Staying compliant is a constant concern for government contractors. Every aspect of your day on the job is affected, from how you track and pay hours to your weekly reporting responsibilities. Mistakes are easy to make, and even a simple error can lead to larger compliance issues.

Since even a small mistake can lead to penalties and legal action, compliance should be at the top of every government contractor’s list of priorities. But the reality of managing a construction project is complicated, so tasks like certified payroll and reporting sometimes take a back seat to more pressing matters.

While you can’t do anything about the compliance responsibilities associated with government contracts, you can make it a bit less of a burden. The following tips will help you streamline some of the most error-prone areas of certified payroll and reporting. This will help your payroll team reduce and catch mistakes before they become large compliance issues.

Compliance and government contracts

Compliance can mean a lot of different things depending on your industry. Staying compliant as a government contractor means that you have followed all of the various regulations required of companies that work on government projects. This can include everything from safety regulations to workforce management practices.

When we use the word “compliance” we are specifically referring to how it relates to government contracts and prevailing wage regulations. This involves the payroll practices and reporting requirements required to be compliant with various prevailing wage laws, including:

  • Davis Bacon and Related Acts (DBRA): These acts apply to federally funded or assisted contracts that require the construction, alteration, or repair of public buildings or public works and are in excess of $2,000.
  • Service Contract Act (SCA): This act applies to all contracts that have over $2,500 in associated costs. SCA effects service employees on government contracts, including roles such as accountants, programmers and a range of other service-related roles.

Many states and municipalities also have prevailing wage laws for locally funded public works projects. Companies must strictly follow the requirements for the laws their contract falls under in order to stay compliance. Failing to do so can lead to an investigation and penalties including debarment from government work and legal action.

Starter compliance checklist

Every government contractor will have their own needs when it comes to creating effective processes. You may want to add the following steps to your workflow in order to eliminate some of the more error-prone tasks related to compliance.

Verify all prevailing wage and fringe rates at the start of each project
Many violations come from having the wrong prevailing wage rates, so it’s important to make sure you’re paying the correct hourly and fringe rates from day one. To do this you’ll need to check everything against the wage determination for the project. Often these are provided in the bid packet, but you should check them through official sources as well.

Federal wage determinations can be found here.
California wage determinations are published by the Department of Industrial Relations.
Download the free wage determination guide here for detailed wage determination help.

Verify that pay and fringe rates are keyed in correctly
Once you’re certain that you are using the correct rates, make sure that the information is entered correctly into your payroll system. It’s easy to incorrectly key in rates which can have a domino effect on your payroll accuracy. Check every point of entry your company requires (payroll, time tracking and/or accounting) in order to verify accuracy.

Double check work classifications
Verify that the work classifications each employee reports every week are consistent with the work actually performed. You should spot check this routinely, especially if your workers work on multiple projects, or if you know that a worker regularly performs multiple roles.

Know and follow overtime laws
Verify that overtime is correctly paid, based on federal and state requirements. You can learn more about overtime and wages by following the links below:

DOL Wages Information and Tips

DOL Overtime Pay Information

Follow pay and reporting frequency regulations
Make sure that you stay current with all required payroll practices under Davis Bacon and Related Acts. This includes paying prevailing wage workers weekly and submitting weekly certified payroll reports.

If you are working on joint, or state funded prevailing wage jobs your requirement may be different. Check with your state’s labor board for details. Visit this DOL page to find your state’s Department of Labor.

Make wage restitution when needed
If pay discrepancies are found, make wage restitution as soon as possible. Be sure you file an amended certified report to show the correction. Document your actions and store with your payroll records.

File complete certified reports
Make sure your certified payroll reports have all of the required information. This includes general company data, such as your company’s address, project name and location and contract or project number. Additionally, each workers’ name, an individual identifying number and the following information must be included:

  • Number of withholding exemptions
  • Work classification
  • Dates and hours worked
  • Total hours
  • Rate of pay
  • Earned gross and weekly net wages
  • Deductions

Document apprenticeships accurately

Verify that apprentice program documentation is included in your project files. You’re required to have documentation for the bona fide apprenticeship program your apprentice is from, as well as individual registration documents for each apprentice.

Understand state prevailing wage laws
If you’re in a state with additional labor regulations, you’ll need to include them in your procedures as well. For instance, if you do prevailing wage work in California, you’ll need to comply with state prevailing wage regulations like AB-3018 and AB-5. Your state’s Department of Labor, or similar governing body is your best source of information in your area.

While staying compliant can be a real challenge, it’s easier if you have a strong understanding of your obligations. It is also more manageable if you have official processes in place that keep your certified payroll workflow on track. Using a checklist is one of the easiest ways to make this happen.

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.