Doing a construction project for the federal government has some big advantages. Your funding source is secure. And you get to do something that helps your community.
But there are also some requirements you should know about before bidding on a project. Certified payroll is one of them. It’s there to make sure federal contractors follow prevailing wage laws.
Knowing what certified payroll is can help you comply with certified payroll reporting rules to complete government projects successfully.
What Is Certified Payroll in Construction?
Construction companies contracted with the government must prepare a special report. This is called a certified payroll report. It shows that you complied with prevailing wage laws. These laws require contractors and subcontractors to pay workers a fair wage for federal projects.
You have to prepare this report each week you work on the project. Use Form WH-347, which is available from the Department of Labor (DOL). You must submit the form within seven weeks after the end of the pay period.
The report is “certified” because the person who prepares it has to sign it and certify all statements are true. It’s a formal document that confirms you paid workers the amount stated.
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Prevailing Wage Laws in Construction
The government requires certified payroll under the Davis-Bacon and Related Acts Regulations. Lawmakers passed this act in 1931. It requires federal contractors to pay their staff fairly. Under these laws, contractors and subcontractors must earn a specific minimum pay rate, also known as the prevailing wage.
Prevailing wage amounts vary by location. This is to match the cost of living and industry norms. The DOL prepares reports about average pay for specific jobs across the country. For example, the department might research how much companies pay electricians in Pennsylvania or how much roofers earn in Florida.
These reports also look into fringe benefits, like health insurance or retirement plans. Companies must provide any required benefits, which vary by state, as well as fair pay. If they don’t, they must provide other compensation instead, like a higher wage.
When Is Certified Payroll Required?
Certified payroll is only required when a company does construction for the federal government and the project’s contract is worth more than $2,000.
Many kinds of repairs or alterations are construction projects under the law. These include:
- Decorating
- Painting
- Cleaning
- Drywall
- Electrical work
Almost any project in a federal building, public works, or commercial construction job for the government counts.
What To Include When Certified Payroll Reporting
Form WH-347 is easy to fill out. The boxes are pre-labeled with sections for every person on your payroll.
The form asks for the following information:
- The full name of each employee and their Social Security number
- The jobs each person does
- Each employee’s worker classification, like “carpenter” or “electrician”
- The hours each person worked per day
- The date work was performed
- Each person’s rate of pay and gross earnings
- Payroll deductions for payroll taxes and benefits
- Net wages
- Fringe benefits
The second page of Form WH-347 requires the preparer’s signature. You must certify that you paid or supervised the payment of workers. This second page is what makes the payroll certified.
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How To Fill a Certified Payroll Report
To fill out a certified payroll report, all you have to do is provide the requested information. You can usually find it on construction invoices and payroll records. But for some items, you have to ask subcontractors directly.
Plan ahead and make sure you have all required information beforehand. That way, you’re not scrambling for numbers or communicating with contractors at the last minute.
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Penalties for Non-Compliance
Companies that don’t comply with certified payroll requirements face serious consequences from the DOL. These include the following:
- Delayed payments
- Termination of the government contract
- Prosecution
- Repaying the government for any costs
- Not being eligible for federal contracts for up to three years
4 Pro Tips for Certified Payroll Reporting
Correctly reporting certified payroll isn’t hard. It just requires foresight. Here are some tips for getting it right:
1. Use Software for Automatized Payroll Solutions
Automated payroll solutions make it easier to track payments and report accurate numbers. That way, when you fill out the form, you have all the information you need.
2. Keep Records for Three Years
The Fair Labor Standards Act (FLSA) requires you to keep payroll records for three years. Use payroll journal entries or software to keep records. The records should detail hours worked, each worker’s pay rate, and payment dates.
3. Create and Share Guidelines for the Process
Update payroll data regularly, especially when you hire new people or change pay rates. Establish payroll guidelines to explain the certified payroll process and stay compliant. This helps new hires understand what’s going on.
4. Hire a Certified Payroll Specialist
If you’re ever unsure, hire a professional. These specialists must pass a Certified Payroll Professional (CPP) exam. The American Payroll Association accredits them. You can hire them to handle payroll and ensure compliance. This is the best way to avoid mistakes.
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Automate bookkeeping by syncing your Joist and QuickBooks Online accounts
Certified payroll is easier with automated bookkeeping. That’s where Joist comes in.
Joist syncs with QuickBooks Online, so you can keep your books organized in less time. Manage clients, generate invoices, and accept payments all in one place.