Certified Payroll Made Simple For You: A Step-by-Step Guide

Certified payroll reporting is crucial for government contractors and subcontractors. Established by the Davis-Bacon Act, this practice mandates organizations to provide a detailed weekly breakdown of their payroll. Although it’s standard practice, the complexity of certified payroll reports can catch many businesses off guard. Given the potential for lucrative federal and state contracts, noncompliance can have serious repercussions. Here’s an in-depth guide to understanding certified payroll reporting and how to ensure your compliance strategy is solid.

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What is Certified Payroll?

Certified payroll is a system established by the Davis-Bacon Act. It requires government contractors and subcontractors to submit a detailed weekly breakdown of their employees’ wages and benefits. This ensures workers on federal projects receive fair compensation as defined by prevailing wage rates. The Act applies to various laborers and mechanics, ensuring they are paid according to their specific classifications.

Understanding Prevailing Wages

Prevailing wages are 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. Department of Labor (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 Boston, Massachusetts.

Who Needs to Submit Payroll Reports?

Any organization working on a federal contract exceeding $2,000 must submit certified payroll reports every week. This applies to various construction and maintenance projects, including:

• Construction: Building new structures or infrastructure.
• Demolition: Tearing down existing structures.
• Restoration: Repairing and restoring old buildings.
• Equipment installation: Setting up machinery and equipment.
• Other modifications to federal buildings: Any changes or improvements to federal properties.

Businesses within Federally Funded Projects

Specifically, any business involved in a federally funded project must submit a weekly certified payroll report. The responsibility lies with employers, not employees. The U.S. Department of Labor’s Wage and Hour Division certifies these reports, which must include a compliance statement signed by:

• The primary contractor
• The applicable subcontractor
• An authorized agent who pays the employees covered by the report

It’s important to note that similar regulations might exist at the state level. These “Little Davis-Bacon Acts” often mirror federal requirements and can apply to state-funded projects. Consult a legal professional to confirm any certified payroll requirements specific to your location.

What Information Goes into Your Payroll Report?

The Department of Labor mandates using Form WH-347 for submitting certified payroll reports for federal or federally funded construction projects. Here’s a breakdown of the crucial information included:

• Contractor/Subcontractor Details: This section identifies your company, specifying if you’re the primary contractor or subcontractor, along with your business address.
• Project Information: This section captures the project’s name, government-assigned number, and location (city and state).
• Payroll Details: This section meticulously details each employee’s:
  • Regular and overtime hours worked each week, clearly marked with “S” for straight time and “O” for overtime.
  • Hourly wage rate
  • Gross wages earned
  • Deductions made, with a breakdown of allowable deductions as defined by the DOL regulations.
  • Net wages paid

Tips for Completing Reports:

• Accuracy is Key: Double-check all information for accuracy before submission. Errors can lead to contract termination, withheld funding, or even legal repercussions.
• Invest in Reliable Software: Consider using HR and payroll software designed for seamless data flow. This minimizes errors and streamlines the reporting process. Look for software that integrates with timekeeping systems to ensure accurate work-hour data.
• Maintain Detailed Records: Retain all payroll data and project documentation for potential audits. The DOL may request these records to verify compliance.

How to Complete a Certified Payroll Report

Understanding what data to include is the first step in completing a certified payroll report. Each government contract might require different data, even if employee salaries remain the same. Here’s a breakdown of the WH-347 form sections:

1. Company Information

The top section requires basic company information, including whether your company is a primary contractor or subcontractor and your primary business address.

2. Project Information

You’ll need to provide your project’s name, government-assigned number, and location (city and state). This information should be part of the contract.

3. Payroll Number and Date

The payroll number is sequential (e.g., “1” for the first week, “2” for the second week). The date should reflect the end of the workweek, not when you complete the form.

4. Weekly Calendar

The WH-347 includes a blank calendar for entering regular and overtime hours worked each week. Specify the days and dates when work was performed.

5. Payroll Information

This section includes employees’ pay rates, gross earnings, deductions, and net wages for the week. Provide this information for every applicable employee.

6. Statement of Compliance

The second sheet of WH-347 is a statement of compliance, confirming the accuracy of the payroll. A company representative must sign this statement and note any exceptions, such as tax-exempt employees.

Common Certified Payroll Mistakes to Avoid

• Employee Misclassification: Ensure accurate job titles and sub-classifications based on official government or state lists. Misclassifying employees can lead to underpayment and potential penalties.
• Wage and Benefit Errors: Verify prevailing wage rates and accurately calculate fringe benefits (including their cash value) for each employee. Don’t forget to factor in benefits like health insurance, paid time off, and retirement contributions.
• Inaccurate Record-Keeping: Maintain accurate records to avoid issues during audits. Use integrated HR and payroll software to ensure seamless data flow and reduce the risk of errors.
• Missing Reports: Don’t skip weekly reports, even for weeks with no work performed. A blank report with a zero for total hours worked is still required.

Penalties for Certified Payroll Non-Compliance

Failing to comply with certified payroll reporting can have serious consequences, including:

• Contract termination: The government agency overseeing the project can terminate your contract for non-compliance.
• Withholding of government funding: You may not receive payment for completed work until compliance issues are resolved.
• Fines: The DOL can impose significant fines for violations.
• Potential legal action: In severe cases, the government may pursue legal action against your company.

Simplifying Certified Payroll with Software

The right HR and payroll software can significantly ease the burden of certified payroll reporting. Explore eBacon’s resources to learn more about easy payroll reporting, compliance, and more

Here’s what to look for with software:

• Unified Platform: Choose a single software solution that integrates HR and payroll functions. This simplifies data management and reduces errors.
• Automated Features: Choose software that automates payroll processes and data entry, ensuring accuracy and efficiency. Look for features that automatically calculate prevailing wages and fringe benefits based on employee classifications and location.

• Robust Reporting Tools: This allows you to generate the specific data required for various compliance needs, including certified payroll reports. Ideally, the software should offer pre-formatted templates for Form WH-347 to minimize manual data entry.
• Audit Trail Functionality: Choose software that tracks all changes made to payroll data. This audit trail provides a clear history in case of any discrepancies and simplifies responding to audits.
• Mobile Accessibility: Consider software with mobile functionalities that allow employees to access paystubs and submit timesheets electronically. This streamlines data collection and reduces the risk of errors.

Beyond Certified Payroll: Additional Considerations for Contractors

While certified payroll reporting is a crucial aspect of government contracts, it’s not the only compliance hurdle. Here are some additional considerations for contractors:

• Wage and Hour Compliance: Ensure you adhere to all federal and state wage and hour laws, including minimum wage, overtime pay, and meal and rest break requirements.
• Employee Benefits: Provide all federally mandated benefits, such as Social Security and Medicare taxes, as well as any additional benefits promised in your contract or employee handbook.
• Worker Classification: Correctly classify employees as either exempt (salaried) or non-exempt (hourly) based on their job duties and salary level. Misclassification can lead to issues with overtime pay and other regulations.
• Tax Withholding and Reporting: Accurately withhold federal and state income taxes from employees’ wages and file all required tax reports on time.

Tips for Successful Certified Payroll Reporting

To ensure your certified payroll reporting is successful, consider these tips:

• Stay Organized: Keep detailed records of all payroll data. This includes timesheets, pay rates, and benefits.
• Use Technology: Invest in reliable HR and payroll software to automate and streamline the process.
• Educate Your Team: Train your staff on the importance of certified payroll and how to handle it correctly.
• Double-check Data: Always review your payroll data for accuracy before submission.
• Consult Professionals: Work with legal and compliance experts to navigate the complexities of certified payroll.

By understanding certified payroll reporting requirements, avoiding common mistakes, and utilizing the right software tools, contractors can ensure a smooth and compliant experience when working on government projects. Remember, successful navigation of compliance regulations requires ongoing vigilance and a proactive approach. Consider establishing a dedicated team or partnering with a qualified compliance professional to stay up to date on evolving regulations and best practices.

Certified Payroll Resources

This guide is aimed at equipping you with a comprehensive understanding of certified payroll. For further information and resources, explore the following:

• Contact eBacon for a FREE DEMO of automated certified payroll reporting management
• U.S. Department of Labor Wage and Hour Division: https://www.dol.gov/agencies/whd
• Davis-Bacon Act Resources: https://www.dol.gov/agencies/whd/government-contracts/construction
• National Association of Home Builders (NAHB): https://www.nahb.org/

By leveraging the available resources and following the outlined tips, you can approach certified payroll with confidence and ensure the success of your government contracting endeavors.

Frequently Asked Questions About Certified Payroll

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.