Government contracts come with big upsides: virtually guaranteed payment, good rates, and the chance to make a difference in your community. One hurdle to accepting government contracts? They require you to use certified payroll reporting.
Certified payroll comes from the Davis-Bacon and Related Acts, a set of labor standards first enacted in 1931 to ensure laborers get a living wage for their work and employers can't outbid one another by undercutting labor costs.
In this article, we demystify the certified payroll reporting process and explain all the important details. By the end, you'll clearly understand the certified payroll process and feel confident applying for a government contract with the U.S. Department of Labor (DOL).
Let's get started.
What is Certified Payroll Reporting?
Certified payroll reporting is when contractors and subcontractors working on federal projects submit payroll reports to confirm they're paying their workers the prevailing wage. That's the lowest possible amount workers can earn on a federally funded project, and it's based on where they're doing the work.
To comply with certified payroll requirements, businesses must:
- Pay employees and contractors weekly.
- Submit weekly certified payroll records, plus a weekly statement of compliance.
- Comply with prevailing wage laws, which say how much certain workers in certain areas should make. The U.S. Wage and Hour Division (WHD) determines local prevailing wage rates.
- Register with the appropriate agency, if applicable and as outlined in the award letter.
When contractors or subcontractors are awarded a contract "in excess of $10,000," they must also submit a notice of their contract to the OFCCP via the Notification of Construction Contract Award Portal (NCAP).
Keep in mind that state and local rules may put additional requirements on the contract holder.
Want an easy way to record pay? Hourly's full-service payroll platform can automatically track, record and pay wages for you—so you don't have to do it manually.
When is Certified Payroll Required?
Certified payroll is required to work on U.S. government-funded construction projects that are over $2,000.
This work can include:
For federal contracts worth over $100,000, contractors must comply with additional rules and regulations as stipulated in the Contract Work Hours and Safety Standards Act.
What Do I Need to Include in Our Certified Payroll Reports?
You need to include two parts when you submit your required payroll forms to the government. They include:
- Your weekly payroll report
- Statement of compliance
You can use your own payroll reports, but many business owners find it useful to use the template provided by the Department of Labor, which includes both items due:
You can find instructions for the form here.
Please note that forms may differ for state projects that receive federal funding. Be sure to refer to your contract for detailed information about reporting requirements.
With that said, let's take a closer look at each part of certified payroll reporting.
1. Weekly Payroll Report
You can use the government form above or your own payroll reports. If you use your own report, you must include all the following information for each employee or contractor.
- Employee name, address, and last four digits of Social Security number
- Work classification code
- Total number of hours worked per day
- Total number of hours worked for the workweek
- Hourly rate of pay
- Gross amount earned
- Withholding exemptions (deductions, contributions, and payments)
- Net wages
- Check number
- Fringe benefits (if any)
You must also include:
- Name of contractor or subcontractor
- License number
- Payroll number
- For week ending date
- Project or contract number
- Project and location
Accounts and business owners often create a reusable spreadsheet to make it easier to submit their weekly paperwork.
2. Statement of Compliance
A Certified Payroll Statement of Compliance is a signed statement (found on page two of the WH-347 form) that confirms covered workers were paid in accordance with the Davis-Bacon Act.
The "contractor, subcontractor or authorized person responsible for supervising the payment of wages" must sign the statement.
Again, you have the choice between using the government's form or your own. If you use your own form, be sure to use the exact wording as included in the capital WH-347 Form provided by the DOL.
How to Fill Out a Certified Payroll Report
There are a few steps to filling out a certified payroll report, so let's go over each one.
1. Company Information
Here, you'll include the name of the contractor or subcontractor awarded the contract and filing the paperwork.
2. Project Information
Here's where you include the project name or contract number. You'll also include the location of the project.
3. Employee Information
This is where you include employee names, addresses, socials, and work classification codes.
4. Payroll Information
This is where you record the number of hours each employee worked. You'll include both total hours for the week and total hours for each day. You must also note any overtime hours and each employee's gross wages.
5. Statement of Compliance
This is the letter where you certify that you and your business are in compliance with the terms of your federal contract.
Certified Payroll Forms
If your current payroll software's reports already include all the necessary information, you may choose to submit those in lieu of the federal form. But, most contractors or their payroll professionals use the government form:
As you can see, most of the information here is quite straightforward. But one area where people get confused is with work classification codes, so let's take a closer look at that piece of the report.
Work Classification Codes
You will need to fill in each employee's corresponding work classification code. The job classification code tells the government how much you are supposed to pay your employee or contractor. Your contract will include a shortlist of codes and the corresponding minimum wage you must pay them.
The WH-347 Form instructions have detailed information regarding what type of work corresponds to each code. For example, it explains the difference between a Clerk and a Secretary, plus the nuances between different levels within the same job function (e.g., Clerk I, II, and III).
If you have questions about the code you should use or do not see a classification covering the work done by an employee or contractor, you should refer to the instructions or contact the point person identified in your contract. We strongly recommend that you do not guess.
Government inspectors visit worksites to verify roles, compensation, and other information. Employers found violating compliance can face criminal prosecution.
Certified Payroll FAQ
What is the difference between a certified and regular payroll?
Certified payroll reporting is for contractors and subcontractors working on federally funded projects, while regular payroll can be run by any company working on any type of project—and doesn't typically need to be submitted to the government.
How do I run a certified payroll report?
You have two options to comply with government rules. First, you can fill out form WH-347 and submit it to the Department of Labor. Second, you can submit your own weekly payroll report and statement of compliance so long as they contain all the required information about you and your workers.
Can you run certified payroll in QuickBooks?
You may be able to submit weekly payroll statements from QuickBooks to the Department of Labor to comply with reporting requirements.
However, you must make sure that all required information regarding you and your employees or contractors is included. You must also complete and attach your Statement of Compliance to your QuickBooks payroll statement.
Is a certified payroll professional worth it for certified payroll reporting?
Small business owners have a lot on their plates, so hiring professional payroll services or using great payroll software can simplify an otherwise time-consuming task.
Looking for a professional with certifications is a great place to start, but be sure to look at their testimonials and experience. Ideally, you want to work with someone who has a history with public works projects.
Bottom Line: Federal Projects are Worth It (Most of the Time)
Federal projects are great for construction companies and contractors willing to follow the rules. Government funding infuses the entire industry with capital, provides wage stability and improves communities. The additional paperwork may seem daunting, but there are ways to make things easier on yourself:
- Use payroll reporting software that complies with government rules.
- Create a report template with boilerplate information (employee names, etc.) already filled in—that you can easily update!
- Hire a professional payroll employee or contractor to do the paperwork for you.
And now all that's left to do? Get out there and start bidding on those contracts!