At its roots, certified payroll exists to protect employees working under federally funded contractors. Most importantly, it ensures that employees are compensated fairly for their work.
There is much information to consider when filling out a certified payroll form; therefore, it is important that everything is filled out correctly and you know everything you need to know about the subject. Certified payroll may seem complicated, especially if the term is unfamiliar to you. Fortunately, once the definition is broken down detail by detail, you will find that you likely understand more than you thought you did.
That is why we will answer the question “What is certified payroll?” for you below!
What Is Certified Payroll?
Contractors who work on federally funded projects are required to submit a weekly payroll report to the United States Department of Labor. This report is called certified payroll.
The form contains information on every employee. This includes workers’ wages, benefits, the type of work they did and the hours they worked. Certified payroll also includes withholdings, gross wages and a statement of compliance.
Moreover, Federal Form WH-347 must include all of the current information on all of the categories above. There are also penalties for filling out the form wrong, so it’s important to do so carefully.
Requirements for certified payroll include each employee receiving weekly payment for their work, as well as all their information listed clearly on the report. The necessary information required is:
- the employee’s legal name
- their address
- their correct job classification
- the rate of prevailing wage pay
- both daily and weekly hours worked
- the net wage paid
As mentioned above, there are penalties for not filling out the forms truthfully, and fraud is taken very seriously. The Wage and Hours Division of the Department of Labor collected over $1.2 billion in back wages from contractors from 2009 to 2016.
Investigators are also hired to make sure contractor compliance is upheld. The whole point of certified payroll is to make sure employees are paid their predetermined wage, so not complying is a huge issue. Penalties can range from withholding funds on projects to being banned from bidding on government contracts for three years.
What Should Contractors Know About Certified Payroll?
The Davis-Bacon Act was passed in 1931 to protect workers from being paid unfairly low wages during the Great Depression. It determined that all employees working on federally funded projects must be paid a prevailing wage.
Businesses that work on a federal contract of over $2,000 for construction, alteration or repair must comply with certified payroll requirements. Davis-Bacon contractors and subcontractors must also pay their employees according to the local “prevailing wage.” That wage should also reflect the type of work performed.
For this reason, contractors should pay attention to state prevailing wage rates. Depending on the state you live in, the rate may be higher than the federal rate. If this is the case, you must comply and pay the higher rate.
Certified payroll is often used for one-off jobs under government contracts or public works projects, so it’s normal for them to be separate from a company’s normal payroll. This is why they need to be their own reports and why it’s so important to fill them out in-depth and correctly.
Certified Payroll: Good News for Contract Workers
Overall, certified payrolls exist to protect employees from being taken advantage of by employers. Contractors should have to pay their workers fair, pre-determined wages, which is why so many penalties exist for those who don’t follow the requirements. Without certified payroll, it would likely be difficult for workers to make a respectable living while working under contractors.
Understanding certified payroll empowers workers, helping them understand their rights and keeping them informed so they can always be prepared to ask the right questions if needed.