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What Is Certified Payroll Reporting?

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    Certified payroll reporting is a practice established by the Davis-Bacon Act that requires organizations that serve as a government contractor or subcontractor to provide a weekly breakdown of their company’s payroll. Though a standard practice, certified payroll reports may be more complicated than you think. And with lucrative federal and state contracts on the line, noncompliance would derail a company’s operations. Read how to understand certified payroll reporting and tighten up your compliance strategy.

    If your organization secured a contract with the federal government, you’ve likely established yourself as a reliable and capable operation. But before you proceed with business as usual, keep in mind the opportunity comes with a major caveat: certified payroll.

    These government contracts bring more intensive compliance requirements. Perhaps the most common (yet nonetheless important) is the need to submit weekly certified payroll reports to the agencies overseeing your organization’s work.

    Whether you’re somewhat familiar with certified payroll or haven’t even heard of the Davis-Bacon Act, we’ll help you understand the purpose this requirement serves, how it works and what your business can do to comply with confidence.

    What is certified payroll?

    Certified payroll is a document that organizations that serve as government contractors or subcontractors must submit to the agency overseeing the company’s work. Certified payroll reporting is required for any organization working on a federal contract valued at over $2,000. Some of the most common work that requires certified payrolls include:

    • construction
    • demolition
    • restoration
    • equipment installation
    • and other work involving the modification of federal buildings

    Certified payroll was established by the Davis-Bacon Act, a federal law that ensures private companies pay the correct compensation to employees who contribute to public works projects. Most employers covered by this law will need to submit a Form WH-347 each week to prove their payroll activity is in compliance.

    Keep in mind that while the Davis-Bacon Act relates to work on federal projects, a state government may maintain a similar rule for organizations working on public spaces. Be sure to consult a licensed legal professional before executing any contract to identify any certified payroll reporting requirements for the area where you operate.

    Who needs to submit certified payroll reports?

    Any business engaged in a contract involving a federally funded project must submit a weekly certified payroll report. Employers — not employees — are ultimately liable for this requirement.

    While the Wage and Hour Division of the U.S. Department of Labor certifies the payroll report, it needs to include a statement of compliance signed by either the:

    • primary contractor
    • applicable subcontractor
    • authorized agent who pays the employees covered by the report

    But again, requirements can also vary from state to state. In fact, certain states like California don’t require certified payroll reports for projects covered by:

    • the four legacy Labor Compliance Programs:
      • California Department of Transportation
      • City of Los Angeles
      • Los Angeles Unified School District
      • County of Sacramento
    • a qualifying project labor agreement
    • the small project exemption, which relates to work that doesn’t exceed:
      • $25,000 for new construction, alteration, installation, demolition or repair
      • $15,000 for maintenance

    The exact requirements and exemptions for certified payroll covered by state-funded programs may differ in your state. Consult a licensed legal professional to confirm the state-specific nuances of certified payroll in the place(s) where you operate.

    What is required to submit certified payroll?

    The Department of Labor requires all federal or federally funded construction-type contractors and subcontractors to submit weekly payroll through a Form WH-347. Certain organizations may also be required to submit a “statement of compliance,” or a signed confirmation that all information within the certified payroll is accurate to the organization’s best knowledge.

    To confidently submit a certified payroll report, businesses need to understand:

    • the nature of their work
    • how often employees work
    • the individual wages of each covered employee
    • the exact benefits each employee receives

    Being able to quickly access, assess and relay this information is vital to compliance. It’s equally crucial for businesses to invest in HR compliance software that makes finding information and generating certified payroll reports easy.

    What is included in a certified payroll report?

    A certified payroll report includes comprehensive information related to all work performed to satisfy a government contract, including:

    • the contractor or subcontractor’s name and work classification
    • identifying information for covered employees
    • hours worked daily, including overtime
    • total hours worked by all employees
    • rates of pay for individual employees
    • the gross amount earned among employees
    • all payroll deductions and their combined total
    • net wages paid for the week

    The Form WH-347 simplifies organizing this information through a step-by-step process, but it’s still the responsibility of the employer submitting the payroll report to ensure its accuracy.

    How to fill out a certified payroll report

    Once you know what data your organization must include on its certified payroll report, you can begin completing it. Keep in mind the exact data you provide will likely change from one government contract to the next, even if your employees’ salaries don’t.

    Let’s dive into the individual components of a certified payroll report to identify what they mean and why they’re needed.

    1. Company information

    The top section of the WH-347 requests basic company information. This includes checking whether your company works as a primary contractor or subcontractor. The report will also require your organization’s primary business address.

    2. Project information

    Another key identifier required by the WH-347 is your project’s name and government-assigned number. The project’s name and number should be provided with the contract. Additionally, the location of the project should be simple, such as the city and state where your company’s work is performed.

    3. Payroll number and date

    Unlike the project number, the payroll number is entirely sequential. For example, the first weekly payroll associated with a project will be labeled “1,” followed by “2” for the next week and so forth. This applies to weeks when no work was actually completed. For the date, you should list when the workweek ends, not when you started filling out Form WH-347.

    4. Weekly calendar

    The WH-347 provides a blank calendar for employers to effectively plug in regular and overtime hours for each week. “S” represents straight (or regular hours) worked, whereas “O” covers any overtime. The top of this section also includes a section to specify the days of the week and specific dates when work was performed. After all, not every contract will relate to a standard, Monday-Friday workweek.

    5. Payroll information

    Somewhat of a continuation of the weekly calendar, sections six, seven, eight and nine encapsulate:

    • employees’ rate of pay
    • gross amount earned
    • deductions
    • net wages paid for the week

    This information must be provided for every applicable employee. Ideally, you’ll already have reliable payroll technology that allows you to easily access this data.

    6. Statement of compliance

    The second sheet of the WH-347 is the statement of compliance. Essentially, this statement confirms the accuracy of the certified payroll. It requires a company representative’s name and title, as well as an explanation of any exceptions affecting the certified payroll, such as a tax-exempt employee.

    This step may seem straightforward, but consider it your company’s stamp of approval. Any issues the document contains reflect an employer’s ability to accurately and consistently process payroll. Incorrectly completing any portion of the WH-347 could affect one’s ability to secure future contracts.

    Common certified payroll mistakes and violations

    Like any process related to payroll, certified payroll reporting opens up an avenue for errors and, by extension, noncompliance. Keep an eye out for the following common mistakes and adjust your practices accordingly to avoid them.

    Misclassifying employees

    Not every job title is as clear as it seems. And a certified payroll report doesn’t just require a general occupational title, but the sub-classification, too. Missouri State University explains that a laborer can also include the following designations:

    • general
    • first semi-skilled
    • second semi-skilled

    This rule also applies to mechanics, engineers or any other occupational title that includes a sub-classification. Verify these titles and cross-reference them with an official list of sub-classifications, either from a federal list or one that’s provided by the state.

    Paying workers incorrectly

    While this issue isn’t exclusive to certified payrolls, an incorrect hourly wage or fringe benefit can stifle operations and, if committed with enough frequency, trigger fines and penalties. Employers should verify the minimum hourly rate for a certain title as defined on a prevailing wage order. (This specification may differ from federal guidance depending on where you operate.)

    Organizations may also stumble by failing to include the value of fringe benefits paid in cash. This exact amount should be included under the “Fringe Amount paid in Cash Added to Rate of Pay” column on the WH-347. This figure, like employee wages, should be calculated based on its hourly value.

    Failing to keep accurate records

    The risk of audits paired with the value of a government contract is reason enough for contractors and subcontractors to retain all records related to the work they perform. Without effectively retaining their payroll data, it’s likewise difficult for an employer to confidently execute a statement of compliance.

    To avoid this issue, businesses should consider using truly single HR and payroll software that allows for the seamless flow of data between tools. This way, they can avoid data reentry that leaves room for missed or erroneous data.

    Missing a weekly payroll report

    Every contractor and subcontractor must submit a certified payroll report each week. No exceptions. This even applies to weeks in which no work was performed, such as due to inclement weather or other unforeseen issues. It’s best practice to remember that certified payroll applies to every week encapsulated by a contract.

    What are the penalties for failing to submit a certified payroll report?

    The exact penalties for failing to submit a certified payroll report are ultimately at the discretion of the government entity managing the program. However, missing a certified payroll deadline or falsifying payroll records outright can result in:

    • withheld government funding
    • the termination of the contract
    • fines that vary based on severity
    • imprisonment or other legal consequences

    To help avoid noncompliance, carefully read and understand the terms of your organization’s contract before executing it. In general, no organization should ever assume it’s in compliance. Successfully navigating the evolving regulatory landscape requires a conscious, constant and deliberate effort.

    How does the right software simplify certified payroll reporting?

    With the right tech, certified payroll reporting doesn’t have to be an unwieldy weekly burden.

    Look for HR and payroll tools that exist within a truly single software. This will help you retain records and easily transmit your employees’ payroll data into a government-required form, like the WH-347. It should also automate payroll and self-start, helping you improve accuracy overall.

    Taking this a step a further, the ideal software should include an HR compliance tool with robust reporting features. Even if it doesn’t provide every report in the government-required format, it should give you tools to help produce the exact data you need to successfully complete any requirement you face.

    Explore Paycom’s resources to learn more about payroll, compliance and more.

    DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.