The Actual Wage Obligation and the Memorandum Behind It
The prevailing wage is published and easy to prove. The actual wage is internal, unpublished and reconstructed from the employer's own pay practices, which is why it is the figure investigations turn on and the one that produces most back wage liability.
The rule in short
An employer must pay the sponsored worker at least the actual wage paid to all other individuals with similar experience and qualifications for the specific employment in question at the same establishment, or the prevailing wage for the occupation in the area, whichever is higher. A written memorandum explaining the system used to set the actual wage goes into the public access file, and lawful pay factors must be applied consistently across the comparison group.
The required wage is the higher of two figures. One is published; the other is not. The prevailing wage can be proved with a printout. The actual wage exists only inside the employer's payroll and its own pay decisions, and proving it requires a document most employers never write until an investigator asks for it.
The two figures and which one controls
The actual wage is the wage paid to all other individuals with experience and qualifications similar to the sponsored worker's, for the specific employment in question, at the same establishment. It is not a company-wide average and it is not a market rate. It is an internal comparison inside one location.
The employer pays whichever of the two figures is higher, and it pays that figure for the entire period of authorized employment. Where the actual wage rises because comparable workers received increases, the obligation to the sponsored worker rises with it. The obligation is measured pay period by pay period, not at filing.
What the memorandum must explain
The regulation requires documentation of the system the employer used to set the actual wage. In practice that means a written explanation, held in the public access file, that identifies the establishment, describes the comparison group, names the factors used to differentiate pay within it, and states where the sponsored worker sits in that structure and why.
Legitimate factors are experience, qualifications, education, job responsibility and function, specialized knowledge, and other legitimate business factors. Each must be applied consistently. A memorandum that lists five factors and a payroll that reflects none of them is worse than a short memorandum that lists two and matches.
The document is written once and maintained. Every hire, promotion and merit cycle changes the comparison group. An annual review of the memorandum against the current payroll is the cheapest compliance task in the whole file and the one most often skipped.
| Feature | Prevailing wage | Actual wage |
|---|---|---|
| Source | Published survey or an accepted determination | The employer's own payroll |
| Geographic unit | Area of intended employment | The specific establishment |
| Comparison group | Everyone in the occupation in that area | Workers with similar experience and qualifications |
| Proof in the file | The determination or the survey and its methodology | The written explanation of the pay system |
| How it changes | When a new survey or determination issues | Whenever comparable workers are hired or paid more |
Employers frequently define the group so narrowly that only the sponsored worker is in it, then record no actual wage at all. An investigator reading the payroll will define the group by the work performed, not by the job title on the offer letter. Two engineers doing the same work at the same site are comparable even where one is called a consultant and the other an analyst.
What may never appear in the system
Pay may not be differentiated on any basis that would be unlawful in an ordinary employment setting, and it may not be differentiated on immigration status. A memorandum that explains a lower rate by reference to the worker's visa category, sponsorship costs or pending permanent case describes an unlawful system in writing and hands the investigator the finding.
Benefits are treated the same way. They must be offered on the same basis and criteria as they are offered to domestic workers, so an eligibility waiting period that applies only to sponsored staff is a violation of the working conditions attestation even where the cash wage is correct.
Deductions and what cannot be recovered
The wage must be paid free and clear, in cash, at the rate stated, and at intervals no less frequent than the employer's normal practice. Only three categories of deduction are permitted: those required by law, those the worker authorized in writing for a matter that principally benefits the worker, and those that are a bona fide obligation not connected to the sponsorship.
The category that generates most liability is the recovery of the employer's own business expenses. Certain statutory filing fees are the employer's expense as a matter of law, and any arrangement that shifts them to the worker is unlawful whatever its form. That includes a payroll deduction, an invoice, a signed note, a reduction in the offered rate, and a repayment clause triggered by resignation. Employers with a repayment policy should have it reviewed by H-1B compliance counsel before it is offered to a sponsored hire, because the clause is usually drafted for the general workforce and never adapted.
Where the document lives and how long
The memorandum is a public access file entry, assembled within one working day after the application is filed, and available to any member of the public who asks for it. Payroll records supporting it are kept for three years from creation. The full file contents and the retention periods are set out under what an employer promises on a labor condition application.
Two related obligations sit alongside it. The wage runs through periods with no assigned work, which is treated under the duty to pay from the first day. And where a determination underlies the prevailing figure, its level and validity window matter as much as the number, which is covered under prevailing wage determinations and the four wage levels. Employers who treat the memorandum as a live document rather than an exhibit rarely lose a wage finding, in the same way that a clinic maintaining a corrective action plan avoids the audit it was written to answer.
Points to carry away
- The required wage is the higher of the actual wage and the prevailing wage, measured continuously.
- The actual wage is set by reference to workers with similar experience and qualifications at the same establishment.
- A written explanation of the pay system belongs in the public access file rather than in a personnel folder.
- Legitimate factors include experience, qualifications, education, job responsibility and specialized knowledge.
- Wages must be paid free and clear, and deductions that shift a business expense to the worker are unlawful.
- Where no comparable worker exists, the wage paid to the sponsored worker becomes the actual wage.
Questions readers ask
What if the sponsored worker is the only person in the role?
Where no other individual at the establishment has similar experience and qualifications for the specific employment in question, there is no comparison group and the wage paid to the sponsored worker becomes the actual wage. That does not remove the documentation duty. The file should record the search that produced no comparators, identify the establishment, and explain how the rate was set. A later hire into the same role creates a comparison group immediately, and the memorandum has to be updated.
Are bonuses and stock counted toward the required wage?
Cash bonuses can count if they are paid, are not conditional or contingent on some future event, and are recorded as earnings on payroll. Equity grants, deferred compensation and benefits generally do not, because the obligation is to pay a wage free and clear. A guaranteed annual bonus paid in full and reported as wages is the safest form. A discretionary bonus that may be withheld is not part of the required wage and should not be counted toward it.
May the employer recover training costs if the worker leaves early?
A genuine estimate of losses agreed in advance may be recoverable where state law treats it as liquidated damages rather than a penalty. A charge that operates as a penalty is not, and any recovery that pushes the worker's pay below the required wage is unlawful regardless of the label. Certain filing fees are the employer's own business expense and can never be shifted, whether by deduction, by an upfront charge, or by a promissory note signed at hire.
Sources
- eCFR — 20 CFR 655.731, The wage requirementDefines the actual wage, the required wage, the documentation duty and lawful deductions.
- eCFR — 20 CFR 655.760, Public access recordsRequires the memorandum explaining the wage system to be available for public inspection.
- eCFR — 20 CFR 655.732, The working conditions requirementRequires benefits to be offered on the same basis and criteria as to domestic workers.
- eCFR — 20 CFR 655.810, RemediesBack wage computation and the penalty tiers applied to wage violations.
- Foreign Labor Application Gateway — Labor Condition Application programThe form, the filing system and the program instructions for the wage attestation.
- Cornell Legal Information Institute — 20 CFR 655.731An alternative text of the wage regulation with cross-references.
Lawwise is a publication, not a law firm. This article states general rules and cites its sources; it is not advice about any particular case, and the law differs by state and changes over time.
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