When it comes to participating in federal government-funded construction projects as a contractor or subcontractor, certified payroll records are your key to demonstrating that your workers are receiving fair wages. But, delving into the world of certified payroll compliance can be bewildering, especially if it’s your first time navigating these regulations.
In this article, we will provide you with a thorough breakdown of what certified payroll is, when it’s obligatory, how to adhere to the rules, the consequences of non-compliance, and recordkeeping requirements. By the end, you’ll have a clear understanding of the steps necessary to ensure compliance.
What Is Certified Payroll?
Certified payroll is a specialized weekly payroll report, typically filed using Form WH-347, that contractors engaged in federally funded projects must complete and submit. This report serves as proof that these contractors are paying their workers the prevailing wage, as mandated by the Davis-Bacon Act.
The Davis-Bacon Act, established in 1931, dictates that contracts over $2,000 with the U.S. government or the District of Columbia for the construction, alteration, or repair of public buildings or public works must stipulate minimum wages for laborers and mechanics employed under the contract. Over the years, various related acts have been enacted, extending the requirement to federally assisted construction projects governed by relevant laws such as the Federal-Aid Highway Acts, the Housing and Community Development Act of 1974, and the Federal Water Pollution Control Act.
When Is Certified Payroll Required?
Certified payroll, submitted using Form WH-347, is mandatory for contractors and subcontractors involved in federally financed or assisted construction contracts exceeding $2,000. This covers a broad spectrum of projects, from public-use structures like schools to public works endeavors like highway or bridge repairs. The term “construction” is interpreted widely and encompasses activities such as painting, decorating, plumbing, electrical work, drywall installation, and cleaning, making certified payroll relevant to a wide array of industries.
Compliance Requirements
To meet certified payroll requirements, you must pay your employees at least the prevailing wage on a weekly basis. This means ensuring that your workers’ gross wages match the “local prevailing wage rates for corresponding work on similar projects in the area.” It’s crucial to abide by your state’s prevailing wage rates, opting for the higher rate between federal and state standards.
Prevailing wage rates are location-specific and vary according to the job titles of your employees. The U.S. Department of Labor provides wage determinations, listing wage rates and fringe benefit rates for each labor category in each locality. Under the Davis-Bacon Act, you are obligated to pay no less than the prevailing wage, inclusive of fringe benefits. Compliance can be met by contributing to bona fide benefit plans, funds, or programs or by making cash payments to covered workers in lieu of fringe benefits.
Required Federal Reporting
To demonstrate compliance on federal projects, you need to complete and submit Form WH-347 on a weekly basis within seven days of the regular pay date for the pay period. This report covers a wide range of employees, including tradespeople, traffic control personnel, and guards.
It must include information such as their names, social security numbers, gross and net wages, benefits, hours worked, job classification (e.g., electrician, carpenter), withholdings, and more. On the reverse side of the form, you’ll find a Statement of Compliance that attests to the proper payment of the prevailing wage to each employee on the contract. This statement, signed by the contractor, subcontractor, or an authorized officer, validates the accuracy of the report.
The weekly reports serve as evidence that you’re remunerating your employees in compliance with prevailing wage standards and must be submitted to the contract’s funding agency, such as the federal, state, or local government. If no work is performed in a given week, you do not need to file a report, but you should record the correct payroll report number for subsequent submissions.
Here are instructions for completing payroll form WH-347.
State Funded Projects
For state-funded projects, you may need to complete a state-specific certified payroll report based on your operating location. While state forms request similar information as Form WH-347, they may have different formatting.
Recordkeeping Obligations
Once you have properly completed and filed the necessary federal or state reports, you are required to retain these records for a specified period. For federal projects, certified payroll reports must be retained for at least three years after the project’s completion. Many of these records overlap with those needed for Fair Labor Standards Act (FLSA) purposes. The timeframes for state projects may vary but typically require records to be kept for around 2-4 years.
Penalties for Non-Compliance
Non-compliance with Davis-Bacon contract clauses can result in severe consequences, including contract termination, contractor liability for government costs, and debarment from future contracts for up to three years. Common violations encompass misclassifying laborers and mechanics, failure to pay the full prevailing wage (including fringe benefits), inadequate recordkeeping, and failure to submit weekly certified payroll reports.
Staying Compliant with Certified Payroll Reporting
For contractors involved in public works projects, adherence to Davis-Bacon Act requirements is paramount to a company’s reputation and future. If you lack the time or in-house resources to navigate the intricate rules and avoid serious penalties, outsourcing your payroll to an experienced provider can be a prudent choice.