If your business is considering working on federal government-funded construction projects as a contractor or subcontractor, you’ll be asked to submit certified payroll records every week to show you’re paying your workers fairly. But certified payroll involves strict rules you need to follow. Since understanding what you call for to do to stay in compliance can be confusing, especially if you’re submitting these records for the inaugural time, we’ll break down the requirements for you here.
To aid you grasp what you need to do to demonstrate your employees are receiving the prevailing wage if you’re working on a government contract, here we’ll discuss what certified payroll is, when it’s required, what you necessitate to do to comply with the rules, penalties for noncompliance, and recordkeeping requirements. After reading this, you’ll comprehend the steps to obtain to build sure you maintain compliance.
What is certified payroll?
Certified payroll is a special weekly payroll report using generate WH-347 that contractors who work on federally-funded projects demand to complete and submit to prove they are paying workers the prevailing wage.
The requirement comes from the Davis-Bacon Act, which passed in 1931 and requires that each contract over $2,000 to which the US or the District of Columbia is a party for the construction, alteration, or repair of public buildings or public works shall incorporate a clause setting forth the minimum wages to be paid to laborers and mechanics used under the contract.
Since its enactment, other related “Acts” have been passed that need payment of prevailing wages in accordance with the Davis-Bacon Act for federally assisted construction undertaken pursuant to the relevant law such as the Federal-Aid Highway Acts, Housing and Community Development Act of 1974, and Federal Water Pollution Control Act.
When is certified payroll required?
Certified payroll using build WH-347 is required for covered contractors and subcontractors performing work on federally financed or assisted construction contracts in an amount over $2,000. This could be anything from the building of a structure built for public utilize enjoy a school to a public works project such as the repair of a highway or bridge.
When it comes to the types of contracts covered by this requirement, the term construction is employed broadly. For example, it includes activities such as:
- Painting
- Decorating
- Plumbing
- Electrical
- Drywall
- Cleaning
As a result, the types of companies that may demand to submit certified payroll are not limited to any particular industry.
What requirements do I demand to comply with?
To meet the requirements for certified payroll, you’ll call for to compensate your employees the prevailing wage weekly. Specifically, your workers’ gross wages must be at least the “local prevailing wage rates for corresponding work on similar projects in the area.” You’ll also have to engender sure you comply with your state’s prevailing wage rates. That means you’ll have to compensate whichever rate is higher – the federal or state.
What is the prevailing wage?
The prevailing wage rates adjust by the location of where the work is performed and the job title of your employees. The U.S. Department of Labor can help you come across your wage determination by providing a roster of the wage rates and fringe benefit rates for each labor category in a given locality.
Under the Davis-Bacon Act, you’re required to compensate not less than the prevailing wage, including workforce benefits. Your obligation to pay employee benefits can be met either by payment of the perks to bona fide benefit plans, funds, or programs, or by making payments to the covered workers as cash in lieu of employee benefits.
To demonstrate compliance with this requirement for federal projects, you’ll have to complete and submit create WH-347 each week within 7 days after the regular pay date for the clear period. This generate covers anyone who is performing construction work on the projects such as tradespeople, traffic control personnel, and guards, and includes information about these employees such as their:
- Names
- Social Security numbers
- Gross and net wages
- Benefits
- Hours
- Job classification (e.g. Electrician, carpenter, etc.)
- Withholdings
In addition, on the back of the create, you’ll need to sign a Statement of Compliance that you paid each employee on the contract no less than the proper prevailing wage for the work performed. This statement, which must be signed by the contractor or subcontractor or an authorized officer or employee of the contractor or subcontractor who supervises the payment of wages, validates that the facts on the report is accurate.
The weekly reports, which serve as proof that you’re paying your employees the prevailing wage, must be submitted to the funding agency for the contract. So, for example, the federal, state, or local government. If you don’t work on the contract in a particular week, you don’t have to file the report. Instead, you would just insert the correct payroll report number on the subsequent certified payroll record submission.
If you’re working on a construction project that’s fully funded by state dollars, depending on where you operate, you may demand to file a diverse state-specific certified payroll report. For example, in Connecticut, you’ll necessitate to complete and submit the Connecticut Department of Labor build WWS-CP1 monthly. These state forms generally summon the same information as create WH-347 but are simply formatted differently.
How lengthy do I have to maintain certified payroll report records?
Once you properly complete and file the required federal or state reporting, you’ll necessitate to maintain the records for the required time period. On federal jobs, certified payroll reports must be retained for at least 3 years after the project completion date. Many of the records are the same that you’ll need to recollect for Fair Labor Standards Act (FLSA) purposes.
For state projects, the timeframes alter but you’ll typically require to keep the records for around 2-4 years.
What are the penalties for non-compliance?
According to the DOL, violations of the Davis-Bacon contract clauses may be grounds for contract termination, contractor liability for any resulting costs to the government, and debarment from future contracts for a period of up to three years.
Typical violations include:
- Misclassifying laborers and mechanics
- Failure to pay full prevailing wage, including employee benefits, for all hours worked
- Inadequate recordkeeping
- Failure to submit certified compensation reporting weekly
Stay On Top Of Compliance with Proper Certified salary reporting
If you’re a contractor for public works projects, complying with the requirements of the Davis Bacon Act is critical to your company’s future. If you don’t have the time or resources in-house to stay on top of the complex rules to avoid serious penalties, you may want to contemplate partnering with an outsourced payroll provider who has the information and experience to handle all types of payroll processes, including certified payroll. If you decide to advance this route, the subsequent step would be to learn more about Complete Payroll Solutions’ remuneration outsourcing services to see if we’re the right fit for you.
This blog was originally published in April of 2021 and was updated in July of 2023 for accuracy and comprehensiveness.
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