Certified payroll reporting: What is it, and who needs to do it?

If your business is working on — or is aiming to work on — federally-funded construction projects in the US, you need to be aware of certified payroll reporting. Failure to comply with this process can lead to serious penalties, including fines, withheld payments, or even prosecution.

In this article, we'll explore what exactly certified payroll reporting is, and how to submit the relevant form. We’ll also explore the steps you can take to streamline the process, all while ensuring full compliance.

What is certified payroll reporting?

Certified payroll reporting is a mandatory process for businesses that are working on federally-funded construction projects. It involves submitting weekly payroll reports to the Department of Labor (DOL), which confirm that your employees are receiving prevailing wages as required by the Davis-Bacon and Related Acts (DBRA).

What are prevailing wages?

Prevailing wages are the standard wages (including fringe benefits) paid to workers in a specific occupation within a particular geographic area. These wage rates are determined by government agencies, such as the DOL, and are designed to protect workers and ensure that government contracts are not awarded to companies that underpay their employees.

Note that, under the DBRA, prevailing wages are only required on federal construction and repair projects costing over $2,000.

Why is certified payroll reporting important?

As mentioned, certified payroll reports serve as a safeguard against worker exploitation, and act as proof that your business is adhering to the DBRA. 

If you don’t carry out certified payroll reporting, or you’re found to be falsifying the reports, your business can face serious penalties including:

• Withheld payments. If the certified payroll report is late or inaccurate, the government may withhold payment until the issues are resolved.

• Debarment. Your business may be prohibited from applying for future government contracts for up to three years.

• Prosecution. Willful falsification of payroll records can lead to civil or criminal penalties, including fines and imprisonment.

• Termination of contract. Non-compliance can also lead to the termination of the federal contract.

What are the certified payroll reporting requirements?

Your business must submit a certified payroll reporting form — known as Form WH-347 — to the DOL each week. If no work was performed during a particular week, the report still needs to be filed, along with a note stating that no work occurred.

For each employee this form includes:

• Employee information. The worker’s full name and Social Security number.

• Work classification. The type of work performed by the employee, such as carpentry, plumbing, or electrics.

• Hours worked. A breakdown of the daily and weekly hours worked, including overtime.

• Rate of pay. The hourly pay rate (which must comply with the prevailing wage).

• Gross earnings. The total amount earned by the worker before deductions.

• Deductions. Any payroll deductions, including taxes and benefits.

• Net wages paid. The total wages paid after all deductions.

Each report must also include a statement of compliance, which certifies that the payroll is correct and that employees have been paid in accordance with prevailing wage laws.

How to fill out the certified payroll reporting form (Form WH-347)

Form WH-347 is made up of several sections, and can be broken down accordingly:

1. Company information. Begin by entering your business’s name and address, and indicate whether your business is the primary contractor on the project, or a subcontractor.

2. Project information. Include the project name and the official number assigned to the project by the federal government.

3. Payroll number and date. Number each weekly payroll sequentially, starting with 1 for the first week of the contract. Continue numbering even if no work is performed.

4. Employee payroll information. Provide each employee’s name, job classification, hours worked, rate of pay, and deductions as detailed above.

5. Statement of compliance. After completing the payroll information, sign the statement of compliance to certify that the report is accurate and that workers have been paid the prevailing wage.

Common mistakes in certified payroll reporting

Even experienced individuals can make errors when submitting certified payroll reports. Here are some common mistakes to avoid:

• Misclassifying workers. Ensure that the job classifications match the work performed (i.e., whether an individual is an employee or an independent contractor). Misclassifying workers can lead to a wide range of penalties.

• Inaccurate pay rates. Pay rates must meet prevailing wage requirements. Double-check that your workers are receiving the appropriate wages.

• Late submission. Failing to submit reports on time can lead to withheld payments or contract termination.

• Incorrect forms. Some states have their own prevailing wage laws and reporting requirements. If the project is fully or partially state-funded, be sure to check when taking on the project.

Best practices for managing certified payroll

Managing your certified payroll reporting requirements can be time-consuming, especially if your business has multiple contracts or a large workforce. Here are a few tips to streamline the process:

1. Lean on technology. Automated payroll software, such as Remote Payroll, can help you fill out and submit your payroll forms accurately and on time. Automation reduces the risk of human error, and helps you keep organized records.

2. Create a procedures manual. Documenting your payroll processes makes it easier to train new team members and maintain consistency. A well-written manual can reduce errors and ensure compliance.

3. Keep detailed records. The Fair Labor Standards Act (FLSA) requires you to keep payroll records for at least three years. Again, an automated payroll platform can make this quick and easy.

Consult a certified payroll specialist. Consider working with a Certified Payroll Professional (CPP) or a Certified Payroll Specialist (CPS). These professionals have the expertise to handle the complexities of certified payroll and ensure compliance.

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Certified payroll reporting is a crucial compliance checkpoint for businesses working on federally funded projects. By understanding how to fill out Form WH-347, staying organized, and using technology to your advantage, you can avoid costly mistakes and ensure full compliance with the DBRA.

Working with an experienced payroll partner can also simplify many elements of the process, as well as handle the countless other headaches that come with running payroll in the US and abroad. To learn more, speak to one of our friendly experts, and see how we can help.

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