Understanding Certified Payroll: What You Need to Know

In November 2021, the federal Infrastructure Investment and Jobs Act created $1 trillion in new funding for construction projects. This is an example of the type of projects that require certified payroll. If you want to take on these projects, here are details of the payroll requirements you need to know. Companies working on federal government-funded construction projects as contractors or subcontractors must submit certified payroll records weekly as the required documentation to show that they are paying workers fairly.

What is Certified Payroll?

Certified payroll is a requirement of federal construction projects. The requirement for a weekly certified payroll report comes from the 1931 Davis-Bacon Act, which requires the following: “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 contain a clause setting forth the minimum wages to be paid to laborers and mechanics employed under the contract.”

What Are the Differences Between Certified and Standard Payroll?

Certified payroll is used for projects subject to prevailing wage laws (see discussion below). Standard payroll is for general businesses not subject to prevailing wage laws. The documentation required for certified payroll is more extensive. Certified payroll is subject to many regulatory requirements and must comply with state and federal laws.

Requirements for Certified Payroll

Certified payroll is submitted weekly by using form WH-347. Companies working on federally funded projects need to submit this form to show that the company is paying the prevailing wage.

What is Exempt from Certified Payroll?

Projects on private property with no federal funding are exempt. Projects with a contract value of under $2,000, such as maintenance or repair work are exempt. Some jurisdictions exempt residential properties such as single-family homes or apartment buildings.

What Are Prevailing Wage Laws?

To meet the requirements for certified payroll, companies must pay employees the prevailing wage each week. The workers’ gross wages must be at least the local prevailing wage rates for similar work in the area.

Federal wage determinations for prevailing wages are in the Sam.gov database. State prevailing wage laws also exist. Companies must pay whichever rate is higher.

When Do Employers Use Certified Payroll?

Any federally funded construction project must use certified payroll. The definition of construction is broadly used and includes jobs such as painting, decorating, plumbing, electrical, drywall, and cleaning.

Common Mistakes to Avoid When Filing Certified Payroll Reports

Here are the top ten most common errors made by companies when filing these reports:

1. Missing or Incorrect Information: Info about hours worked, wages paid, job classifications, and fringe benefits must be correct.
2. Wage Rates: Mistakes include incorrectly reporting wage rates for all job classifications or failing to adjust rates according to prevailing wage requirements.
3. State Laws: It is important to check state laws for prevailing wages that may differ from federal requirements. The higher rate is the one to use.
4. Fringe Benefits: Neglecting to include fringe benefits such as health insurance, retirement contributions, or other benefits is a problem.
5. Calculations: Errors in calculating overtime pay, deductions, or total wages might violate labor laws.
6. Missing Signatures: A certified payroll report requires signatures from the employer and the contractor.
7. Late Filing: Missing deadlines may result in penalties or the suspension of the project.
8. Record-Keeping: Companies must maintain accurate records of hours worked, wages paid, and other necessary information.
9. Failure to Update: Changes in wage rates, job classifications, or other necessary information may occur and must be updated.
10. Filing Incorrectly: Submission of the forms must be done in the proper way.
    
    

To avoid these errors, companies should establish robust payroll processes, ensure ongoing training for personnel responsible for payroll reporting, and regularly audit their payroll records for accuracy and compliance with prevailing wage laws. Working with a company like Exact Payroll, an expert in certified payroll reporting, can help streamline the process and reduce errors.

Certified Payroll FAQs

Here are some of the frequently asked questions about certified payroll:

• What information must be included in a certified payroll report?

Certified payroll reports must include employee names, social security numbers, work classifications, hours worked, pay rate, gross wages, deductions, and net wages.

• How often must certified payroll reports be submitted?

Certified payroll reports must be submitted weekly for each project.

• To whom are certified payroll reports submitted?

Certified payroll reports are typically submitted to the federal project contracting agency.

• Can certified payroll reports be submitted electronically?

Yes, many agencies allow for the electronic submission of certified payroll reports.

• How are deductions reported in certified payroll?

Deductions must be itemized, showing amounts taken for taxes, benefits, and other authorized withholding.

• What records must be kept to support certified payroll reports?

Contractors must keep accurate records of employee time, pay rates, and deductions for at least three years after the project's completion.

• Can certified payroll reports be audited?

Yes, certified payroll reports can be audited by the Department of Labor or the governmental contracting agency to ensure compliance with labor laws.

Struggling with certified payroll compliance? Contact Exact Payroll today for expert guidance and support!