work with the office team—the people handling the compliance side—to map those simple tasks to the actual classifications, groups, and rates.
So for the field, we try to keep it simple: tell us what you did and when you did it. Punch in like normal. You don’t have to know how the sausage is made behind the scenes. As long as the hours and punches are reasonably accurate, the hard work gets handled by the system.
The biggest area of conflict between the field and office usually comes when the information wasn’t right the first time. Maybe no one realized the job was prevailing wage when it was bid. Maybe somebody forgot to punch in hours. Maybe the wrong task was selected. Maybe the rates were wrong.
That kind of after-the-fact change is just a reality in construction. It took us a while to understand that dynamic, so we built a restitution system.
If anything changes after the fact—even after everyone has been paid and reports have been submitted—you just go in, change it, and let the system reprocess everything. The system tells you what it originally paid, what it now needs to pay, and what the difference is. Then you hit a button, it pays the difference, runs new reports, and that’s it.
We had a client where the state came in and changed everybody’s punches for a day just to prove a point. Normally that would have taken three days to recalculate, reprocess, and sort out taxes and everything else. We got it down to about 50 seconds.
That kind of automation is what keeps the field and office aligned.
Ryan Gilmore:
I also wanted to talk about contractors who might want to get into prevailing wage work for the first time. What are some things they should know to set themselves up for success right away?
Jack Biltis:
The main thing is documentation.
You have to make sure employee hours are properly documented so that if you get audited—and eventually, you probably will—you can prove exactly what the employees punched. In California, for example, you may also need to prove they took required breaks, worked where they were supposed to work, and that if you had apprentices, there was a journeyman on staff at the same time.
So all of that has to be properly documented. The government has made this so difficult that you really need an automated system to help with it.
For a new company coming in, we usually do a walkthrough. If they’ve already bid the job and bid it properly, then we help them figure out which determinations they need to use and whether their classifications are actually accurate. Should this be Labor Group 2 or Labor Group 4? Let’s look at the determination and see what the scope of work says.
That’s the kind of groundwork you want to get right from the start: using the right determination and the right classifications.
And most importantly, can you trace back what you paid someone to what they actually punched? Can you show how you calculated the rates and prove that you paid them everything required? Can you show how your fringe, 401(k), and other items were calculated and where everything went?
That all falls into recordkeeping. That’s really the problem we’ve focused on solving, especially for new companies. If you took a $2.87 health insurance credit for one employee, can you justify it? Can you show the math? Can you prove every number?
That’s the biggest thing: being able to prove every number is correct.
Ryan Gilmore:
Do you recommend an on-ramp for easing into this kind of work? Is it better to start with a smaller job, or can somebody jump into a large project if they have the right support?
Jack Biltis:
The difficulty of the certified payroll side doesn’t really change with the size of the job.
If you can physically do the work on a large job and it won’t overwhelm your resources, then go after as big a job as you can reasonably handle operationally.
In a place like California, the bigger operational change is dealing with apprenticeships and related requirements. If you’ve only done private work up to now, you may never have used apprentices before. You either need to have apprentices working or at least go through the process of requesting apprentices so you don’t get penalized even if none ever show up.
That’s one example of a real operational change on the construction site.
You also need to make sure you bid enough to cover the costs. An electrician in Arizona might make $15 an hour. An electrician in California might make $25 an hour. But an electrician doing prevailing wage work in California might make $50 an hour plus fringe, which could put you at $80 an hour in labor cost before taxes and other burdens.
So the biggest thing is making sure you bid it correctly and that there’s enough money in the job. If that’s true, operationally you’ll be fine. The compliance side can be wrapped up pretty quickly with the right help. I wouldn’t worry too much about the size.
Ryan Gilmore:
You mentioned California and the need to have apprentices on site. Could you get into that a little bit more?
Jack Biltis:
Sure. California is one of the harshest states when it comes to apprenticeship requirements for prevailing wage work.
You also have to understand that in many blue states, prevailing wage is something unions see as their territory. So if you’re a merit shop or non-union contractor entering that space, you’re operating under rules shaped heavily by union priorities.
One example in California is the apprentice ratio. In general, for every five journeymen working on a site, you need at least one apprentice, though the ratio can vary a bit.
If you don’t comply, you can be fined or required to pay higher rates, and there are a lot of ways to get in trouble.
The issue is that you can’t always get an apprentice. They might not be available. If you’re big enough, you can have your own apprenticeship program, or you can work through a training organization. Or you can request apprentices through the proper channels, which means filing forms like the DAS 140 and DAS 142.
Even if the unions don’t send you any apprentices, if you filed the forms on time, you’ve at least met the requirement and protected yourself. If you didn’t file one simple piece of paperwork, you could be exposed to tens of thousands of dollars in fines on that same job.
That’s one example of something we automated. Back in 2020, we set it up so every time a California client starts a new job, our system automatically emails the apprenticeship shops in that county. That gives the client proof that they did it.
Most of the time they won’t get any apprentices, but at least they can show they met the requirement. If they do get apprentices, then they have to maintain ratios and manage that correctly. It’s not terrible, but it’s definitely an area where you can get in trouble if you don’t handle it properly.
Ryan Gilmore:
Could you also break down job classifications for someone trying to get into this type of work? I think that can feel pretty overwhelming.
Jack Biltis:
Yeah. Job classifications generally follow union nomenclature in a given area.
So the first question is: what kind of trade are you? Are you a cement mason, a laborer, an electrician, a carpenter, and so on?
In some trades, it’s straightforward. If you’re a carpenter, you might look at the determination and see one common carpenter classification plus maybe something more specialized like bridge carpenter. You read the scope section and say, “Yes, that sounds like what I do.” That’s pretty easy.
It gets more complicated with trades like laborers or operating engineers. In those determinations, you may see Labor Group 1, Labor Group 2, Labor Group 3, and so on, sometimes all the way up to Labor Group 8. Each group has different rates, and the back of the determination explains what kinds of work fall into each one.
So you have to look at what your employees are actually doing. If they’re doing a mix of work and you can keep good records, then you can split their time by task and pay the appropriate rate for each task. But if it’s murky and they’re doing a little bit of both without a clear split, then you generally have to pay the higher code.
That’s one reason we encourage clients to create as many plain-English tasks in the system as possible. Use simple task names that employees understand. They pick what they’re actually doing, and then we map those tasks behind the scenes to the proper classifications and rates.
The key is to keep it simple for the employee and let the complicated stuff happen on the backend.
Ryan Gilmore:
Where do contractors actually get wage determination information? Is that something a GC would typically provide, or do they need to go to a third party or government source?
Jack Biltis:
Usually it comes from government websites.
In some cases, we have to call government agencies for specific scheduled increases or allocations. But for the most part, if it’s a federal job, it’s published.
The federal side is called Davis-Bacon, which is where we got the name eBacon. The federal rates are published on U.S. Department of Labor websites, and each state publishes its own rate schedules.
If it’s a federal job, you use the federal rates. If it’s a state job, you use the state rates. If it’s a joint job, you load both and pay whichever is higher.
It only gets extremely complicated on something like a PLA job or an apprenticeship situation where you also have to account for union or apprentice rates. In our case, the system compares and combines all of that.
But generally speaking, the rates are published by the state or federal government.
Ryan Gilmore:
You talked about fringe a little bit earlier. Could you explain what that is and maybe share any best practices related to it?
Jack Biltis:
Sure.
Let’s say you’re a laborer in San Diego County on a recently awarded job. You might have a base pay rate of $25 an hour, plus a fringe rate of another $20. So the total required compensation is $45 an hour.
If you’re union, that’s straightforward. The employee gets paid the base wage, and the extra $20 generally goes to the union benefit structure, which satisfies the requirement.
If you’re a merit shop, you may already be offering benefits like health insurance, a 401(k) match, PTO, and so on. So you start doing the math. Maybe health insurance is worth $2.50 an hour. Maybe the 401(k) match is another dollar. Maybe PTO is another $1.50. You add that up and maybe you’ve got $4 in fringe credit against a $20 requirement.
That still leaves $16 you owe the employee.
The government says that if that’s all the benefit credit you can take, then you can pay that $16 in cash—meaning add it to wages. But in some states that amount also has to be applied to overtime, and now you’re paying payroll taxes, workers’ comp, and possibly other burdens on top of it.
That adds up quickly.
So one of the first things we do is make sure the system is taking the maximum legitimate credit available for each employee. A lot of companies are afraid to take credits because they don’t want to do it wrong, so they leave money on the table.
Then, if there’s still a remaining amount to pay, we can give the employer the option of putting that into a fringe benefit trust instead of paying it all out in cash. The employee still has access to the money, but both the employee and employer can be protected from some of those extra taxes. So it can be a win-win.
Ryan Gilmore:
Very cool. So it’s a way to simplify things for the client while also giving workers some added benefit value.
I also wanted to ask about metrics. Knowify is a pretty data-driven company, and that’s one of the things we try to empower our clients with. Are there any metrics, measurements, or KPIs contractors should look at to make sure they’re on track with a prevailing wage job—or to spot big red flags?
Jack Biltis:
It really comes down to margin.
Most clients are looking for something like 16% to 20% profit. So your best KPI starts with whether you’re using the right rates, fringe assumptions, and classifications when you bid the work.
I’ve had clients bid off the wrong determination and underbid by two bucks an hour, and that kills their margin.
So first, make sure you start with the right determination and the right classifications, and make sure you understand how many hours in each classification it’s going to take to do the job.
Then there are really two metrics. One is the pure dollar side: are they making the expected margin, and are actual wages and fringe costs lining up with what they planned on?
The other KPI we encourage clients to use is real-time labor tracking. Whether they use our time and attendance system or Knowify’s, we’re agnostic on the time collection side, and we have a good integration there.
As those hours come in, you want to track them against the budget and percent complete. Knowify already does a lot of that very well. That’s the big KPI: knowing which jobs are in the red, yellow, and green. If you’re not paying attention while the job is still happening and it’s going over budget, it gets a lot harder to recover.
Ryan Gilmore:
Absolutely. We’re getting close to the end of the interview, so I’ve got two more questions for you.
Looking ahead to the year ahead, do you see any big-picture changes happening with prevailing wage work that folks in the trenches should know about—or that people new to this work might need to plan for?
Jack Biltis:
There are always new regulations popping up.
The two big ones that were effective this year and will continue to matter next year both involve fringe calculations.
In California, AB 889 requires annualization on things that didn’t require annualization before. So if you’re paying, say, $1.50 an hour into a training fund for a journeyman, but that journeyman is only doing 50% prevailing wage work, then you may only get $0.75 of credit instead of the full amount.
That’s a big change, and contractors need to understand how the mechanics work.
Another recent development is that the Department of Labor has clarified rules around PTO and has been discouraging companies from taking easy credit on standard PTO policies, vacation, and sick time. They’ve drawn a stronger line between funded and unfunded policies.
If you have a normal vacation policy—one week after a year, two weeks after two years, and so on—that’s considered an unfunded policy because you’re not setting that money aside somewhere else. That means you may need prior Department of Labor approval, which isn’t practical for a lot of contractors.
So we created a product around that: a funded PTO policy where the employer can operate it similarly, but because the funds are administered properly, it doesn’t require the same approval process.
Those are probably the two biggest things a lot of contractors are talking about right now.
Ryan Gilmore:
Good stuff to know.
On a similar note, we like to make this podcast as actionable as possible. If there was one big thing you’d recommend to a trade contractor looking to get into a better place with certified payroll and prevailing wage work, what would it be?
Jack Biltis:
I’d probably say: use an electronic time and attendance system.
I don’t want to make this an advertisement for us. There are a lot of good time and attendance systems out there. But the old days of keeping track of this stuff on paper don’t hold up when you get audited. It makes your life harder, and it’s already hard enough running a regular construction business. For prevailing wage, doing it manually is nearly impossible.
So that would be the first big action item: make the jump to an electronic time and attendance system.
If you also want something that handles all the other work on top of that, great—we’d love to talk. But at the very least, get a time and attendance system in place and have your employees clock in electronically, because it’s too complicated to track all of this and do all the calculations on paper.
Ryan Gilmore:
Makes sense to me.
If someone wanted to learn a little more about eBacon and what you offer, where should they go?
Jack Biltis:
Very simple. They can email sales@ebacon.com. We’d love to talk with them.
If they prefer calling, they can call and ask for someone in sales, and we’d be happy to walk them through it.
One thing about us is that we’ll walk you through your situation and give you as much free advice as you want. If it makes sense for us to do something together, fantastic. If you just need some confidence-building and want to talk through the decisions you’re making, we’re happy to do that too.
If it makes sense to work with us as a client long term, great. If not, we’re still happy to build a relationship, give some free advice, and maybe revisit it later when the timing makes more sense.
Ryan Gilmore:
Fantastic. Well, thanks, Jack, for joining us and sharing all this great insight about prevailing wage and certified payroll.
If you need help managing your construction projects or construction finances, please visit Knowify.com to learn a little more about Knowify.
We’ll be back with another episode of The Cost Code Show soon. Thanks for tuning in. Take care.
