Certified payroll, as a reporting compliance measure, can cause some confusion, especially for contractors who secured a federal construction contract for the first time.
At Gusto, we understand the importance and significance of certified payroll in contractors’ payroll operations. That’s why in this article, we want to share our expertise and address the most commonly asked questions regarding certified payroll, prevailing wages, fringe benefits, and more.
Contents:
2. What types of businesses need to submit certified payroll?
3. Why do contractors and subcontractors need to file certified payroll?
6. Is payroll reporting necessary for certified payroll?
7. How often is certified payroll filed?
8. What are payroll requirements included in the certified payroll reporting?
9. How should certified payroll be calculated?
10. How to file certified payroll?
11. What common mistakes should contractors avoid when filing certified payroll?
What is certified payroll?
Certified payroll is a specific type of payroll reporting that needs to be submitted by contractors and subcontractors of federal construction projects ($2,000 plus) for manual workers. It ensures that the prevailing wage (including fringe benefits) is applied according to federal and state laws.
What types of businesses need to submit certified payroll?
Certified payroll needs to be filled out by the contractors and subcontractors who are working on federal government contracts (funded or assisted) of more than $2,000 for construction, repair, or alteration of public buildings or other types of public works projects.
While certified payroll is not limited to a specific type of business or industry, it applies to manual labor workers, which could include but are not limited to builders, plumbers, electricians, guards, mechanics, cleaners, and decorators. What is important is that they work on the above type of projects performing manual work during most of their working hours. What follows is that other personnel like administrative or executive staff will not be filed under the certified payroll reporting.
Why do contractors and subcontractors need to file certified payroll?
Certified payroll stems from the Davis-Bacon Act and related acts, which ensure that workers are paid at least the prevailing wage including fringe benefits. Certified payroll has been put into place to guard fair wages (fringe benefits included) for those performing manual labor jobs for federal contracts.
What is a prevailing wage?
Prevailing wage is a term that applies to hourly pay that is provided to workers and it matches the wages of workers in the same occupations, for specific work, and in a local area (including fringe benefits). This ensures that the wage is not an arbitrary number but it takes into consideration specific conditions. The Department of Labour has a designated tool such as the Prevailing Wage Calculator to help you determine the prevailing wage.
There are specific federal and state prevailing wage laws (though not all states have them). In a situation when both federal and state laws are applicable, whichever prevailing wage is greater, applies.
What are fringe benefits?
Fringe benefits are perks above and beyond the workers’ wages like retirement plans, health insurance, and many more. However, this does not include any federal, state, or local law benefits – they are, by definition, mandated and are not treated as fringe benefits.
Department of Labour specifies that fringe benefits can be paid in two ways:
- Payment to bona fide benefit funds, plans, or programs;
- Payments to the workers as cash in lieu of fringe benefits.
Is payroll reporting necessary for certified payroll?
Yes, it is absolutely necessary to report certified payroll to the right authorities. So what matters here is not only the fact that workers are paid the prevailing wage but that the necessary payroll data is reported on time.
How often is certified payroll filed?
Certified payroll needs to be filed weekly, from the first week of starting the actual work until the last week of the work. However, there are times when no work is being done on-site, which could be due to weather conditions, for example. In such a situation, instead of a weekly certified payroll, a weekly Statement of No-Performance has to be filled. In other words, from the commencement of the actual work, documentation needs to be submitted weekly.
What are payroll requirements included in the certified payroll reporting?
Certified payroll reporting consists of specific information that can be grouped as:
- Business information (contractor and project details);
- Employee information (personal data and payroll details);
- Statement of Compliance (signing required).
The reporting typically includes essential information like contractor details, project location as well as employee details such as employee names, job classifications, hours worked, wages paid, and any deductions or benefits provided. These reports are crucial for demonstrating compliance with wage and hour regulations, prevailing wage rates, and fringe benefits.
How should certified payroll be calculated?
Calculating certified payroll needs to be done accurately and in accordance with the applicable laws. It is important to accurately track and record employee hours, wages, and benefits – this ensures that every week the right data can be supplied.
Utilizing a robust payroll system like Gusto can simplify this process by automating time tracking, wage calculations, and benefit deductions. The platform ensures accuracy and provides comprehensive reports tailored to certified payroll requirements.
How to file certified payroll?
When it comes to filing certified payroll, contractors or subcontractors need to follow specific procedures outlined by the government agency overseeing the project.
Depending on the state, you might be required to submit different forms. For federal compliance, payroll form WH-347 can be used as it meets all the requirements.
What common mistakes should contractors avoid when filing certified payroll?
There are very strict regulations surrounding certified payroll that need to be followed precisely. Unfortunately, this creates many circumstances that could lead to mistakes and further penalties even leading all the way up to civil or criminal prosecution.
Common mistakes include:
- Failing to provide the prevailing wage as per federal and state laws;
- Misclassification of workers;
- Delayed submission of payroll reports;
- Mistakes in recordkeeping;
- Failing to submit a Statement of No-Performance for the non-working week(s).
To avoid common mistakes when filing certified payroll, businesses should pay attention to timely and accurate record-keeping and comply with the specific reporting guidelines. Gusto’s intuitive payroll system and reporting features can help contractors stay compliant and minimize errors by automating calculations and generating accurate reports.
Conclusion
If, as a contractor or subcontractor, you are required to file certified payroll, make sure that both what you offer the workers in terms of wages and fringe benefits as well as the payroll reporting meet the necessary federal and state requirements. This way, you will avoid any penalties.
Certified payroll is an essential aspect of many businesses, and the Gusto platform ensures that you can easily handle this process. With Gusto, you will have access to certified payroll reporting that includes all the necessary details, such as employee information, job classifications, hours worked, wages paid, and more. Our robust reporting capabilities enable you to maintain compliance while saving you valuable time and effort.
If you’re an ecommerce or SaaS business, choose Gusto as your payroll and HR partner, and enjoy a seamless integration with Synder, ensuring a cohesive and efficient experience across your financial and HR processes.
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