What is certified payroll? How to do reporting and forms to file

Navigating certified payroll can feel like traversing a construction site with many hidden pitfalls. The payroll forms, reports, and filing processes can be time-consuming for contractors and subcontractors. 

You may need to submit weekly payroll reports if your business works on federally-funded projects. It’s one more thing you need to take care of as a business owner. 

Here’s a breakdown of what you need to know about certified payroll, including payroll reports and how to file:

How certified payroll works

Certified payroll is a federal payroll report that government contractors must submit weekly using Form WH-347. 

The form lists every employee, their wages, their benefits, the type of work they did, and the hours worked. It also shows withholdings and gross wages. You must file the report with the US Department of Labor each week, even if the work temporarily halts. 

Certified payroll reports confirm you are paying employees a prevailing wage as part of the Davis-Bacon and Related Acts.

What is the Davis-Bacon Act?

Certified payroll is a requirement of the Davis-Bacon and Related Acts, which ensures workers on public works projects get fair compensation. These laws apply to the construction or repair of public buildings or public works projects. The term “public works” refers to structures built for public use, such as schools and highways.

If your business works on a federal contract of over $2,000, the Davis-Bacon Act requires that you complete certified payroll reports. 

What are prevailing wage laws?

To ensure business owners who work on federal construction projects compensate workers fairly, they must pay their workers a specific pay rate. Their gross pay must be no less than the local prevailing wage rates for corresponding work on similar projects in the area. 

You must also comply with state prevailing wage rates. If the state rate is higher than the federal rate, you must pay the state’s higher rate. Your state can verify whether you must comply with a state wage requirement.

The Department of Labor can help you find your wage determination. It lists the wage rates and fringe benefit rates for each labor category. Use the filters on the site to find the wage rates for a particular project. 

Certified payroll requirements

If you submit certified payroll reports via Form WH-347, you’ll need to include basic payroll data, like each worker’s name, Social Security number, and tax withholding information. 

Like most federal forms, Form WH-347 can be confusing. Let’s look at the two key sections of the form. 

Start by entering your information at the top of the form: 

Then move on to the numbered columns on the form:

Now review the certified payroll example below to see what Form WH-347 looks like filled out:

After completing the first page of Form WH-347, don’t forget the second page. The second page is where you “certify” your report. 

It includes a statement of compliance that indicates the payroll forms are correct and complete. It asserts the pay for each employee meets the proper prevailing wage.

Certified payroll reporting

Some contractors and payroll providers think they must be a Certified Payroll Professional (CPP) to complete and submit a certified payroll report. That’s not true. Any contractor provider can complete and submit a certified payroll report.

A company owner or payroll manager signs the statement of compliance. In doing so, they understand that the willful falsification of any payroll information may subject the contractor or subcontractor to civil or criminal prosecution.

Who creates certified payroll reports?

Anyone can complete a certified payroll report. The biggest job is gathering the data and completing the form.

It should take less than an hour to gather and compile the information for eight employees on a single report. But you could spend hours just collecting, reviewing, and confirming your payroll data. That’s in addition to generating paychecks and completing a certified payroll report. 

This work becomes more time-consuming; the more employees you have, the more jobs you work on. It’s also highly error-prone if you are creating these payroll reports manually.

Best practices for managing certified payroll reports

Better organization makes it easier to fill out and submit your certified payroll reports. Here are a few tips to stay on top of this important task:

• Create a procedures manual: This will help you document the payroll process, where a manual can help you train new team members, work efficiently, and reduce errors.
• Embrace technology: If you’re managing payroll on spreadsheets, you might be using an outdated process. Entering data manually can result in errors, and you risk losing important data. 
• Keep records: The Fair Labor Standards Act (FLSA) requires that you keep payroll records for at least three years. So make sure you’re storing them in an organized way. You’ll be glad you did if you ever need to refer back to them.
• Avoid key mistakes: Some contractors and payroll providers believe one payroll form or format will meet certified payroll requirements in all 50 states. However, some states have multiple forms and electronic filing requirements.

Failing to pay the prevailing wage can be costly, as you may have to pay back wages to employees. Plus, not meeting the requirements of the Davis-Bacon Act can lead to contract termination. 

Next steps for streamlining your payroll process

Managing payroll is a necessary part of construction accounting for contractors. However, creating and submitting a certified payroll report is an added step for those who work on construction projects. 

Automated payroll services and software like QuickBooks Payroll can help you run payroll faster and more accurately. You can also use built-in payroll tools to create a certified payroll report.