Certified payroll is a weekly payroll report that must be submitted by employers who work on federally funded projects. It’s federal Form WH-347 and should be provided to the agency overseeing your contract to prevent losing funds. It lists details about every worker, like wages, benefits, and hours worked. It also includes a compliance statement.
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How Certified Payroll Works
To comply with the Department of Labor’s (DOL) certified payroll requirements, you must submit a completed and signed certified payroll report (Form WH-347) for any week your company performs contract work. If you’re a subcontractor, you should submit your report to the contractor you’re working for, and if you’re a contractor, you should submit to the federal agency contracting or financing the project. Reviewers will confirm you’re paying each worker the prevailing wage rate they’re entitled to.
The report requires specific information about your payroll. You will probably have an easier time gathering basic information like pay rates, wages paid, and deductions, because these must be reviewed before you can even process payroll. Work classifications and fringe benefit reporting might be a little more challenging, though.
Who Needs to Submit Certified Payroll
Any contractor or subcontractor working on projects that are fully or partially funded with federal money and have a contract value over $2,000 can complete federal Form WH-347 to comply with certified payroll requirements; however, even if they choose not to, they must furnish the information that is requested in the form. Typically, these are contractors or subcontractors in the construction industry.
How to Complete the Certified Payroll Report Manually
The certified payroll report is two pages long. You’ll start by entering specific information about your employees, business, federal project, contractor, and payroll. One of the most challenging parts is reporting fringe benefits. If you pay the minimum required fringes, per the DOL, in cash instead of through a provider, you must add this to your employee’s hourly pay rate.
Work classifications, descriptions of the type of labor performed by each worker, can also be tricky if one or more of your workers perform multiple types of work. For example, Worker A might work on three jobs in one week (e.g., carpenter, foreman, and equipment operator). In that case, you’ll need to report each job he performed for the week using separate line items on the certified payroll form.
Filling in the basic payroll information should be simple if you keep good payroll records. You determine the employee’s rate of pay before they begin working, but their hours worked, deductions and amounts, and fringe benefits paid need to be tracked closely to ensure accuracy.
How to Complete Certified Payroll With Software
Creating certified payroll reports using a payroll software, like ADP Workforce Now, can save you time and help you avoid penalties from submitting inaccurate information. In just three steps, ADP WorkForce Now can automate a weekly certified payroll report using the payroll information that’s already been entered in your payroll system. That eliminates double-work, project misallocations, and ensures details like names, hours worked, pay rates, and job codes transfer to your report accurately.
Here’s the simple three-step process:
1. Process Payroll
When you process payroll, the system assigns the appropriate prevailing wage and fringe rates to your employee’s certified payroll jobs worked in the pay period. It then creates a standard export called a management report that includes the majority of the information needed for creating federal, state, and local-certified payroll reports.
2. Create the Report
Once the management report is exported, you will log in to the online certified payroll reporting solution using your company’s specific webpage. The solution imports the ADP WorkForce Now export file and applies the required mappings, formatting, and other data manipulation needed to create your certified payroll. Depending on your needs, the software can produce a single federal or multiple state reports.
3. Review & Submit
Once your report is created, you can review it online. You should verify that the values and formatting are as expected and in compliance with the various government agencies. If there are any errors, you can use the edit feature to make changes to the data and rerun the certified payroll report until it is correct.
If you’re already using an ADP payroll product, consider switching to WorkForce Now. The certified payroll feature alone could be worth it for your business. Request a free demo.
Prevailing Wages Certification
Prevailing wages or wage determinations, not to be confused with minimum wage, are hourly wages, including benefits and overtime, the DOL has determined to be prevailing in a given area for a particular type of construction. When you sign the Statement of Compliance that accompanies the certified payroll report, you’re confirming you’ve paid all laborers and mechanics at least the local prevailing wages and fringe benefits for similar work completed in the area per the Davis-Bacon Act.
Here’s a list of workers you should generally pay prevailing wages if they’re working on a federally-funded project:
Although the list is not inclusive, you can conclude that workers are covered under this requirement if their duties are manual and physical in nature as opposed to mental or managerial.
Exceptions to Prevailing Wages
There are some exceptions to those who should receive prevailing wages. You’re not required to pay apprentices and trainees the predetermined wage rates. Instead, the program they are enrolled in specifies the minimum wage rate.
Here’s how the DOL defines apprentices and trainees:
- Apprentices: A person employed under an apprenticeship program or in the first 90 days of probationary employment as an apprentice who isn’t officially registered in a program.
- Trainees: A person who is receiving on-the-job training in a construction occupation under a program that has received prior approval from the DOL.
If you need help determining the wage rate you need to pay your workers to comply with the Davis-Bacon Act (DBA), you can query the DOL’s Wage Determinations Online Program. You can enter a DBA wage determination (WD) number to start the search. This number is in the following format: AR180101, which shows the two-letter state abbreviation for Arkansas, the latest year of publication (18), and the sequential number assigned to the WD (0101).
If you don’t have a list of WDs for each position working under your contract, you can also search using other criteria, like state, country, and type of construction. The system will pull up the existing WD numbers based on the information you give.
Your search results will contain a lot of standard information. What you are looking for specifically is the minimum rate you’re required to pay a particular worker. We searched for the prevailing wage rates that highway construction workers in Arkansas should be paid.
The report lists wage rates for each position along with the counties they apply to. If your results show a list of counties but the county in which your worker will be working doesn’t show, you can send Form SF 308 via mail or contact the Wage and Hour Division at (202) 693-0073 to request a new wage determination for your contract. You may also need to do this if the work classification is not listed for the area you are searching.
Search results from the Wage Determination Online (WDOL) website can display different pay rates for each position and have a space for minimum fringe rates when applicable. You must comply with prevailing pay and fringe rates published by the DOL to ensure compliance.
Federal Laws vs State Laws
In your efforts to comply with federal prevailing wage laws and certified payroll requirements, keep in mind that some states have their own prevailing wage laws. Currently, all states but 23 have their own prevailing wage regulations.
Use the map below to determine whether you need to consider state rules and what threshold your contract must meet to be subject to them:
If you’re in a state that doesn’t have its own prevailing wage laws, you only need to follow federal regulations for certified payroll. The DOL requires that you include all of the following information below to complete your certified payroll report:
Certified Payroll Report: Page 1
Enter the following information about your federal project at the top of the report before moving on to employee data:
Contractor or Subcontractor: Enter your company’s name and check the appropriate box.
Address: Enter your company’s address.
Payroll No.: List the payroll number; if it’s your first time submitting, start with 1.
For Week Ending: List the end date for the workweek.
Project and Location: Identify the project and location (city and state).
Project or Contract No.: Enter the contract number for the project.
Enter the following information about your employees and their work details:
Column 1: Name and Identifying Number: You must enter the employee’s full name, and you can use the last four digits of the worker’s Social Security number as an identifying number.
Column 2: Withholding Exemptions: This column is optional. If you want to complete it for convenience, you can. It should reflect on their W-4 form. If not, disregard.
Column 3: Work Classifications: List the classification descriptive of work actually performed by each laborer or mechanic. Check the classification and minimum wage schedule in the contract for more information. If your employee worked in more than one classification, you can show this with an accurate breakdown of hours worked in each classification. They must be shown on separate entries.
Column 4: Hours Worked: Enter the day and date for all time worked, with straight time and overtime hours worked in the applicable boxes. On all contracts subject to the Contract Work Hours Standard Act, enter hours worked over 40 in a week as “overtime.” The row with “O” under the “OT OR ST.” column is for overtime hours, and the row with “S” is for straight time hours.
Column 5: Total: Add all hours, straight and overtime, and enter the total.
Column 6: Rate of Pay (including fringe benefits): In the straight time box for each worker, labeled as “S” in the “OT OR ST.” column, enter the hourly rate you paid for straight time worked plus cash paid in lieu of fringe benefits paid. To prevent confusion, separate the straight time hourly rate and cash paid in lieu of fringe benefits like this: “$10.15/.60.”
$10.15/.60 would reflect a $10.15 base hourly rate plus 60 cents for fringe benefits. This comes in handy when computing overtime. We’ll discuss more about fringe benefits later.
When an employee works overtime, show the overtime hourly rate paid plus any cash in lieu of fringe benefits paid in the overtime box; if there was no overtime, you may skip this box. If the work falls under the Contract Work Hours Standard Act, you must pay the employee overtime at a rate of 1.5 times the regular rate if the prime contract exceeds $100,000.
In addition to paying at least the prevailing wage rate for the classification in which an individual works, you must pay predetermined fringe benefits per the contract, whether this is to approved fringe benefit plans, funds, or programs, or cash in lieu of fringe benefits. There’s more about fringe benefits below.
Column 7: Gross Amount Earned: Enter gross earnings on this project. If the worker earned part of their money from projects other than the project you’re reporting on this payroll form, enter the following in column 7:
- Amount earned on the federal or federally assisted project
- Gross earnings during the week on all projects
Enter $200.00/$420.00; this would reflect that a worker earned $200.00 on a federally funded construction project during a week that they earned a total of $420.00 on all work.
Column 8: Deductions: The form gives you five columns to show deductions taken. If you need more, use the first four columns and show the balance of the remaining deductions under “Other” column. Show the grand total (first four deductions plus total other) under “Total Deductions” column. In the payroll’s attachment, describe the deduction(s) contained in the “Other” column.
If one of your workers works on other jobs in addition to this project, show actual deductions from his or her weekly gross wages, and indicate that deductions are based on his gross wages.
Column 9: Net Wages Paid for Week: Subtract total deductions from gross amount earned and enter here.
Totals: There’s space at the bottom of the columns so you can show totals if you want, but this is optional.
Certified Payroll Report: Page 2
Statement Required by Regulations: This is the statement of compliance that accompanies the payroll report. Once it’s signed, the report is certified. You don’t need to have it notarized, but you do need to be sure the information presented is correct. By signing, you certify that the information included is accurate; you are subject to a fine, possible imprisonment up to five years, or both if you’re wrong.
Items 1 and 2: Enter the date and your name and title above Item 1. Then, enter your business name and project (building or work). And lastly, enter the starting and ending dates of the pay period before re-entering your business name.
Use the space above Item (2) of the statement to describe any deductions made. If all deductions made are adequately reflected in the Deductions column on Page 1, Column 8, state “See Deductions column in this payroll.”
Item 4: Fringe Benefits: If you pay all required fringe benefits to approved plans, funds, or programs (instead of cash) per the amount in the prevailing wage determination, only show the straight time hourly rate and overtime rate paid to each worker on the face of the payroll, i.e., don’t add it to Column C on Page 1, and check paragraph (4a) of the statement to indicate the payment. If you paid in cash, check Box (4b). Note any exceptions in section (4c).
No fringe benefits: If you’re not paying any or all of the fringe benefits you’re required to under the prevailing wage law, you must pay any remaining fringe benefit amounts to each worker in cash. Then update the straight time (S) row of the “Rate of Pay” column on Page 1 with an amount that is at least equal to the prevailing wage rate for your worker’s classification plus the amount of fringe benefits required.
States-specific Certified Payroll Laws
Now that you know what certified payroll is, how to complete Form WH-347, and whether or not you need to check for prevailing wage and reporting guidelines in your state, you can start preparing your first certified payroll report. We encourage you to research your state laws carefully. If covered by federal and state prevailing wage laws in a state like Connecticut, you may have to submit Form WH-347 and a state-specific report(s). Always call if you’re unsure.
Here are some of the differences that currently exist between state regulations for certified payroll and the DOL:
State law requires contractors and subcontractors to submit certified payroll records to the Labor Commissioner using the Department of Industrial Relations’ (DIR) online system. The federal DOL doesn’t require electronic filing and states you should submit to the federal agency financing your project. Another major difference is the frequency of reporting. State law requires monthly reporting, and the DOL requires weekly.
New York State requires contracting agencies to collect certified payroll forms every 30 days versus the DOL’s weekly requirement. In addition, payroll records must be kept for five years from the work completion date instead of the three required by federal law.
The New York DOL does not require a specific form but does have one, PW 18.1, that can be used when a standard state or federal certified payroll form is not used. We were unable to find a standard state form online.
Texas law doesn’t specifically define certified payroll records but does require that contractors maintain records showing that all employees working on public projects are being paid at least the prevailing wage rate for all time worked on the project. The Texas Workforce Commission points out that even though a contract might not state that certified payroll records are required, it’s a good idea to keep them in case you’re inspected. There’s no specific state-mandated form.
Remember that prevailing wage rates are updated at least once a year, and certified payroll requirements can change at any time. It’s a good idea to check federal and state websites to stay updated.
Penalties for Not Complying With Certified Payroll Laws
Submitting detailed weekly reports in addition to your regular payroll process can be daunting. However, it’s necessary to avoid the negative consequences that result from not complying with prevailing wage and certified payroll laws.
Here are the penalties for violating Davis-Bacon laws:
- Debarment: Debarment from future contracts for up to three years
- Payments placed on-hold: Contract payments may be withheld to pay for unpaid wages and awarded damages that result from overtime violations
- Termination: Termination of the federal contract
- Prosecution: Falsification of records could lead to civil or criminal prosecution, which could be punishable by fines and imprisonment
If the Wage and Hour Division determines you violated applicable laws, you can challenge the determination before an administrative law judge. You can also appeal decisions made by the administrative law judge to the Administrative Review Board (ARB), and if you’re unhappy with the ARB’s decision, you can appeal to the federal courts.
Doing Certified Payroll Manually
Taking on federally-funded projects could help grow your business if you comply with the laws. Compliance can cost hundreds of dollars a month, depending on the number of workers you need to report, but understanding what certified payroll is and how to do it manually can help save you money. In turn, it can be a huge time expenditure, so it’s important to consider all factors before determining if managing the reports on your own is worth.
Here is a list of drawbacks to doing certified payroll manually:
- Time-consuming: The DOL estimates it will take 55 minutes on average to gather and review the required detail in addition to the instructions you need to follow when completing the report. Obviously, it can take much longer depending on other factors.
- Risky: If your business’ certified payroll reporting has any errors, you can be penalized. If you’re a contractor, you must review your subcontractors’ reports for compliance, because you can be held liable for their mistakes and non-compliance.
- Complex: It’s subject to federal, state, and local laws, all of which can have varying requirements. Some states, like California, require you prepare and submit additional reports beyond federal Form WH-347.
Certified Payroll Frequently Asked Questions (FAQs)
Contractors generally have additional questions about the requirements they must comply with under the certified payroll regulations. Here are some of the most common. If you have a question we didn’t answer, feel free to post it in our forum. We will do our best to answer you soon.
Questions that contractors and subcontractors often ask about certified payroll include:
How do I report fringes paid in cash on my certified payroll report?
Enter fringe benefits paid in cash in Column 6 on Page 1 (under Rate of Pay) of the certified payroll report. Enter the regular hourly pay rate/the cash fringe amount. For example, enter $15.00/$4.00 if the hourly pay rate is $15.00 and the cash fringe rate per hour is $4.00.
Can I include my subcontractors on my certified payroll report?
No, you should only include payroll detail for your workers on your certified payroll report. Your subcontractors will need to complete their own and submit to you so you can attach it to yours. Be sure to review their reports thoroughly before submitting, because you can be held liable for their errors.
How do I calculate fringe benefits to report on the certified payroll form?
First calculate the total cost per year of the fringe benefits you provide. Then divide the total annual cost by 2,080 hours (40 hours per week x 52 weeks per year), and the answer you calculate will be the hourly rate you should report on your certified payroll report. Example: $5,000 in annual fringe benefits / 2,080 annual hours = $2.40/hour.
How do I figure out how much I’m required to pay my workers?
If you’re unsure what the prevailing wage determination is for your workers, consult the Online Wage Determination website. You will need to enter the Davis-Bacon Act Wage Determination Number (DBA WD) that applies to the position in question. If you don’t have this information, you can search using applicable state, county, and construction type criteria.
What type of fringe benefits can I provide to satisfy my wage determination requirement?
You can provide insurance benefits, like life and health insurance. You can also include any paid time off, like vacation, holiday, and sick leave. Pension and other bona fide fringe benefits qualify as well. If you need more assistance in determining what constitutes as a bona fide fringe benefit, contact the DOL’s Wage and Hour Division.
Do I have to be certified to submit a certified payroll report?
No, “certified” just means the report is presented in the right format on the appropriate form and the accompanying compliance report has been signed as confirmation that all information presented is correct. To understand what certified payroll is, review Form WH-347 and its requirements.
Certified payroll is a standard reporting requirement that protects contractors and subcontractors working on federal projects. Due to the intricacies and variations of federal and state requirements, preparation can easily consume hours of your time if you don’t have help.
You can always download the federal certified payroll form online and follow the instructions to complete it manually, but a good payroll software like ADP will generate it in minutes. Request a free demo online today.