How to Do Certified Payroll for Contractors

Certified payroll reports are required for contractors on government-funded or federally-assisted construction projects. This reporting mechanism ensures workers receive fair wages, typically set at a prevailing rate for the local area. Understanding these obligations and the reporting process is important for contractors to maintain compliance.

Understanding Certified Payroll Obligations

Certified payroll requirements apply to contractors and subcontractors performing work on federal or federally-assisted construction contracts exceeding a specific threshold, typically $2,000. These obligations are primarily mandated by the Davis-Bacon and Related Acts (DBRA), which establish standards for wages and fringe benefits on public works projects.

A central concept in certified payroll is the “prevailing wage,” which represents the minimum hourly wage rate, including fringe benefits, that contractors must pay laborers and mechanics for work performed on covered projects. The United States Department of Labor (DOL) determines these rates for various worker classifications in specific geographic areas. These determinations are published as “wage determinations” and are incorporated into the contract documents, informing contractors of the required minimum compensation.

Fringe benefits are additional benefits provided to employees beyond their basic hourly wage, such as contributions to health insurance plans, retirement funds, or vacation pay. For certified payroll purposes, these benefits can be counted towards satisfying the total prevailing wage rate. Contractors may pay the full prevailing wage in cash, or a combination of a lower cash wage and qualifying fringe benefits, provided the total equals or exceeds the specified prevailing wage rate.

Correctly classifying workers is another important aspect of certified payroll compliance. Each worker must be assigned a classification that accurately reflects the type of work they perform, aligning with the descriptions provided in the applicable wage determination. Misclassification, such as paying a skilled laborer as an unskilled one, can result in significant penalties, including back wage liabilities and potential debarment from future federal contracts. Contractors must regularly review worker duties against the wage determination to ensure accurate classification throughout the project.

Information Required for Certified Payroll Reporting

For each employee, contractors must gather their full name, address, and social security number. The precise work classification, daily and weekly hours worked (including overtime), actual hourly rate of pay, and total gross wages earned for the payroll period are also required. Financial details include an itemized breakdown of all deductions from gross wages, such as taxes and insurance premiums. The resulting net wages paid and a detailed breakdown of all bona fide fringe benefits paid or contributed on behalf of each employee are also mandatory.

Beyond individual employee data, specific project information is also required for the report. This includes the complete project name and its physical location, along with the unique contract number assigned to the project. The contractor’s full name and address, as well as the specific dates covering the payroll period, must also be clearly stated. The primary document used for certified payroll reporting is Form WH-347, “Payroll (For Contractors and Subcontractors).” This form is available from the United States Department of Labor’s website.

Preparing the Certified Payroll Report (Form WH-347)

Form WH-347 requires specific information:
The header section requires the contractor’s name and address, project or contract number, and payroll period dates.
Column 1: Employee’s full name and social security number.
Column 2: Employee’s work classification as per the wage determination.
Column 3: Daily and weekly hours worked, with entries for each day and a total for the period.
Column 4: Hourly rate of pay, excluding fringe benefits (basic cash wage).
Column 5: Total gross amount earned by each employee for the payroll period.
Column 6: Itemized list of all deductions from gross wages (e.g., taxes, FICA).
Column 7: Net wages paid to the employee.
Column 8: Details of fringe benefits, indicating hourly rate equivalent or actual cost. Note “cash” if paid directly to employee.

The reverse side of Form WH-347 contains the “Statement of Compliance,” which must be completed and signed by an authorized representative of the contractor or subcontractor. This statement certifies that the payroll information is correct and complete, that each employee has been paid the applicable prevailing wage rate, and that all required deductions have been made. The statement also confirms that any fringe benefits not paid in cash were provided through a bona fide plan or program. This section typically requires the signature of an owner, partner, or officer of the company, along with their title and the date of signing.

Submission and Record-Keeping Requirements

The completed Form WH-347, along with any supporting documentation, is typically submitted weekly to the contracting agency or the general contractor, depending on the project’s specific requirements. Submission methods often include secure online portals, such as LCPtracker or Elation, or traditional mail delivery.

Deadlines for submission are generally weekly, following the close of each payroll period, to ensure timely oversight of wage compliance. Failure to submit reports on time can result in project delays, non-compliance notices, and potential withholding of payments. Contractors should confirm the exact submission method and schedule with the contracting officer or general contractor at the project’s outset.

Strict record-keeping is a legal requirement for contractors on covered projects. Contractors must retain copies of all completed certified payroll reports (Form WH-347) for a specified period. These records must be readily accessible for review by government auditors or representatives of the contracting agency.

In addition to the certified payroll forms, contractors are required to maintain basic payroll records, including accurate timecards or other records of daily and weekly hours worked by each employee. Documentation proving the payment of fringe benefits, such as cancelled checks, trust fund receipts, or insurance premium statements, must also be kept. These records, along with the applicable wage determinations, must typically be retained for a period of three years from the date of project completion.