If your business receives a government-funded job, you’ll be required to submit certified payroll records. Certified payroll reports come with strict requirements, and there are hefty penalties for non-compliance.
[Read more: What to Know Before Bidding on a Government Contract]
What is certified payroll?
Certified payroll is a special type of weekly payroll used by contractors working on federally funded projects.
To complete your certified payroll requirements, you’ll submit Form WH-347 to the Department of Labor. This form includes information about your employees, their wages and the total number of hours worked.
Form WH-347 ensures you’re paying your employees the prevailing wage, which is the average wage for employees in a certain occupation. This report demonstrates that your business is compliant with these requirements.
Keep in mind that the prevailing wage doesn’t apply to salaried employees in executive and administrative positions. It solely applies to employees who spend the majority of their time working manual labor jobs.
The Davis-Bacon Act
Certified payroll is a requirement stemming from the Davis-Bacon Act. In 1931, Congress passed the Davis-Bacon Act to protect workers from low hourly pay.
If your business works on a federal contract over $2,000, you’re required to comply with certified payroll requirements. The law applies to contractors and subcontractors hired to complete construction, alteration or repair of public buildings or public works.
The best way to ensure your business is compliant is to utilize technology to help you run payroll faster. It can also help make sure you keep accurate, organized payroll records for at least three years.
What is the prevailing wage?
The prevailing wage was created to ensure hourly workers are paid fairly. To meet these requirements, your employees’ gross wages must meet the prevailing wage requirements for work on similar projects in the surrounding areas.
Any fringe benefits received must meet these requirements as well. Some states have their own version of the prevailing wage.
States determine the prevailing wage by referring to the federal prevailing wage and conducting surveys of local wages. If the prevailing wage in your state exceeds the federal prevailing wage, you’re required to pay the state’s rate.
You can contact the Department of Labor to find your wage determination. Once you know the prevailing wage, you can complete Form WH-347.
Certified payroll requirements
In addition to meeting prevailing wage requirements, certified payroll employees must be paid weekly. And, you have to complete Form WH-347, which can be a bit confusing.
You’ll start by filling out some general information about your business:
- Whether you’re a contractor or subcontractor.
- Your business address.
- Your payroll number.
- The last day of the workweek.
- The project or contractor number.
From there, you’ll provide detailed information about each of your employees. That includes:
- The name of the employee.
- Their Social Security Number.
- The number of withholding exemptions.
- The employee’s job classification.
- Their total hours worked.
- The employee’s pay rate and fringe benefits.
On the second page, you’ll certify the report by including a statement of compliance. When you’re finished, you’ll sign the statement of compliance and submit the report.
Penalties for non-compliance
The Department of Labor will review certified payroll reports to ensure wages are paid fairly, for which the government agency has increased its scrutiny in recent years.
If you knowingly violate the Davis-Bacon Act, your business could be fined or terminated as a government contractor. Knowingly submitting false payroll information could lead to criminal or civil prosecution.
The best way to ensure your business is compliant is to utilize technology to help you run payroll faster. It can also help make sure you keep accurate, organized payroll records for at least three years.
You might also consider working with a certified payroll specialist to ensure you’re meeting the government’s requirements. Doing this can improve your quality assurance and standardize your payroll process.
[Read more: How to Choose the Right Payroll Software for Your Business]
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