What Is a Certified Payroll and How Does It Work?

A certified payroll is a specific type of payroll report required for contractors and subcontractors on government-funded or public works projects. It ensures that all laborers and mechanics receive fair wages and that employers comply with labor laws.

Understanding Certified Payroll Requirements

Certified payroll ensures compliance with prevailing wage laws, such as the federal Davis-Bacon Act and similar state-level regulations, on public works or federally funded construction projects. The Davis-Bacon Act applies to contracts exceeding $2,000 for the construction, alteration, or repair of public buildings or public works, including painting and decorating. This act mandates that contractors and subcontractors pay their laborers and mechanics no less than the locally prevailing wages and fringe benefits for comparable work in the area.

Prime contractors and subcontractors working on these projects must submit certified payroll reports. The concept of “prevailing wages” refers to the minimum hourly wage rate, including fringe benefits, determined by the Department of Labor (DOL) for each labor classification in a specific geographic area. These rates are established through surveys of wages paid to workers in similar occupations and are updated annually.

Preparing Certified Payroll Reports

Accurately completing a certified payroll report requires detailed information for each employee. This includes:

• Employee’s full name, address, and an identifying number (e.g., last four digits of their social security number).
• Worker’s classification (e.g., journeyman, apprentice).
• Hourly rate of pay.
• Total hours worked daily and weekly.
• Gross wages earned, itemized deductions, and net wages paid for the week.
• Fringe benefits, and how they are provided (e.g., cash or contributions to approved plans).

For federal projects, the standard form is Department of Labor Form WH-347. Although this specific form is optional, the information it requests is mandatory for weekly payroll submissions under the Davis-Bacon and Related Acts. State-specific forms may also be required, so contractors should verify applicable forms for their projects. Forms are available from the DOL website or relevant state labor department websites.

The gathered information is entered into the form. This includes project and contractor details, payroll period dates, and a sequential payroll number for each weekly submission. A signed “Statement of Compliance” must accompany each report, certifying the accuracy and completeness of the payroll information and confirming that all workers received the required prevailing wages and fringe benefits. This statement is found on page 2 of Form WH-347.

Submitting Certified Payroll Reports

Completed certified payroll reports for federal projects are submitted on a weekly basis. This submission should occur within seven days after the regular pay date for the payroll period. Even if no work was performed during a particular week, a report indicating “no work” is still required.

Reports are submitted to the contracting agency or, in some cases, to the prime contractor, who then forwards them to the relevant government authority. Common methods of submission include mail, online portals, or secure file transfer. Some state agencies mandate electronic submission through their dedicated online systems.

After submission, the contracting agency or the DOL reviews the information to verify that workers have received legally required wages and fringe benefits. Contractors should anticipate potential agency review processes and be prepared for requests for clarification if discrepancies are found. Failure to submit reports on time can lead to penalties, such as withheld contract funds, and may even result in ineligibility for future government-funded projects. Records, including certified payrolls, must be retained for at least three years after the project’s completion date for potential audits.