What is certified payroll? Everything you need to know

If you’ve been hired as a contractor to work on a government project, you’ll need to adhere to some additional payroll requirements. This includes submitting weekly certified payroll reports. If you don’t comply, you may face some hefty consequences.

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What is certified payroll?

Certified payroll is a weekly payroll report that contractors and subcontractors chosen to work on federally funded projects must fill out and submit. To stay compliant and meet requirements, you must file a WH-347 form to the Department of Labor each week.

Short for ‘wage and hour form 347’, it includes information such as the name of the workers hired for the project and their work classifications, hours worked and deductions. The report ensures your workers are paid the average rate for workers in their particular occupation. This is also known as a prevailing wage. 

Besides filling out the WH-347 form, as a contractor or subcontractor, you must fill out and submit a statement of compliance that confirms the payroll report you’re filing is complete and free from errors. 

Davis-Bacon Act

The Davis-Bacon Act was passed by Congress in 1931 to ensure that contractors and subcontractors hired for federally funded projects pay workers the prevailing wage. Any government project with a value of at least $2,000 that deals with the construction, repair or alteration of a public building or public works project falls under this category. Workers might include laborers and mechanics and, under certain conditions, watchmen, guards or foremen. 

Prevailing wage laws

Under the Davis-Bacon Act and related acts, contractors are required to pay, at minimum, the prevailing wage. You can think of prevailing wage as the combination of the basic hourly rate of a worker on a federally funded project, plus any fringe benefits. The contractor—or subcontractor—is responsible for paying all on-site hours, including said fringe benefits.

The Department of Labor (DOL) determines the prevailing wage, and the DOL’s Wage and Hour division breaks down the classifications and prevailing wage rates on SAM.gov, which is the U.S. Government’s system for award management. 

This also includes fringe benefits the worker receives, such as benefit plans, funds or programs. The contractor’s obligation to pay fringe benefits can be fulfilled through these benefits or cash paid instead of doling out these agreed-upon benefits. 

Businesses working on a federally funded project need to sign up for a SAM.gov account. They are then assigned a unique 12-digit ID. From there, they can search for the prevailing wage rates based on the wage determination (WD) number, public building or works or service contract act. 

Certified payroll requirements

You must administer certified payroll requirements if your business is a contractor on a federally funded project valued at $2,000 or more. To fulfill these requirements, you’ll need to check off the following: 

• Meet prevailing wage requirements: You are required to pay your workers for all hours worked plus fringe benefits. You can find information on current prevailing wage rates on the U.S. government’s SAM.gov website. 
• Fill out the WH-347 form: This is a detailed form that must be filled out and submitted weekly, even if no wages or fringe benefits are owed to the workers on the project. 

It’s essential to stay on top of these requirements. The Department of Labor will carefully review certified payroll reports to ensure you’re paying workers on these projects fairly and in a timely manner. 

If you don’t fulfill these requirements and, so, break Davis-Bacon laws, your small business might be forced to shut down. Also, knowingly submitting false information on these reports can result in criminal or civil prosecution charges. 

How to do certified payroll

Now that we’ve given an overview of the main certified payroll requirements, we’ll go over the basics of administering certified payroll. According to Mitch Chailland, president of Canal HR, a professional employer company that serves Louisiana and the Southeastern United States, in a broad sense, certified payroll involves the following:

• Detailed records: This includes worker classification, hours worked, wages, benefits and deductions.
• Statement of compliance: This is a signed document that states the payroll is accurate and free of errors.
• Weekly submissions: As a contractor or subcontractor, you’ll be required to submit certified payroll reports weekly. Even if there’s a lull in the project and you don’t owe your workers any pay in a given week, you’re still on the hook for submitting a certified payroll report.

If you need assistance administering certified payroll for your business, you can get professional help from a payroll software provider. If they offer certified payroll, they can help you fulfill certified payroll requirements. 

Consequences of not complying with certified payroll

You’re looking at significant repercussions if your small business doesn’t comply with certified payroll requirements. According to Chailland, they may include: 

• Financial penalties: As a contractor, your small business can face hefty fines.
• Being blocked from working on future projects: Non-compliant contractors can be prohibited from working on future public projects. 
• Criminal charges: In extreme cases, willful violations can result in criminal charges or civil prosecution. 
• Restitution: If your workers are underpaid, you may have to pay back wages. 

“Certified payroll ensures workers on public projects receive [fair] wages and demands meticulous attention and understanding,” said Chailland. “Non-compliance isn’t just costly; it can have long-term repercussions for the business’s reputation and ability to secure future contracts.” 

Tips for filling out form WH-347 

The WH-347 form can be found on the U.S. Department of Labor’s website. Information that needs to be filled out includes: 

• The name of the contractor or subcontractor. 
• The contractor’s address. 
• The payroll number.
• The project name and location. 
• The project and location number. 

For each worker: 

• The worker’s name and individual identifying number. 
• The number of withholding exemptions.
• The worker’s work classifications.
• Whether the pay is covering overtime (OT) or standard pay (ST). 
• The day and date.
• The number of hours worked each day. 
• The worker’s pay rate. 
• The worker’s deductions.
• The worker’s net pay for the week. 

The contractor or subcontractor also needs to provide their signature, fill out and sign a statement and note any fringe benefits paid. Here are some tips on filling out the WH-347 form, according to Jackie Slater, head of human resources at Pressat: 

• Ensure accuracy: Double-check the form to make sure everything is accurate. All fields should contain precise information. Plus, common mistakes, like mathematical errors, should be checked and corrected. 
• Submit frequently: Even if the project is on pause and you don’t need to pay your workers in a given week, a WH-347 must still be submitted weekly. In this case, you label the form “no work performed.” 
• Pay attention to employees’ classifications: Each employee should be classified based on their work type. Misclassifying a worker can lead to stringent penalties.

Navigating the form, especially if you haven’t filed and submitted one before, can be tedious. Even if you have an accounts payable department, they might not be familiar with the ins and outs of certified payroll. According to the Department of Labor, it can take an average of one hour to properly fill out the form. If you’re busy running a small business, you might not have the time or know-how to properly complete the form.

The good news is there are a number of payroll providers that can help small businesses fill out this form, including: 

• ADP
• Gusto
• QuickBooks

“When managing certified payroll, diligence, thoroughness and a comprehensive grasp of prevailing wage regulations are crucial,” said Slater. “Business owners might benefit from expert advice or specialized software to guarantee adherence.”

Featured payroll software offers

OnPay

Learn More

Via OnPay’s website

Monthly fee

$40 per month plus $6 per employee

Direct deposit

Yes

SurePayroll

Learn More

Via SurePayroll’s website

Monthly fee

$29.99 per month plus $5 per employee

Direct deposit

Yes

Gusto

Learn More

Via Gusto’s website

Monthly fee

Starting at $40 plus $6 per month per employee

Direct deposit

Yes

Rippling

Learn More

Via Rippling’s website

Monthly fee

$35 per month + $8 per user

Direct deposit

Yes

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