What is Certified Payroll?
There is a massive difference between the certified payroll process and the typical payroll process most business owners are accustomed to. Certified payrolls only pertain to government jobs. Contractors and subcontractors must submit a special payroll report when working on government funded projects.
Government contractors must submit federal Form WH-347 to the agency overseeing the government contract weekly. Included on the form should be a list of every employee, their wages, their benefits, the type of work they did, and the hours they worked. It also includes gross wages, withholding and a statement of compliance.
Companies that fail to comply with the guidelines of certified payroll and the Davis Bacon Act could face penalties.
What is the Davis Bacon Act?
The certified payroll regulations stem from the Davis Bacon and Related Acts. These acts were passed by Congress during the Great Depression to ensure workers on public projects were being paid fairly.
The Davis Bacon Act applies to the construction, alteration, or repair of public buildings or public projects. Public work refers to structures built for public use like schools, roads and highways. Any company with a federal contract over $2,000 must pay their laborer’s the local prevailing wage and fringe benefits for their work. A certified payroll report must be completed for those employees as well.
What are prevailing wage laws?
Due to the regulations with the Davis Bacon Act, business owners who work on public construction projects must pay their workers no less than “the local prevailing wage rates for corresponding work on similar projects in the area.” The same rule applies for fringe benefits.
State prevailing wage rates takes precedent over the federal rate. If the state rate is higher than the federal rate, you must pay the state’s higher rate. Your state can verify which rate to pay your workers.
How to Find Wage Determination?
With each government job, labor categories must be assigned to each employee for the type of work they are performing. For example, they may be one labor category for plumbers and another for electricians. Each labor category has a coinciding wage rate and fringe benefit rate.
To find your wage determination, go here. It lists the wage rates and fringe benefit rates for each labor category. Once you have the correct wage rates, you’ll submit the payroll information using form WH-347.
The government requests the use of WH-347 to submit certified payroll reports for government construction contracts. Simply fill out the form with the correct information on the first page. On the second page there is a statement of compliance. A company owner or payroll manager must sign the statement of compliance. The signature represents that they understand that the willful falsification of any payroll information may subject the party to a civil or criminal prosecution.
This is what a certified payroll report looks like filled out:
Who is Exempt from Certified Payroll?
Certified payroll is only applied to workers on site and whose primary job duty included manual labor. Certified payroll does not apply to salaried workers in executive, administrative or professional positions.
In conclusion, certified payroll is only used for government jobs. All information in the payroll report must be accurate or else risk penalties and fines.
We understand that the certified payroll process can be daunting even for experienced professionals in the industry. Partnering with a Professional Employer Organization (PEO), like CornerstonePEO, might be in your best interest. We have years of experience across thousands of clients when it comes to certified payroll. We also offer other administrative services like payroll, taxes, human resources, employee benefits, and risk management. We take care of time consuming, back office tasks for your company so you can get back to actually running your business. Our industry leading PEO services offer innovative, cost effective, easy to understand business solutions for companies of any size and industry. Contact us to learn more or a FREE consultation.