What is Certified Payroll?
Do you have federally-funded projects in construction, alteration, or repair work worth over $2,000?
If so, you’ll likely need to become familiar with certified payroll reporting and what the Davis-Bacon Act means for you.
You can be subject to costly penalties if you fail to follow certified payroll requirements.
In this guide, we’ll give you an in-depth understanding of certified payroll reports and answer common questions to equip you with the confidence to follow certified payroll reporting requirements.
Here’s What We’ll Cover:
Certified Payroll Definition
Federal projects are always subject to stringent laws for compliance. Certified payroll reporting is one of those special requirements that adds a layer of paperwork to payroll reports.
Certified payroll applies to government-funded public works or public building contracts.
Requirements of certified payroll include:
- Contractors must pay workers in government contracts local prevailing wage and fringe benefits.
- Contractors need to sign and submit a weekly certified payroll report called Form WH-347 to the U.S. Department of Labor (DOL).
- Contractors must pay employees weekly.
Be aware that prevailing wages vary by region and by job. If you do contract work in multiple states or even regions, the prevailing wage will likely be different.
What is the Davis-Bacon Act?
The Davis-Bacon Act prevents contractors and subcontractors from underpaying employees.
Bids for public works projects like construction projects have always been super competitive. Contractors with the lowest bid prices for public works projects often have an advantage. Since bid prices account for the rate of pay of employees, some contractors would underpay employees to gain the lowest bid advantage.
Penalties for Violating Davis-Bacon Act
The U.S. Department of Labor is constantly penalizing companies for violations of the Davis-Bacon Act. There are serious penalties for violating Davis-Bacon Act, which include:
- Paying back wages
- Contract termination
- Ban from bidding on government contracts for up to 3 years
How Do I Fill Out Certified Payroll Report, Form WH-347?
Here are the steps to fill federal Form WH-347
- Start with a Form WH-347.
- Select contractor or subcontractor.
- Payroll number: Start with number 1. This denotes what week you're on under the government-funded contract.
- For week ending: Insert workweek ending date.
- Project or contract number: You’ll find this number on your awarded government-funded contract.
- Fill in details of employees.
- Column 2: Optional for contractors.
- Work Classification: Enter specific worker’s job classification. Refer to job classifications outlined in the contract specifications. One employee can have different job classifications.
- Day and date: If it’s Friday, May 5, you’d put “Fri” on top and “5” on the bottom. Then insert hours. S stands for standard hours worked, and O stands for overtime hours worked.
- Column 5-9: Fill in employee wage rates, including fringe benefits (note: total hours, gross amount earned, total deductions and net wages paid are auto-filled if you submit Form WH-347 online).
- Sign to confirm Form WH-347 is compliant with appropriate prevailing wage rates and fringe benefits.
When filling the form, only include employees doing physical labor on site since they’re the ones eligible for prevailing wages. Employees in executive and administrative positions are not eligible for prevailing wages.
Who is Required to Submit Certified Payroll Reports?
Contractors and subcontractors on government-funded public works contracts worth over $2,000. This includes government-funded construction projects, alteration projects, or repair projects.
Can Only Certified Payroll Professionals Do Certified Payroll?
It’s a common misconception for a contractor to think they need a certified payroll professional to do certified payroll. Any designated authorized person can sign the “Statement of Compliance”. Performing this act makes payroll officially certified.
How Do I Calculate Prevailing Wage?
Furthermore, having a well-organized payroll system makes certified payroll reporting much easier.
You can do payroll manually, but payroll software makes filling a certified payroll report easier.
Payroll software automates payroll to reduce human error and save you many hours per week. Payroll software also helps keep you compliant with all types of legislation on payroll information.
Correctly following certified payroll requirements starts with an organized system. This way, you’re not gathering payroll information at the last second to fill a certified payroll report.
Certified Payroll Made Easy
At first, certified payroll may seem intimidating, but it shouldn't be. Take advantage of payroll software to simplify the certified payroll process. Even without software to help with certified payroll, it's still a relatively straightforward process once you know what's expected of you.
Try payroll software to automate time-consuming portions of Davis-Bacon Act compliance.
More Resources on Small Business Accounting
- How to Calculate Overhead for Construction Companies
- 8 Accounting Basics for Contractors and Construction Businesses