Certified Payroll: Everything You Need to Know Now for Payroll Management 

This comprehensive certified payroll FAQ guide will help you understand the complexities of certified payroll and prevailing wage. We cover both basic and more advanced questions and provide handy resources to help you stay on top of Davis-Bacon compliance for your next construction project.

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What is the Prevailing Wage?

The prevailing wage is the minimum wage that must be paid to workers on federally-funded construction projects, as determined by the Department of Labor and based on the geographic location of the project. At the federal level, the Davis-Bacon Act (DBA), Davis-Bacon And Related Acts (DBRA), and the McNamara-O’Hara Service Contract Act (SCA) are the main prevailing wage laws. 

States and even municipalities may have their versions of prevailing wage laws for state-funded work. The Department of Labor (DOL) of each state, or similar organization, is the best source for information about prevailing wage laws.

What is the Davis-Bacon Act?

The Davis-Bacon Act (DBA) is a federal law that was enacted by Congress in 1931. The law was originally intended to address concerns that contractors were bringing in lower-paid, non-local workers to perform federal construction projects and undercutting local wages. Under the law, contractors are required to pay their workers at least the prevailing wage rate in the local area, which helps to protect local workers and maintain fair wages.

The Davis-Bacon Act applies to contracts for the construction, alteration, or repair of public buildings or public works that are funded, in whole or in part, by the federal government and whose value exceeds $2,000. This includes contracts for highways, bridges, airports, water treatment plants, and other infrastructure projects. In general, any federal or federally-assisted construction project that involves construction work on public buildings or public works may fall under the Davis-Bacon Act.

What are Davis-Bacon and Related Acts Combined?

Davis-Bacon and Related Acts refers to the combined body of legislation that extends the prevailing wage requirement beyond just the original Davis-Bacon. The “Related Acts” extend Davis-Bacon labor standards to most federally assisted construction. This includes the Federal-Aid Highway Acts, the Housing and Community Development Act of 1974, and the Federal Water Pollution Control Act.

Who is responsible for complying with prevailing wage laws?

Contractors and subcontractors working on projects that fall under any prevailing wage law, either federal or state, have to comply. So not only does it apply to construction work, but any service work that is under the SCA, or any similar state law.

What is the difference between a general or prime contractor and a subcontractor?

A general or prime contractor is a person or company hired by the owner of a construction project to perform work on the project. A subcontractor is a person or company hired by the contractor to perform a portion of the work.

What is a certified payroll?

A certified payroll is the term given to payroll on projects that fall under prevailing wage laws. The payroll must be certified by the contractor or subcontractor as accurate and complete, with a signature by someone on the payroll team. The payroll itself must have all normal payroll information, like the worker’s hours for the work week. It must also include the project’s location and fringe payments, and must also track the various work classifications of the worker.

What is certified payroll reporting?

Certified payroll reporting is a requirement for contractors and subcontractors working on federally-funded, or federally-assisted construction projects. Those working on these types of projects must submit payroll records that are “certified” to be truthful and show compliance with the law. This can be facilitated through the use of Form WH-347. Usually, these are submitted to the agency holding the contract and the Department of Labor (DOL) and include the signature of someone authorized by the company submitting the report. 

What is Form WH-347?

Form WH-347 is a federal form for submitting your certified payroll reports on federal projects. This is considered an optional form but using it will ensure that you submit all the information that is required to comply with DBRA. You will need details from your payroll to complete the form, like the names, Social Security numbers, and tax withholding information for each worker. You can view the form here and read through the provided instructions.

Form WH-347 is for federally certified payroll reporting. Your state may have local prevailing wage laws with specific reporting requirements as well. The type of contract you have will dictate the type of reporting you are required to do.

What are some of the requirements for compliance with prevailing wage laws?

The requirements vary between federal and state prevailing wage laws, so it’s important to check with your locality for details on state or city-funded projects. In general though, the following are federal requirements under Davis Bacon and similar requirements are in place at the state or city level in areas with prevailing wage laws.

• Payment of prevailing wages as set by the DOL 
• Accurate tracking of work classifications by workers in the field. 
• Posting of the hourly and fringe benefits rates in an easily visible area.
• Payment of fringe benefits
• Using apprentices for a portion of work performed
• Accurate payroll records
• Submission of certified payroll reports, generally required weekly

Who reviews certified payroll reports?

The DOL and contracting agency review certified payroll reports. In some situations, a third-party labor compliance firm may also review them. 

Who is responsible for maintaining and submitting certified payroll reports?

The contractor is responsible for maintaining and submitting certified payroll reports for all workers on the construction project. So ultimately, it is the general contractor (GC) that has to ensure compliance for every sub under them, on every project. If a GC has subcontractors working for them, those subs generally submit reports to both the GC and the overseeing agency. 

Can certified payroll records be audited?

Yes, certified payroll records can be audited by the government agency responsible for overseeing the construction project. The audit process helps ensure compliance with prevailing wage laws and helps prevent fraud and abuse. This may happen because a worker files a complaint because someone at the overseeing agency notices something may be off, or randomly. Once an audit is underway, any labor law violation that is found can be acted upon, not just violations of prevailing wage laws. 

What are the consequences of non-compliance with prevailing wage laws?

Consequences of non-compliance with prevailing wage laws may include fines, penalties, debarment from federal contracts, and legal action by affected workers. Mistakes that are made due to typos or misunderstanding of the law are also considered non-compliance and subject to penalties. 

What is the difference between Davis-Bacon and prevailing wage laws?

Prevailing wage laws are a broad category that refers to laws that focus on prevailing wages for workers. Davis-Bacon is a federal law that requires the payment of prevailing wages on federally-funded construction projects. There are also prevailing wage laws at the state or city level that have similar requirements in place. All of these are considered prevailing wage laws even though the requirements may be different.

What is a wage determination?

A wage determination is a determination of the prevailing wage for a specific job classification in a specific geographic location, as determined by the Department of Labor. These are published by the DOL on  Sam.gov, the official website for federal wage determinations. States with prevailing wage laws will similarly publish wage determinations either on the local DOL site, or another oversight agency, such as the Department of Industrial Relations (DIR) in California.

What happens if a construction project is located in an area not covered by a published wage determination?

If there is no general wage determination for the county and type of construction, you should obtain a project wage determination. This is generally done by the agency funding the project, not the contractor.

What is a project wage determination?

A project wage determination is issued at the specific request of a contracting agency and only applies to the named project. It expires 180 calendar days from the date it is issued unless an extension is approved. Once this timeframe is over, the project wage determination expires.

Once construction has begun, do rates change when new wage determinations are issued for the area in which the project is located?

The wage determination incorporated into a bid solicitation and awarded contract generally establishes the rates owed for the entire term of the contract. There are a couple of exceptions to this rule, however. For example, wage determination modifications after bidding has been opened do not apply to the contract except if the contract has not been awarded in 90 days and no extension has been granted. Always double-check all provided wage determinations, even those provided in the award packet to make sure you are using the correct information. When in doubt, check with the agency that holds the contract.

What is a wage schedule?

There are four different classifications for construction projects under Davis-Bacon and Related Acts:  Building, Heavy, Highway, or Residential. Each of these has its own wage schedule for issuing wage determinations. So the rates listed for a work classification under residential are under a different “wage schedule” than they are for a project listed under one of the other classifications.

Can multiple wage schedules apply to a single project?

Yes, it is possible for a large project to have work listed under multiple types of construction, and therefore different wage schedules. Most of the time this information is provided by the awarding agency in the bid solicitation, but the DOL issued a memo regarding how to select the correct wage schedule and published it here.

How are workers classified for certified payroll and prevailing wage?

For certified payroll and prevailing wages, workers are classified based on their job duties and responsibilities. A worker who performs general labor duties would be classified as a laborer, while a worker who operates heavy machinery would be classified as a mechanic.
Within classifications, there are generally various sub-classifications as well. For example, there are different classifications for high-voltage work and low-voltage electrical work. 

What is a fringe benefit?

A fringe benefit is a benefit provided to an employee in addition to their regular wages, such as health insurance or retirement benefits. Certified payroll, prevailing wages, and fringe benefits are often paid directly to workers as cash or put into a trust that complies with regulations.

Are fringe benefits included in the prevailing wage?

The Davis-Bacon Act requires that fringe benefits be paid in addition to the prevailing wage, but the specific requirements for fringe benefits may vary depending on the location and type of project. When you view a wage determination, you will see the hourly prevailing wage rate and an additional rate for fringe benefits. 

What can be counted toward the fringe benefit under Davis Bacon?

Some benefits that are normally provided can be counted as fringe benefits, this includes: 

• Life insurance
• Health insurance
• Pension
• Vacation
• Holidays
• Sick leave

Payments that are required under federal, state, or local law, however, cannot be counted toward fringe benefit contributions. So payments to unemployment, workers’ comp, or Social Security can not be counted as fringe. 

What is a fringe trust and what does it have to do with fringe benefits?

A trust is a relationship where a trustor allows a trustee to hold title to property or assets for the benefit of a third party, or beneficiary. A 401(K) is a type of trust, so you may already be familiar with the concept even if the name is less familiar. A fringe trust is one way to pay fringe benefits it is the most affordable way to handle fringes since it can reduce some tax and liability costs.

To be compliant, a fringe trust must be a bona fide trust that is not set up as a safe harbor match or a deferred payment plan. It must be a pre-tax employer contribution into a qualifying plan followed by an optional distribution. This means the fringe must be structured in a way that is compliant with all applicable laws, including:

• Employee Retirement Income Security Act (ERISA)
• Internal Revenue Service rules and regulations outlined in Section 401(k)
• Davis-Bacon and Related Act

It is important to work with a company that is experienced in setting up fully compliant fringe trusts if you decide to go this route.

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Does overtime still apply to DBRA projects?

Overtime on federal prevailing wage contracts is covered under other federal laws, FLSA and CWHSSA. So workers must be paid time and one-half the basic rate of pay for hours worked more than 40 hours in a workweek. In some situations, overtime may be required on contracts lower than this amount, and it’s generally spelled out in the contract or in the wage determination. This applies to federal prevailing wage jobs; state prevailing wage laws including overtime requirements may be different. Make sure you understand the laws of your contract and in your state by checking with your state’s Department of Labor for details.

Here are a few important details to understand abo

• Fringe benefits are not included in the overtime calculation, so you calculate overtime only on the straight-time rates.
• If a worker performs work under more than one work classification with different rates of pay, overtime can be calculated based on the weekly average.
• A workweek is a fixed and regularly recurring period of 168 hours occurring within seven consecutive 24-hour periods. It can start on any day but must be fixed and reoccurring.
• A workday is a consecutive 24-hour period beginning at the same time each calendar day, but it may begin at any time of day.

Certified payroll and prevailing wage resources

The following links and guides will help you and your team stay in front of prevailing wage compliance.

Wage Determinations Guide
Fringe Trust Guide
Overtime and Prevailing Wages 
Form WH-347 and instructions
Certified Payroll Basics Presentation (downloadable)
U.S. Department of Labor Prevailing Wage Seminars
Wage Determinations Learning Center

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.