What Does Certified Payroll Mean for Contractors?

Certified payroll is a specific type of payroll reporting required for contractors and subcontractors engaged in certain government-funded or public works projects. This reporting mechanism ensures that workers on these projects receive fair wages, typically defined as prevailing wages, for their labor. It promotes transparency and adherence to labor standards by detailing employee wages, hours, and benefits, affirming compliance with established regulations.

Understanding Certified Payroll Requirements

Certified payroll mandates contractors and subcontractors to submit detailed weekly reports confirming adherence to wage and hour laws on public works projects. This requirement primarily applies to projects subject to federal laws, such as the Davis-Bacon and Related Acts, which cover public works contracts exceeding $2,000. Many states also have their own prevailing wage laws, often referred to as “Little Davis-Bacon” acts, which impose similar reporting obligations for state-funded projects.

To fulfill these obligations, contractors must gather specific information for each employee working on a covered project. This includes the employee’s full name, address, and an identifying number, typically the last four digits of their Social Security Number. It is also necessary to record their work classification, such as carpenter or electrician, and the hours worked each day, distinguishing between straight time and overtime.

Other data points include the actual hourly rate of pay, gross wages earned, itemized deductions, and net wages paid. A detailed breakdown of any fringe benefits, such as health insurance or pension contributions, along with their hourly equivalent, must be documented. Contractors must also identify the applicable prevailing wage rate for each classification, including required fringe benefits, and note any difference between the actual wages and benefits paid versus the required prevailing wage. This comprehensive data is typically organized and reported on a standardized form, such as the federal Form WH-347, or an equivalent state-specific form.

Preparing and Submitting Certified Payroll Reports

Compiling the certified payroll report involves transferring gathered employee and project information onto the required form, such as the federal Form WH-347. This includes accurately recording daily and weekly hours worked, calculating gross and net pay, and accounting for all fringe benefits. Precise prevailing wage rates and fringe benefit requirements for each work classification must be listed on the form.

The report must also detail any instances where an employee was underpaid, outlining the restitution required to meet prevailing wage standards. Each weekly report needs a unique payroll number, beginning with “1” for the first submission and incrementing for subsequent weeks, even if no work was performed. The form also requires basic company and project information, including the project name, location, and contract number.

The “Statement of Compliance,” often found on the reverse side of Form WH-347, must accompany each submission. This statement affirms that wages were paid correctly, at or above prevailing rates, and that no illegal deductions were made. An owner, officer, or authorized agent of the contracting entity must sign this statement, certifying the accuracy and completeness of the payroll information under penalty of perjury.

Certified payroll reports are typically submitted weekly to the contracting agency, prime contractor, or a specific government department. While weekly submission is common, some contracts or state regulations may permit monthly submission. Submission methods can vary, including mail, secure online portals, or specialized software. Contractors must retain copies of all submitted certified payroll reports and supporting documentation, such such as time cards, payroll records, and benefit plan documents, for at least three years for federal projects, with state requirements often ranging from two to four years.

Ensuring Compliance

Certified payroll requirements stem from federal legislation, primarily the Davis-Bacon and Related Acts, which mandate prevailing wages on public works projects over $2,000. Many states have enacted their own “Little Davis-Bacon” laws, extending similar prevailing wage and reporting mandates to state-funded construction projects.

Government agencies, such as the U.S. Department of Labor’s Wage and Hour Division and various state labor departments, enforce these prevailing wage laws. These agencies conduct investigations and audits to verify that contractors and subcontractors are adhering to the regulations outlined in their contracts and certified payroll submissions.

Failure to comply with certified payroll requirements can lead to consequences for contractors and subcontractors. Penalties for non-compliance include the payment of back wages to underpaid employees, civil monetary penalties, and fines ranging from hundreds to thousands of dollars per violation. Serious or repeated violations may result in contract termination or debarment from future federal or state contracts for about three years. Accurate and timely reporting helps avoid these financial and operational repercussions.