What Is Certified Payroll & How To File Reports

Kaitlin Edwards | Apr 22, 2024

Certified Payroll: What Is It & Reporting Resources

The government often uses outside professionals to fulfill key projects. Experts entrusted by the government with an important task often contend with strict regulations for government jobs. This is in addition to the rules and regulations they’re expected to follow as private employers. Certified payroll may be necessary in some of these cases.

Let’s discuss what certified payroll is and how it may be relevant to your business, whether you’re operating out of a single state or managing multi-state payroll.

What Is Certified Payroll?

Certified payroll is a weekly report generated by contractors working for the government or on a federally funded job and differs from the typical payroll process. A certified payroll report is more detailed than a private one an employer might utilize for private employees.

When you’re working with the government’s money, they need substantial details regarding how funds are utilized. A certified payroll report will show that you’re not underpaying employees using deceptive salary practices to utilize government funding irresponsibly.

It’s an accountability measure designed to protect the taxpayers and maintain faith that private contractors are working with everyone’s best interest in mind.

Employers acting as government contractors are required to complete Form WH-347 and submit it to the Department of Labor on a weekly basis. The form details pay, benefits, hours worked, and type of work performed by each employee.

The government is checking to be sure that employees are paid the prevailing wage for their position and that the hours they’re working are reasonably aligned with the progress being made on the contracted project.

What Is the Certified Payroll Law?

Certified payroll isn’t the official title of the law used to enforce certified payroll requirements. These requirements are derived from the 1931 Davis-Bacon Act. The Davis-Bacon Act was designed to protect workers from being on-boarded by their employers at unfairly low rates, advocating for the rights of hourly and salaried employees. The act clearly describes the necessity of certified payroll.

The Davis-Bacon Act has been fortified by other acts relating to housing, urban development, and the government hiring outside contractors. Most of these laws involve the how, when, and why the government would hire an outside contractor and won’t be especially relevant to private employers. The government manages its own compliance.

What Are Prevailing Wage Laws?

The Department of Labor conducts studies and reviews data to determine a fair wage for a specific job in each region of the country. These studies are designed to find an average or prevailing wage for a specific type of work. This wage is used to assess whether employees are being paid fairly for their work.

In addition to salary or hourly pay, the Department of Labor also considers employee benefits, like health insurance. They use the data to create regional job profiles as a basis for comparison for federally related evaluations, like government contract work and work-related visas.

In the case of certified payroll, the government wants to see that contractors working on the project are being compensated fairly and reasonably, which means that their employer isn’t undercutting them what they’re owed or overinflating their value for the purposes of greater budget utilization.

Who Must Utilize Certified Payroll?

Any employer accepting a federally funded construction contract worth over $2,000 must utilize certified payroll. This wouldn’t include a contractor who comes in to replace or repair a leaky faucet in a government building. Small repairs that one or two people complete within a couple of hours generally aren’t lucrative enough for special payroll purposes.

Certified payroll is most commonly utilized for large-scale construction projects that the government outsources to private employers, like building courthouses or constructing highways. The budget for these projects often exceeds several million dollars, so a thorough accounting of how every penny is spent is essential.

How Can Employers Determine a Prevailing Wage?

The majority of prevailing wage resources are designed for use with immigration processes, but the information is objectively accurate. You can utilize the same information even if all of your employees are United States citizens who have never lived or worked outside of the country.

Prevailing wages can be obtained by submitting a request to the National Prevailing Wage Center (NPWC) with the specifics of your location and the positions of your employees. The prevailing wage is the minimum amount employers should be paying employees when accepting a government contract. It’s okay to pay your employees a little more than the prevailing wage, but it’s never acceptable to pay them less.

How To Complete Form WH-347

Government forms can seem daunting, but Form WH-347 isn’t as difficult as it seems. The form will ask you for two types of information: Information about your business, and information regarding each employee. The Department of Labor offers thorough guidance for the certified payroll process.

Business Information

Your certified payroll report should include the name and address of your business, the government project you’re completing, the address of the project, and the project’s identifying number.

Include the date the work week ended and your payroll number. Payroll number refers to how many weeks you’ve filed payroll since you began working on your government contract. Your first week of payroll will always be number one.

Employee Information

Certified payroll requires you to share information about each employee working on the project. In addition to including identifying information like their names and the last four digits of their social security number, you’ll need to provide their employment information.

You may provide information related to tax withholding, but you aren’t required to do so. The form allows you to provide certain information if you intend to use your certified payroll record as your only payroll record.

You’ll need to include the pay rate and benefits of each employee. Their wages are expected to be, at minimum, the same as the prevailing wage for employees of the same job classification. You must include their job classification as it would be described by the Department of Labor, not as it would be described within your company.

You also must include the total number of hours worked at a fair wage besides the total the employee earned within the pay period.

Checking Your Info

The law requires that all certified payroll reports be completed accurately and submitted on time. Remember that these documents are for the benefit of the Department of Labor, so it’s important to use their standards and definitions instead of your company’s normal standards and definitions. Misclassifying workers or inaccurately describing the nature of a project can cause issues as you work on your government contract.

What To Do With Your Certified Payroll Reports

Reports can be mailed to the United States Department of Labor Wage and Hour Division. There is currently no method for electronic submission of these forms. If you use a payroll company, they may be able to submit forms on your behalf.

You must retain a copy of each certified payroll report for a minimum of three years after the project’s end date. When the period expires, you can securely dispose of or destroy the records.

What Are the Consequences for Certified Payroll Noncompliance?

Certified payroll is a legal requirement. Like with any legal obligation, there are consequences for failing to follow the guidelines. Consequences escalate in severity depending upon the specific noncompliance issue.

Loss of Contracts

The government can end your contract if you fail to comply with certified payroll requirements. In addition to taking the contract away from your company, they can forbid your company from working on government contracts in the future. A ban can last for up to three years, depending on the nature of a non-compliance issue.

Stoppage of Payments

If you don’t submit your certified payroll report, the government can withhold payment for the project until you become compliant. They may also award your employees damages if they haven’t been paid on time or in full.

Your employees will be paid what they’re owed, but you won’t be able to recover the costs of goods, services, or materials you intended to bill to your government contract.

Criminal Penalties

If you intentionally falsely report information on your certified payroll report, the government can pursue charges against you. Your company can face fines depending on the nature of the deliberate falsification. Key members can face imprisonment if their intention is to defraud the government.

Maintaining State Payroll Compliance with Mosey

Payroll compliance is a serious requirement for businesses of all sizes. You need to have a record of employee wages and payments to prove you’ve been abiding by state payroll laws.

Mosey’s business compliance dashboard is designed to help you keep track of key statewide payroll requirements and remain in good standing. Schedule a demo with Mosey to learn how our automated tools can simplify the process of running your business.

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