Certified payroll is a tedious, time-consuming, and frustrating requirement for contractors that do prevailing wage work. There are many moving parts to manage, from tracking the hours and roles of workers in the field to keeping up with changing wage determinations. This adds up to hours of work each week, all dedicated to simply keeping up with certified payroll and reporting.
Apart from the mechanics of tracking hours and submitting reports, being well-versed in the laws behind certified payroll is also important. You need to understand what certified payroll is, what laws govern it and how to find updated information since regulations and wage determinations change.
We put together this list of common certified payroll FAQ to help answer some of the top questions people have about certified payroll, construction reporting and compliance.
What is certified payroll?
Certified payroll is a phrase often used to collectively refer to the special payroll AND reporting requirements required of prevailing wage contractors. These requirements come from various legislation at the federal, state and even municipal levels. Federally, there is Davis-Bacon and Related Acts(DBRA) and the McNamara-O’Hara Service Contract Act (SCA). Some states and cities may also have rules that require certified payroll. Construction companies must complete their payroll following certain rules and then submit reports to reporting agencies at the federal, state or city levels. During this process they must “certify” that their payroll and required report is accurate and that they are following all prevailing wage regulations.
What are prevailing wages and prevailing wage laws?
Prevailing wages are predetermined wages that are considered the going rate for specific tasks within a geographic location. The wage is actually a combination of a predetermined hourly wage rate and an hourly fringe benefit rate. You have to add the hourly and fringe rate to find the correct prevailing wage.
Many states, and even municipalities, have prevailing wage laws in place that are separate from DBRA and SCA. These wages are published as wage determinations, and it is your job as a contractor to know which wage determinations is correct based on where you’re located and the type of contract it is.
Learn more about reading wage determinations here.
Who has to do certified payroll?
Contractors and subcontractors that work on qualifying government contracts that fall under DBRA, SCA or local prevailing wage laws are required to do certified payroll. Federally assisted contracts, where federal and local dollars are combined, also fall under these rules. Contracts must meet a certain dollar amount to trigger these regulations. Davis-Bacon Act applies to federally funded contracts over $2,000 for the construction, alteration or repair or public buildings or public works. SCA applies to prime contracts in excess of $2,500. Contracts under this amount fall under the federal minimum wage. Additionally, federally assisted contracts, where federal and local dollars are combined, also fall under these rules.
There are state and municipal regulations in some areas as well. It is always the responsibility of the contractor or subcontractor to know and follow all applicable laws.
How is certified payroll different from other types of payroll?
Certified payroll must follow all of the same laws as traditional payroll, but it has additional requirements as well. First, it includes precise information for each worker, detailing each hour worked, the role they worked and the hourly prevailing wage rate and fringe rate they were paid. 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.
Is certified payroll a state or federal requirement?
There are federal, state and municipal prevailing wage laws in place, all of which require certified payroll. The type of contract you have, and where the work is being done, dictates which law or laws you must follow. This is important to understand because each law has its own set of reporting requirements, including how, what and when you must submit reports. For example, DBRA requires weekly reporting even if no work is done in a particular week. Some state regulations require monthly reporting.
It is always the responsibility of the contractor or subcontractor to know, understand and follow all required regulations.
What happens if I fail to submit certified payroll?
If you are a subcontractor that fails to submit certified payroll reports, you are officially out of compliance. This simply means you have not met all the requirements you need to under prevailing wage law. The repercussions of being out of compliance vary. You may not receive payment until you’ve submitted everything you’re required to submit. You many also be investigated by a federal or state agency and face legal and financial penalties.
Read about some compliance problems other companies have experienced.
What are public works projects, and do they require certified payroll?
Public works are simply projects financed by the government. Infrastructure projects, including building highways and bridges, are considered public works projects. These types of projects are generally subject to prevailing wage laws like DBRA or local regulations as long as they meet the minimum dollar threshold. For example, a project for the construction, alteration or repair or public buildings or public works that is over $2,000 falls under DBRA and must fulfill all certified reporting requirements.
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 actually required to comply with DBRA. You will need details from your payroll in order to complete the form, like the names, Social Security number and tax withholding information for each worker. You can view the form here and read through the provided instructions.
Form WH-347 is for federal 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.
How do I know if my state requires certified payroll for eligible projects?
There are a few places you should bookmark as sources of information on certified payroll and prevailing wage laws, starting with your state’s labor offices. You can also view a list of services by state for each Department of Labor. This can help you find local regulations, apprenticeship information and official links to local agencies. Additionally, each state has an agency that oversees labor issues. For example, contractors and subcontractors in California must go through the Department of Industrial Relations. Texas companies doing prevailing wage work fall under the Texas Workforce Commission (TWC).
Additional certified payroll resources:
Payroll tips for contractors
How to select the best certified payroll software
Four ways to make certified payroll easier
Common certified payroll mistakes video
Four ways to find government contracts
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.