Jun 06, 2022

What Is A Certified Payroll Report

Certified payroll is a special weekly payroll report using Form WH-347 for contractors working on government-funded projects. Employers must complete and submit these reports to prove they are paying workers the prevailing wage.

The Certified Payroll Reports requirement comes from the Davis-Bacon Act, which passed in 1931 and requires that each contract over $2,000 to which the U.S. 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.

Since its enactment, other related “Acts” have been passed that require 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.

Many states and city governments have adopted the certified payroll requirement to ensure contractors pay an appropriate wage to their workers.

Who Has To File A Certified Payroll Report?

Certified payroll using Form WH-347 or equivalent state or local form is required for covered contractors and subcontractors performing work on government-financed or assisted construction contracts over $2,000. 

The term construction is used broadly when it comes to the types of contracts covered by the certified payroll requirement. For example, it includes activities such as:

• Painting
• Decorating
• Plumbing
• Electrical
• Drywall
• Cleaning

This means the requirements are not limited to just traditional contractors and include many construction-related industries.

Compliance

To meet the requirements for certified payroll, you are required to pay your employees the prevailing wage weekly. 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 make sure you comply with your state’s prevailing wage rates. That means you’ll have to pay whichever rate is higher – the federal, state, or local. 

The prevailing wage pay rates vary 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 find your wage determination. It lists the wage rates and fringe benefit rates for each labor category.

Your obligation is to pay the prevailing wage also includes fringe benefits. This can be met either by payment of the fringe benefits to bona fide benefit plans, funds, or programs or by paying the covered workers as cash in lieu of fringe benefits.

To demonstrate compliance with this requirement for government projects, you’ll have to complete and submit the appropriate federal, state, or local form each week within seven days after the regular pay date for the pay period. This form 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

The weekly reports, which prove 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 do any 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 next certified payroll record submission.

Once you properly complete and file the required federal, state, or local reporting, you’ll need to make sure you maintain the records for the required time period. Certified payroll reports must be retained for at least three years after the project completion date on Federal jobs. State and local requirements vary from 2 to 4 years.

Non-Compliance Penalties

According to the DOL, violations of the contract clauses may be grounds for contract termination, contractor liability for any resulting costs to the government, and debarment from future contracts for up to three years.

Typical violations include:

• Misclassifying laborers and mechanics
• Failure to pay full prevailing wage, including fringe benefits, for all hours worked
• Inadequate recordkeeping
• Failure to submit certified payrolls weekly

Aatrix supports Federal & State certified payroll reports for many of our partners as part of our unlimited eFile package subscription.