What is certified payroll?

Running a small business comes with numerous compliance worries. If your business is considering working on federal government-funded construction projects, add certified payroll to the challenges you must navigate. Certified payroll can be daunting, but we’re here to help. In this article, you’ll learn what certified payroll is, why it’s required, and how to ensure you stay compliant. Let's begin!

Understanding certified payroll

Certified payroll is a special type of weekly payroll report required for contractors and subcontractors working on federally funded projects. This report, submitted using Form WH-347, includes detailed information about your employees, their wages, hours worked, and benefits. The purpose of certified payroll is to ensure that workers on federal projects are paid the prevailing wage, which is the average wage for employees in a certain occupation.

Certified payroll requirements began with the Davis-Bacon Act, which was passed in 1931. It applies to federal contracts over $2,000 for the construction, alteration, or repair of public buildings or public works. The act mandates that contractors pay their workers no less than the local prevailing wages, including fringe benefits, for the type of work performed.

Why certified payroll is required

Certified payroll reports confirm that contractors and subcontractors working on federally funded projects are paying their employees prevailing wages. These records must be filed with the U.S. Department of Labor (DOL) on a weekly basis, even if work is temporarily halted. By verifying that contractors are paying the required prevailing wages and fringe benefits, certified payroll reports help protect the livelihood of workers on certain federal contracts.

What is the prevailing wage?

Prevailing wages refer to the minimum hourly rates and fringe benefits that contractors must pay workers on federally funded construction projects. These rates are determined by the U.S. DOL and vary depending on the location, specific job classification, and type of construction. For instance, a carpenter in Phoenix, Arizona might have a different prevailing wage than a carpenter in Portland, Maine.

In addition to federal requirements, state and local prevailing wage laws may also apply, requiring additional reporting. Independent contractors (1099 workers) must be listed on the certified payroll form if they perform work subject to Davis-Bacon prevailing wage requirements.

Certified payroll requirements

To comply with certified payroll requirements, you must submit Form WH-347 weekly. This form includes:

• Contractor Details: Your company’s name, address, and whether you’re the primary contractor or subcontractor.
• Project Information: The project’s name, government-assigned number, and location.
• Payroll Details: Each employee’s name, Social Security number, job classification, hours worked, pay rate, gross wages earned, deductions, and net wages paid.
• Statement of Compliance: A signed statement confirming the accuracy of the payroll and compliance with prevailing wage requirements.

How to complete a certified payroll report

Here’s a step-by-step guide to completing Form WH-347:

1. Company Information: Enter your company’s name and address and check the box for either “contractor” or “subcontractor.”
2. Project Information: Provide the project’s name, government-assigned number, and location.
3. Payroll Number and Date: List the first week of the contract as payroll number one and increase sequentially each week.
4. Weekly Calendar: Enter regular and overtime hours worked each week.
5. Payroll Information: Include employees’ pay rates, gross earnings, deductions, and net wages.
6. Statement of Compliance: Complete and sign the statement of compliance on the second page of Form WH-347.

Managing certified payroll reports

To ensure compliance and avoid penalties, follow these best practices:

• Accuracy is Key: Double-check all information for accuracy before submission.
• Invest in Reliable Software: Use HR and payroll software (liked isolved) to minimize errors and streamline the reporting process.
• Maintain Detailed Records: Keep all payroll data and project documentation organized and retain them for at least three years.
• Create a Procedures Manual: Document the payroll process to train new team members and reduce errors.

Penalties for non-compliance

Failure to comply with certified payroll reporting can have serious consequences, including contract termination, withholding of government funding, fines, and potential legal action. Common violations include submitting false payroll information, failing to pay the prevailing wage, inadequate record-keeping, and missing reports.

Simplifying certified payroll with software

The right HR and payroll software can significantly ease the burden of certified payroll reporting. Software designed specifically to handle these requirements can help ensure accurate data flow, reduce errors, and maintain compliance. Look for solutions that integrate with timekeeping systems to ensure accurate work-hour data and streamline the reporting process.

Conclusion

Certified payroll reporting is crucial for government contractors and subcontractors. By following the guidelines and best practices outlined above, you can ensure compliance with the Davis-Bacon Act and avoid penalties. At Paper Trails, we understand the challenges that small businesses face, and we’re here to help you navigate the complexities of payroll reporting. If you have any questions or need assistance with certified payroll, don’t hesitate to contact us. We’re here to help you keep your business in compliance and running smoothly.

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