“Certified Payroll” almost sounds like a special option that any company can choose in order to make their payroll super official and by-the-book. We wouldn’t blame someone for misunderstanding the concept the first time they heard of it. After all, we all know about certified letters, certified checks, and certified organic foods. In each of these categories of certification, an outside organization or entity verifies your work, and you reap the benefits.
Wouldn’t certified payroll also be as simple as an outside organization certifying your payroll work as accurate? Then you could get the benefits of having a stamp on your website that says you, too, have certified payroll!
That would be nice, but it is not at all the whole picture. Yes, Certified Payroll does involve working with an outside organization to verify your work. (In this case, you are working with the federal government, via the Department of Labor.)
But for many companies, Certified Payroll is not at all optional. It is not a stamp you can put on your workplace like the stamp that goes on Certified Organic Food. It is an important federal requirement that can have a significant impact on your business’s day-to-day activities.
So, what exactly is Certified Payroll?
Certified Payroll is the process that is required by the Department of Labor for all employers who hire employees to work on federally-funded construction contracts. It is part of from WH-347, which is submitted weekly.
This form provides a place to report the following:
- The name of each contracted employee
- The wages and benefits of each employee
- The type of work being done
- The number of hours worked during that week
- Withholdings and gross wages
- A statement of compliance
This reporting allows employers who are obligated to submit this form to be fully compliant with the Davis-Bacon and Related Acts, which have existed since the early 1930s as a way to protect contract employees from being underpaid due to high competition for jobs.
All companies that are required to abide by Certified Payroll are doing so to prove that they are providing their workers with a competitive wage that meets the local prevailing wage.
How does this apply to construction, waste disposal, and manufacturing jobs?
The Davis-Bacon and Related Acts govern federal contracts for construction jobs that are worth over $2,000. There are four main categories of construction that are required to use Certified Payroll. These four areas are:
- Residential construction
- Heavy construction
- Building construction
- Highway construction
Additionally, the Act covers contracts that include the following:
- Concrete finishing
- Electrical work
- Insulation work
- Laborer work
- Power equipment operation
- Sheet metal work
- Truck driving
Employers in the fields of construction, waste disposal, and manufacturing often end up being responsible for abiding by Davis-Bacon through the filing of Certified Payroll. The main qualifier, aside from industry, is whether or not your employees are working on contracts that are federally funded. Importantly it does not matter if the federal funding is partial or complete. If there are any federal funds provided to cover these contracts, then your company is mandated to use Certified Payroll.
What happens if you don’t comply with Certified Payroll requirements?
This is the precise language provided by the Department of Labor:
Penalties/Sanctions and Appeals:
Contract payments may be withheld in sufficient amounts to satisfy liabilities for underpayment of wages and for liquidated damages for overtime violations under the Contract Work Hours and Safety Standards Act (CWHSSA). In addition, violations of the Davis-Bacon contract clauses may be grounds for contract termination, contractor liability for any resulting costs to the government and debarment from future contracts for a period up to three years.
Contractors and subcontractors may challenge determinations of violations and debarment before an Administrative Law Judge (ALJ). Interested parties may appeal ALJ decisions to the Department’s Administrative Review Board. Final Board determinations on violations and debarment may be appealed to and are enforceable through the federal courts.
What does all this mean? Essentially, there are three types of penalties:
- Being blocked from future federal contracts
These options, of course, are related to the type and severity of error. Intentionally fraudulent recordkeeping is going to lead to more severe penalties than small mistakes. That said, small mistakes can definitely cause a problem, which leads us to our next point.
How do you know if you should get help with your Certified Payroll needs?
There is no specific set of requirements for becoming the person in a company who handles Certified Payroll. While there are training courses and seminars that can be taken, the most important thing is that whoever your company assigns to manage Certified Payroll should be incredibly attentive to detail, experienced with payroll process, and well informed on how Certified Payroll works.
If your construction, waste disposal, or manufacturing company does not have a person who fits those requirements, you are probably going to want to look into getting some help. It can end up saving you time and money to outsource this integral aspect of human resources, rather than training your own Certified Payroll manager.
Outsourcing Certified Payroll tasks ensures that you do not make simple errors or major ones. This weekly reporting can be a pretty big burden on your team. Letting someone else take care of these tasks can ensure accuracy, alleviate stress, and save you or someone on your team time that can be spent on more pressing tasks.
Whether your company needs to outsource this important responsibility or you just need to talk through your options, give us a call or send us an email! At Complete Payroll, we care about the details in a way that allows you to take care of your business.
Let us know what questions you have! We can come up with a plan that ensures that you are always in compliance with the Davis-Bacon Acts and the Department of Labor.