Certified Payroll: What It Is & How It Works

Certified payroll is a weekly payroll report that must be submitted by employers who work on projects fully or partially funded with federal money that have a contract value over $2,000. This applies most often to companies in the construction industry.

The report is submitted via Form WH-347 and should be provided to the agency overseeing your contract to prevent losing funds. It lists details about every worker—including wages, benefits, and hours worked—and includes a compliance statement.

Some of the best payroll software providers have certified payroll features that will automate this for you. ADP RUN’s Point North Certified Payroll Reporting is flexible enough to handle union and nonunion contractors and will meet your state-specific reporting requirements. Get a free quote today.

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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. Remember that this is in addition to standard payroll forms.

If you’re a subcontractor, you should submit your report to the contractor you’re working for; 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. Gathering basic payroll information like pay rates, wages paid, and deductions is usually the simplest part since these must be reviewed before you can even process payroll. Work classifications and fringe benefit reporting might be a little more challenging, though.

Some states, such as California and New York, have specific laws that impact certified payroll. Make sure to always check with state laws and regulations before processing or reporting certified payroll for your employees.

Doing Certified Payroll

The certified payroll report is two pages long. You’ll start by entering specific information about your employees, business, federal project, contractor, and payroll. 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.

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 performed for the week using separate line items on the certified payroll form.

If you decide that doing your certified payroll manually is the best option, we’re here to help. Below, you’ll find screenshots and line-by-line guidance to help you every step of the way.

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 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.

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.

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 the “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 their weekly gross wages and indicate that deductions are based on 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.

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 4(a) of the statement to indicate the payment. If you paid in cash, check Box 4(b). Note any exceptions in section 4(c).

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.

Prevailing Wages Certification

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 (DBA).

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.

Here’s a list of workers you should generally pay prevailing wages if they’re working on a federally funded project:

Laborers
Mechanics
Painters
Electricians
Plumbers

Although the list is not inclusive, you can conclude that workers are covered under this requirement if their duties are physical/manual 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.

Wage Determination

If you need help determining the wage rate you need to pay your workers to comply with the DBA, you can use the federal Wage Determinations Online Search. You can enter a DBA wage determination (WD) number to start the search. This number is in a specific format that includes the two-letter state abbreviation, latest year of publication, and the sequential number assigned to the WD.

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.

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, half of the states 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.

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 award 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.

Bottom Line

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 RUN will generate it for you in minutes, making the process a whole lot easier. Request a free demo online today.