Certified payroll is required for construction projects funded by the federal government and some state-funded projects. Even if you know how to comply with the regulations associated with certified payroll, mistakes happen. These mistakes can set off a chain reaction of additional mistakes and violations that leave your company open to an investigation and subsequent legal and financial costs.
The following certified payroll best practices can help ensure that your certified payroll reporting is accurate so you stay compliant and out of trouble.
Understand the requirements: The first step to creating accurate certified payroll reports is to understand the requirements. The DOL sets minimum prevailing wage rates for different classifications of construction workers based on the prevailing wages in the area where the project is located. Employers must pay their workers at least the prevailing wage rate, and provide certain benefits or pay a specific amount in fringe benefits. Reporting is required and must include specific and detailed information.
You have to become an expert on these regulations, otherwise you risk an investigation, fines or legal action. You can even be banned from government contracts in some situations.
Implement digital time tracking: Time tracking may seem like a small matter, but it’s more complicated for construction companies that work on government contracts. Other than general hour tracking, work classifications have to be tracked carefully and changed according to the actual work an employee performs in the field. A single worker may work under multiple work classifications during their shift, or on prevailing and non-prevailing projects during the week. Tracking these accurately by hand on time cards is difficult, and transferring hours between multiple systems leads to errors.
Moving to a digital time clock can eliminate problems associated with tracking multiple work classifications, mistakes made due to manual entry and misinterpretations of handwriting.
Use certified payroll software: Certified payroll reporting can be complex and time-consuming, particularly for smaller teams or companies working on multiple prevailing wage contracts. Certified payroll software can significantly reduce the time it takes to complete payroll and reporting. The right system can also reduce mistakes and help you stay in compliance with the law. For instance, it can flag errors or make wage restitution and updated reports easier to create.
General payroll software is not sufficient for construction companies and may actually add steps that complicate the process further. Instead, look for certified payroll software that was designed for the construction industry.
Offer ongoing certified payroll training: Certified payroll can be tricky, so it is important to make sure to offer ongoing training. Not only do regulations change, the laws are different from city to city and state to state. This means the state prevailing wage job you have in San Diego is under different rules than the federal prevailing wage job you have, even if it’s in the same city. Some states, like California, may have different wage rates by county, adding one more element to figure out and track.
Finding certified payroll training resources for your team can help them stay on top of the law and how it applies to your various projects. The federal Department of Labor has prevailing wage resources, including webinars and videos. Check with your state’s Department of Labor for state prevailing wage resources.
Conduct regular self-audits: Conduct internal audits on a regular basis to identify and correct mistakes. You may consider having a checklist that you run through every payroll cycle and before every certified payroll report submission to catch mistakes before they become final. Have a larger audit that looks at key areas for mistakes, like pay rates, overtime, and failing to accurately check work classifications on time cards. And if you are using handwritten time cards, have multiple people verify the data that gets transcribed from card to payroll.
Auditing yourself can also help you find opportunities to improve your overall certified payroll process. Make a schedule for regular, in-depth audits and put someone in charge of maintaining audits and periodic process reviews.
Government contracts can be a great source of business but they come with added responsibilities, including certified payroll. By following these best practices, you can limit mistakes and ensure that your certified payroll reporting is accurate and compliant.
Additional certified payroll resources:
How to fill out certified payroll guide
Guide to fringe trusts
Guide to wage determinations
U.S. Department of Labor Prevailing Wage Seminars
The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.
