If your business works on federally funded projects as a contractor or a subcontractor, you’re required to submit a weekly payroll report. You submit this report, also called a certified payroll report, to the U.S. Department of Labor.
We get it. That seems daunting. It’s one more thing you need to take care of as a business owner. So we’re breaking down what you need to know about certified payroll. Understand the basics of certified payroll and how QuickBooks supports reporting requirements.
Use the links below to jump to the section that best covers your query, or read end to end for an in-depth overview on the topic.
- What is certified payroll?
- Certified payroll updates
- What is the Davis-Bacon Act?
- What is form WH-347?
- Certified payroll reporting
- FAQs about certified payroll
Certified payroll is a federal payroll report. Government contractors submit federal Form WH-347 weekly to the agency overseeing the government contract. The form lists every employee, their wages, their benefits, the type of work they did, and the hours they worked. It also shows withholdings and gross wages and includes a statement of compliance.
Why is certified payroll important?
The short answer is compliance. If you’re working on a government-funded public works project, then you’re required to pay your employees the predetermined prevailing wage. When you submit a certified payroll report, it’s your proof that you’re abiding by those requirements.
If you’re a construction business bidding on government contracts, the last few years have brought good news and the promise of opportunity.
Since 2018, there have been ongoing talks about improving the existing infrastructure of the country’s interstate highways, bridges, and transportation systems. In July 2019, Senator John Barrasso, R-WY, introduced S.2302 to the Senate Environment and Public Works Committee. In August 2019, the bill was placed on the Senate legislative calendar.
S.2302, America’s Transportation Infrastructure Act of 2019, provides funding for much-needed road and transit system improvements. The bill would authorize “$287 billion from the Highway Trust Fund over five years in investments to maintain and repair America’s roads and bridges.”
The bill would also funnel $10 billion into grants for disaster-resilient projects and incentive programs for projects that would lower highway-related carbon emissions.
Today, these laws apply to the construction, alteration, or repair (including painting and decorating) of public buildings or public works projects. The term “public works” refers to structures built for public use, including schools and highways.
If your business works on a federal contract over $2,000, the Davis-Bacon Act says you need to comply with certified payroll requirements. The rules address a worker’s rate of pay and fringe benefits.
What are prevailing wage laws?
To ensure business owners who work on federal construction projects compensate workers fairly, they must pay their workers a specific pay rate.
Their gross wages must be no less than “the local prevailing wage rates for corresponding work on similar projects in the area.” The same rule applies to fringe benefits.
You must also comply with state prevailing wage rates. If the state rate is higher than the federal rate, you must pay the state’s higher rate. Your state can verify whether you must comply with a state wage requirement.
How do you figure out your wage determination?
The U.S. Department of Labor can help you find your wage determination. It lists the wage rates and fringe benefit rates for each labor category. Use the filters on the site to find the wage rates for a particular project. Once you have the wage rates, you’ll submit payroll information using Form WH-347.
Businesses must use Form WH-347 to submit certified payroll reports for government construction contracts. You’ll need to enter some basic payroll data on the form, including each worker’s name, Social Security number, and tax withholding information. The form’s instructions explain the rest of the reporting requirements, including work classification, workweek, and hourly rate.
Certified payroll requirements
Like most federal forms, Form WH-347 can be confusing. Let’s break down each of the form’s sections in detail.
Enter your information at the top of the form.
- Firm’s name: Check a box to indicate whether you’re a contractor or subcontractor.
- Firm’s address
- Payroll number: Begin with “1” and then move sequentially for each payroll submission. Payroll numbers represent the weeks worked under your government contract.
- For week ending: Enter the end date of your workweek.
- Project and location: Specify the project you’re working on and its location.
- Project or contract number: You’ll find this on your contract for your public works project.
Then move on to the numbered columns on the form.
- Column 1: Enter each worker’s name and the last four digits of their Social Security number.
- Column 2: Note each worker’s number of withholding exemptions. The Department of Labor states that this column is for your convenience. It’s not a requirement for submitting a certified payroll report.
- Column 3: Enter each worker’s job classification (i.e., electrician, carpenter, laborer, etc.).
- Column 4: Enter the day and date in the top chart. In each worker’s row, enter the hours they worked each day. The “O” row is for overtime hours, and the “S” row is for standard hours.
- Column 5: Enter each worker’s total hours.
- Column 6: Enter each employee’s pay rate, including fringe benefits. Remember, their rates need to comply with prevailing wage rates.
- Column 7: Calculate and enter each employee’s gross pay. If you fill out the form online, it calculates gross pay for you.
- Column 8: Subtract your employee’s deductions, such as FICA and withholding tax. Add up the totals for those deductions, and note them in the appropriate columns.
- Column 9: Subtract the total deductions from the gross amount earned from column 7 to get the week’s net wages.
Certified payroll report example
Review the example provided to see what Form WH-347 looks like filled out.
You’ve made it through the bulk of Form WH-347, but don’t forget that there’s a second page.
The second page is where you “certify” your report. It includes a statement of compliance that indicates the payroll forms are correct and complete. And asserts that you’ve paid each employee no less than the proper Davis-Bacon prevailing wage.
A company owner or payroll manager signs the statement of compliance. In doing so, they understand that the willful falsification of any payroll information may subject the contractor or subcontractor to civil or criminal prosecution.
Who creates certified payroll reports?
Anyone can learn how to complete a certified payroll report. The biggest job is gathering the data and completing the form.
The U.S. Department of Labor estimates it will take 55 minutes to gather and compile eight employees’ information on a single report. That’s not bad if you only have eight employees who only work on one job.
But in reality, you could spend hours just collecting, reviewing, and confirming your payroll data. That’s in addition to generating paychecks and completing a certified payroll report. This work becomes more time-consuming, the more employees you have and the more jobs you work on. It’s also highly error-prone if you are creating these payroll reports manually.
How to keep certified payroll reports organized
Filling out and submitting your certified payroll reports weekly can be daunting and time-consuming. But the more organized you are, the easier it will be to manage this process. Here are a few tips to stay on top of this important task:
1. Create a procedures manual
Your payroll isn’t set in stone. When you add employees, lose employees, or offer pay raises, your payroll data changes. You need to know what to do next—and you shouldn’t be the only one who knows. Create a procedures manual to document the payroll process. A manual can help you train new team members, work efficiently, and reduce errors.
2. Embrace technology
If you’re managing payroll on spreadsheets, you might be using an outdated process. Entering data manually can result in errors, and you run the risk of losing important data. Automated solutions like QuickBooks Payroll services can help you run payroll faster and more accurately.
3. Keep records
The Fair Labor Standards Act (FLSA) requires that you keep payroll records for at least three years. So make sure you’re storing them in an organized way. You’ll be glad you did if you ever need to refer back to them.
Common certified payroll report mistakes to avoid
Creating and submitting a certified payroll report can be challenging for contractors who work on public works projects or government-funded construction projects. Here are some common certified payroll mistakes to avoid:
- Some contractors and payroll providers think they must be a Certified Payroll Professional (CPP) to complete and submit a certified payroll report. That’s not true. Anyone can become a Certified Payroll Professional, provided they meet the American Payroll Association’s criteria. It’s extremely difficult to become a CPP, but any contractor’s payroll provider can complete and submit a certified payroll report. Though, it helps if that provider has previous experience.
- Some contractors and payroll providers believe one payroll form or format will meet certified payroll requirements in all 50 states. But some states have multiple forms and electronic filing requirements.
- Some contractors and payroll providers believe the certified payroll reports built into their payroll software will provide everything they need. Unfortunately, that’s also not true. Anyone who must complete and file a certified payroll report shouldn’t rely entirely on a single tool. Instead, contractors and payroll providers need to be aware of their state’s regulations, which may require more in-depth reporting.
- Some contractors may forget about or be unaware of the Davis-Bacon Act. But failing to pay the prevailing wage can be costly, as you may be required to pay back wages to employees. Plus, “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,” says the Department of Labor.
Have questions about certified payroll? We have answers to some of the most common questions.
How do I create a certified payroll report in QuickBooks?
Follow the instructions to create a certified payroll report in QuickBooks.
- Select the Reports menu.
- Select Employees & Payroll.
- Select More Payroll Reports in Excel.
- Select Certified Payroll Report.
Follow the instructions to create the report. As you follow the instructions, the Certified Payroll Report Interview window will open to gather additional information.
What is a certified payroll specialist?
A certified payroll specialist (CPS) is licensed and accredited by the National Association of Certified Payroll Specialists (NACPS). The United States and its properties recognize the license. For more details about the certification process and requirements, visit the National Association for Certified Public Bookkeepers.
What is the prevailing wage law?
Prevailing wage is the average or majority hourly rate of pay, benefits, and overtime a contractor pays. The pay rate of the majority workers, laborers, and mechanics in the largest city of a given county determine the prevailing wage. Workers include apprentices and trainees.
The Department of Industrial Relations for the state of California recognizes there may not be a single rate paid to a majority. If that’s the case, “then the single or modal rate being paid to the greater number of workers is prevailing.”
The Davis-Bacon Act of 1931 established the concept of the prevailing wage.
What type of work is considered for the prevailing wage?
The prevailing wage law specifies several job classifications. Classifications include carpenters, electricians, plumbers, ironworkers, flaggers, craftsmen, welders, concrete finishers, longshoremen, power equipment operators, and helpers.
What is certified payroll in California?
California’s certified payroll requirements include filling out the California Department of Industrial Relations (DIR) Form A-1-131.
How much is the prevailing wage in California?
California’s Labor Code section 1771 sets the minimum government contract threshold at $1,000. California’s Labor Code section 1771.5 sets the threshold to $25,000 for construction work and $15,000 for alteration, demolition, repair, or maintenance.
Who is exempt from certified payroll?
Like anything, there are plenty of caveats to certified payroll. One big one to be aware of is that certified payroll does not apply to salaried workers in executive, administrative, or professional positions. Certified payroll is for workers who are on-site and whose primary work duties include manual and physical labor.
This content is for information purposes only and should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. does not warrant that the material contained herein will continue to be accurate nor that it is completely free of errors when published. Readers should verify statements before relying on them.
We provide third-party links as a convenience and for informational purposes only. Intuit does not endorse or approve these products and services, or the opinions of these corporations or organizations or individuals. Intuit accepts no responsibility for the accuracy, legality, or content on these sites.