Payroll, certified payroll, payroll for construction… no matter what you call it, payroll for the construction industry comes with its own unique set of challenges. Those that work on government contracts have to keep up with increased reporting, changing legislation and the heavy administrative burden associated with certified payroll.
Even if you’re a seasoned payroll specialist, this can be challenging. For those new to government contracting, it can be downright overwhelming. It can also be risky because compliance violations can have financial and legal repercussions.
If you’re interested in learning what certified payroll is, what it means to be “out of compliance” and how to avoid trouble, the following tips can help.
Exactly what is certified payroll?
Certified payroll refers to payroll that fulfills specific requirements for government contractors working on qualifying public works projects. Typically, this includes federal and federally-assisted construction projects in excess of $2,000 and state and municipal projects in areas where prevailing wage laws are in place.
Part of the certified payroll process includes submitting certified payroll reports weekly. For federally funded work, this means submitting Form WH-347 to the federal government. States and municipalities with prevailing wage laws may require additional reports for work funded at the local level. For instance, in California contractors must submit certified payroll records using the Department of Industrial Relations’ (DIR) electronic certified payroll reporting system. As a contractor, it’s your responsibility to understand and follow all federal and state requirements.
How is certified payroll different from other types of payroll?
Payroll and certified payroll are very much alike with a few key differences. Payroll for construction must be processed weekly, and it must track and account for information that other industries don’t, like fringe benefits. Certified payroll must also track a worker’s changing roles through the day, which often comes with different prevailing hourly wage rates and fringe rates. So a worker may have multiple roles, and varying wage and fringe rates, during the course of a single day.
Certified payroll also comes with reporting requirements, which may include state, federal, municipal and union reports. Depending on the type of job and where it is located, additional requirements may be in place, such as apprenticeship reports. Failing to comply with all of these requirements can lead to financial and legal complications.
What does “out of compliance” mean?
Since certified payroll comes with a lot of reporting requirements you can be “out of compliance” by simply not hitting all reporting deadlines. Reporting inaccurate or partial information is also a compliance issue. In general, the nature of the project and the location of the jobsite determine which regulations you must comply with. This may include union and apprenticeship reports on top of general certified reporting.
There are additional ways to be out of compliance other than just failing to meet the reporting requirements. If you misclassify workers, pay incorrect wages, or use the wrong wage determinations, you’re also out of compliance. In reality, these are only a few of the mistakes that can lead to compliance issues. Each violation can have legal and financial repercussions, from owing back wages to being debarred from government projects.
Can software help with certified payroll?
This is difficult to answer because everything on the market has varying capabilities. In general, most payroll services and software platforms that say they handle certified payroll only help with basic certified reporting. In reality, even the reporting functions are limited and may require manual entry and duplicated work. You may be able to technically create a certified payroll report, but you then have to manually re-key that information into official reporting sites. These systems often don’t help with additional reports, like apprenticeship or union reporting.
Mainstream payroll services and platforms also don’t validate the accuracy of your data, so the data you input will make its way onto the report. This means that you not only have to manually enter and transfer information multiple times, there is no verification system in place. For example, there is nothing to help you verify that you’re using the correct prevailing wage for each work classification as required by law.
Our certified payroll platform is the exception because it was created specifically for the construction industry. Payroll information flows directly into certified payroll reports, removing the need for manually re-entering data. It also reduces errors by auto assigning prevailing wage rates and automatically calculates the correct fringe benefits based on applicable local and federal regulations.
As you can imagine, it’s easy to make certified payroll mistakes, but difficult to find and correct them. This makes continuing education your best bet when it comes to staying in compliance and out of trouble. The following certified payroll resources are a good place to start:
Common certified mistakes
How to select certified payroll software
How to implement certified payroll software
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.
