Government-funded jobs can be lucrative and exciting. But if you land one as a contractor or subcontractor, you may be required to submit certified payroll records. To avoid serious penalties for noncompliance, it’s a good idea to familiarize yourself with what certified payroll is and how it works. In this handy guide, we’ll help you do just that.
Featured Partners
1
OnPay
Yes
Yes
$40 per month + $6 per user
2
SurePayroll
Yes
Yes
$29.99/mo plus $5 per employee
3
Gusto
Yes
Yes
$40 per month plus $6 per user
4
Rippling
Yes
Yes
$35 per month + $8 per user
5
Justworks
Yes
Yes
$50/month + $8/user
What Is Certified Payroll?
Certified payroll is a special weekly payroll report used by contractors who are working on federally funded projects. To meet your certified payroll requirements, you’ll need to submit Form WH-347 to the Department of Labor every week. This form includes details about your employees, their wages and benefits, the type of work they performed and the total number of hours they work.
There is also a statement of compliance that states your attached payroll report is accurate and complete. The goal of WH-347 is to ensure you’re paying your employees the prevailing wage or the average wage for employees in a specific occupation. It shows that your business is complying with all prevailing wage requirements.
The Davis-Bacon Act
Certified payroll comes from the Davis-Bacon Act, which was passed by Congress in 1931 to protect workers from low hourly wages. Per the Davis-Bacon Act, if the government gives your business a contract for over $2,000 to complete construction, alteration or repair of public buildings or public works projects, you must comply with certified payroll.
Since the Davis-Bacon Act has been enacted, other acts have been passed to enforce prevailing wage laws. Several examples of these acts include the Housing and Community Development Act of 1974, Federal-Aid Highway Acts and the Federal Water Pollution Control Act.
What Are Prevailing Wage Laws?
Prevailing wage laws were created to ensure fair pay to hourly workers. To meet these laws, your employees’ gross wages must adhere to the prevailing wage requirements for work on related projects in surrounding areas. Fringe benefits, such as health insurance and retirement plans, must also meet these requirements.
To determine prevailing wages, the Department of Labor conducts surveys to determine the average wage paid to workers in a specific occupation in a particular area. States with higher average construction wages will have a higher prevailing wage. To find out your wage determination, reach out to the Department of Labor.
When Do Employers Use Certified Payroll?
Certified payroll is mandatory for contractors and subcontractors who work on various types of federally funded construction contracts that are over $2,000. This may be anything from building a school or repairing a highway. While the term “construction” is broad, it can apply to a variety of activities such as painting, decorating, cleaning, plumbing, drywall and electrical.
Requirements for Certified Payroll
At first glance, Form WH-347 can seem overwhelming. To make it easier to understand, here’s a breakdown of each section you’ll need to fill out.
- Business name: This is where you’ll state whether you’re a contractor or subcontractor.
- Business address: Include your street, city, state and zip code.
- Payroll number: Payroll numbers show the weeks worked under your federal contract. You’ll begin with “1” and then move in sequential order for each payroll you submit.
- Week ending: State the last day of the work week.
- Project and location: Identify the project you’re working on and where it’s located.
- Project or contractor number: You can find this information on your contract for your public works project.
Next, you’ll share detailed information about each employee, including:
- Their name.
- The last four digits of their Social Security number.
- The number of withholding exemptions. Keep in mind that this column is not required and simply there for your convenience.
- The employee’s job classification. This may be a painter, carpenter, electrician, etc.
- Their total hours worked.
- The employee’s pay rate, including fringe benefits. Remember their rates must meet prevailing wage requirements.
What Happens if You Fail To Comply With Certified Payroll?
While complying with certified payroll takes time and effort, it’s essential if you’d like to avoid serious consequences. The penalties for violating Davis-Bacon laws include:
- Withholding payments: The government may decide to hold payments to pay for unpaid wages and award damages to employees.
- Debarment: Your business will be debarred from future contracts. This penalty can last for up to three years.
- Prosecution: If you submit false certified payroll records, you put yourself at risk for criminal prosecution. This type of crime may lead to fines or imprisonment.
- Termination: The government may terminate your federal contract.
Common Mistakes To Avoid When Filing Certified Payroll Reports
If you’re new to certified payroll reports or don’t have an experienced professional to guide you, errors can occur. Here are some of the most common mistakes you should be mindful of and do your best to avoid.
- Using the wrong occupational classification to define your business
- Misclassifying workers
- Reporting inaccurate hourly pay rates
- Failing to explain a lapse in weekly payroll reports when there was no work performed
- In states that have their own prevailing wage laws for state-funded projects, using one form or format for all 50 states when individual state forms and submission requirements vary
- Processing and submitting payroll reports late
Tips for Filling Out Certified Payroll Reports
There’s no denying that filling out and submitting certified payroll reports each week can be a daunting and time-consuming endeavor. The good news is there are several ways you can simplify the process and ensure compliance.
1. Work With a Certified Payroll Specialist
While you can try to tackle certified payroll reports on your own, it might make sense to enlist the help of a certified payroll specialist. A certified payroll specialist has passed the Certified Payroll Professional (CPP) exam and been accredited by the American Payroll Association (APA). They have the knowledge and experience to handle all types of payroll processes, including certified payroll.
2. Design a Payroll Procedures Manual
Your payroll data will change every time you add employees, lose employees or give pay raises. By taking the time to create a procedure manual that documents your certified payroll process, you can easily train new team members. A well-written manual can mean the difference between processing your payroll efficiently without errors and facing penalties for noncompliance.
3. Take Advantage of Technology
The days of managing payroll on spreadsheets are long gone. To make your life easier, reduce the risk of mistakes and ensure you never lose important data, use an automated payroll solution. Even though you will have to invest in it, it will speed up your process and increase accuracy.
4. Don’t Forget To Keep Records
According to the Fair Labor Standards Act (FLSA), you must keep payroll records for at least three years. These include personal employee information, hours worked, pay rate, regular and overtime hours worked, additions to and deductions from pay, total wages per pay period and the dates of payment. Ideally, you’d store your records digitally so they never get lost.
Certified Payroll Doesn’t Have To Be a Hassle
Certified payroll should be on your radar if your business takes on federal construction contracts. To simplify the process and save time, don’t be afraid to ask for help. By doing so, you can rescue your risk of penalties and focus on running and growing your business.
Featured Partners
1
OnPay
Yes
Yes
$40 per month + $6 per user
2
SurePayroll
Yes
Yes
$29.99/mo plus $5 per employee
3
Gusto
Yes
Yes
$40 per month plus $6 per user
4
Rippling
Yes
Yes
$35 per month + $8 per user
5
Justworks
Yes
Yes
$50/month + $8/user
Frequently Asked Questions (FAQs)
Where do I find Form WH-347?
Form WH-347 is the form you’ll use to submit your weekly certified payroll reports. It’s easily accessible on the Department of Labor website.
Who is exempt from certified payroll?
Certified payroll is designed for on-site workers whose responsibilities include physical and manual labor. It does not apply to salaried workers in administrative, management or professional positions.
What is the difference between certified payroll and standard payroll?
Standard payroll is the process you use to pay your employees. Certified payroll is a report you submit to a government agency certifying that you have paid your employees for the previous week according to prevailing wage laws. Certified payroll reports need to show information on each worker’s classification as well as their prevailing and fringe rate.
