Contractors and subcontractors who work on government-funded contracts above $2,000 must complete certified payroll reports each week. Additional reports may be required, based on state or city regulations. Unfortunately, processing certified payroll and complying with all reporting requirements is time-consuming. It’s also complicated, which is why it’s so easy to make mistakes.
If you’re currently in charge of handling certified payroll or are new to the process, you may be stressed out about all of the things that can go wrong. After all, errors can lead to penalties, legal action, or debarment from government contracts.
Here are four common mistakes related to certified payroll, including a few ways you can prevent them.
1. Accurate Time Tracking in Certified Payroll is Critical
Timecards and other manual forms of time tracking are still fairly common, especially in the world of construction. This type of process lends itself to errors in both accurately recording time and keeping track of work classification, both vital parts of certified payroll. Even when digital tracking is in place, these types of errors are easy to make. When errors are discovered, reconciling time and pay can be a cumbersome process. Failing to make corrections, however, can lead to penalties and even legal action.
2. Work Classifications Must Be Accurate
Failing to accurately track and record a worker’s classification throughout the day is a common mistake. If an employee is classified as an iron worker but spends part of their day on tasks outside of the scope of work for that classification, it must be tracked. As the worker classification changes, so does the prevailing wage rate. This means that a classification mistake can lead to additional errors throughout the payroll process. Mistakes in tracking work classifications can be tedious to correct but failing to do so can lead to penalties and legal trouble.
3. Wage Determination Errors Lead to Penalties
Wage determinations apply to work done under prevailing wage laws such as the Davis-Bacon Act (DBA) and the Service Contract Act (SCA). These determinations define the hourly wage and fringe benefit rate for each classification of labor or mechanic. The correct rate must be paid based on worker classification by using the most recently published wage determination. Additionally, some states have prevailing wage laws that also govern hourly pay rates and fringe benefits. Mistakes in wage determinations can be corrected but may lead to penalties or legal action.
4. Certified payroll reporting
Submitting certified reports can be time-consuming and often requires users to manually enter information, sometimes multiple times. You may even have to submit reports to various agencies, increasing your workload and the opportunities for making mistakes. Some common errors include reporting the wrong number of hours worked, inaccuracies in reporting fringe pay, or not entering the correct worker role and prevailing wage rate. Mistakes related to completing all of the required fields on reporting forms can prevent you from submitting the form, but the accuracy of the data entered all falls on you.
Reduce Certified Payroll Errors and Save Money
The complicated rules and regulations governing certified payroll create an environment where mistakes are difficult to avoid. You can help reduce mistakes by creating a process of checks and balances for all manually entered information. Having multiple people check the data along the way will help you find mistakes early in the process. If you use time cards and other manual processes for tracking time, consider moving to a digital system. This will make it easier to track hours, assign wage rates, track changing roles, and reconcile errors that occur.
Additionally, you may want to start using payroll software that’s designed to meet the unique needs of certified payroll reporting. Look for software that can help assign prevailing wage and fringe rates and also create WH-347 and city-specific reports.
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FAQ and Tips for Payroll Errors
How do I write a payroll processing error letter?
Writing a payroll processing error letter involves a clear and concise approach. Begin with a brief but direct introduction, stating your name, position, and the purpose of the letter. Clearly outline the nature of the payroll error, specifying details such as the affected period, the type of error (e.g., incorrect wage calculation or deduction), and the impact on employees. Take responsibility for the mistake and express regret for any inconvenience caused.
In the body of the letter, provide a step-by-step explanation of how the error occurred and the corrective measures being taken. If applicable, outline the timeline for rectifying the mistake and when affected employees can expect the corrected payments. Be transparent about any additional steps, such as revised documentation or communication, to address the error comprehensively.
Conclude the letter by expressing gratitude for employees’ understanding and cooperation during the resolution process. Encourage employees to reach out with any questions or concerns, providing contact information for further assistance. Keep the tone professional, acknowledging the importance of accurate payroll processing and your commitment to preventing similar errors in the future.
How do I correct certified payroll errors?
Correcting certified payroll errors can be a meticulous process crucial for legal compliance and accurate financial records. Begin by identifying the errors within the certified payroll report, encompassing inaccuracies in wage rates, hours worked, or classifications. Document these errors and the accurate information to replace them. Maintain detailed records of the original report and corrections for transparency and audit purposes. Prepare a revised certified payroll report, adhering to any specified submission procedures, and promptly submit it to the relevant parties. Communicate corrections to affected employees, providing updated wage or benefit information. If the errors are complex, seek guidance from payroll experts, accountants, or legal professionals. Investigate root causes to prevent future errors, implementing process improvements and training. Monitor corrected records to ensure successful implementation and stay informed about prevailing wage laws and reporting requirements for ongoing compliance.
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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.
