Certified Payroll: Everything You Need to Know

While government contracts come with many financial advantages, they also impose an administrative burden. If your business regularly performs work on federally- or state-funded projects, you must submit a weekly certified payroll report to prove you’ve complied with wage and hour laws.

Completing the mandatory forms can prove complex depending on your team's size, the project's scope, and the work schedule. However, the consequences of non-compliance are steep and range from financial penalties to criminal prosecution. 

In this article, we’ll provide a detailed breakdown of everything you need to know to confidently navigate the certified payroll process.  

What is certified payroll? 

Certified payroll is a special payroll report that contractors working on federally funded projects must file weekly with the US Department of Labor (DOL). The report consists of Form WH-347, which itemizes wage and hour information for your workers, and a compliance statement.

Typically, businesses will file a certified payroll report when working on publicly funded projects related to the construction, alteration, or repair of government buildings or public works initiatives. Non-construction work, volunteer initiatives, and small projects valued at less than $2,000 are exempt from the certified payroll requirement.

What is the Davis-Bacon Act?

Certified payroll came into existence in 1931 when Congress passed the Davis-Bacon Act to protect federal contractors and their employees. The act requires that any company that completes work valued at more than $2,000 in connection with a federally-funded project must file certified payroll for the project's duration, even during periods where work is suspended. 

Following the Davis-Bacon Act, Congress enacted other laws to ensure federal contractors paid workers a fair wage. Examples include the Federal-Aid Highway Acts, the Federal Water Pollution Control Act, and the Housing and Community Development Act of 1974.

The Davis-Bacon Act requires that qualifying employers pay workers the local prevailing wage set by the DOL for the type of work they perform and fringe benefits. If the time worked in a week exceeds 40 hours, workers can claim overtime at one-and-a-half times their basic hourly rate.

Requirements for a certified payroll report

The WH-347 consists of multiple sections, some of which pertain to your business and others to your workers. Not all fields will apply to all contractors or subcontractors, and it’s essential to complete the form carefully to avoid confusion.

The most important information in the report helps the DOL verify that your business has complied with the wage and hour requirements set out in the Davis-Bacon Act.

Company details

In this portion of the report, you will provide basic information about your business and the project you’re working on.

Business name and address

Include your complete business name and registered address. If you signed a contract with the federal, state, or local government to perform services, the name and address on your WH-347 should match the information in your contract.

Project and location

Identify the project on which you’re working by number and location. If you're unsure where to find your project number, check your contract.

Payroll number and ‘for week ending’

Insert a ‘1’ in this field the first time you file your certified payroll report. For every subsequent week, increase by one. Be sure to note your workers' last day of the workweek. 

• Example: Marvin’s construction company works an adjusted schedule of Sunday to Thursday. This is his third certified payroll filing. He writes ‘3’ in the ‘Payroll Number’ field and ‘Thursday’ in the ‘Week Ending’ field.

Employee details

Now that you’ve added information about your business and project to the WH-347, you’ll need to provide the DOL with wage and hour data for each employee or contractor on your payroll.

Name, identification number, and classification

You’ll need to provide, at minimum, each worker’s last name and the last four digits of their Social Security number. You’ll also need to tell the DOL what kind of work they perform (e.g., painter, electrician, plumber).

Hours worked daily

Note that the WH-347 breaks down time worked into ‘straight time’ and ‘overtime’ for each calendar day. You must track time and attendance correctly to file an accurate report. 

• Example: Linda worked eight hours every weekday except for Wednesday. On Wednesday, she worked ten hours. For that day, you’ll enter eight hours of straight time at her regular rate of pay and two hours of overtime at a rate of time-and-a-half.

Pay rate and withholding

If your workers qualify as W-2 employees, you’ll need to itemize your FICA and other payroll tax withholdings. If, on the other hand, your team consists of contractors, you’ll leave these portions blank unless other deductions apply. 

The compliance statement

In this portion of the form, the person responsible for compiling wage and hour information for your workers and preparing the report certifies that, to the best of their knowledge, the WH-347 has been completed accurately. 

Be aware that the WH-347 applies to federally funded projects. If your business has contracted with state or local government, you may need to file a different form with your state’s Department of Labor. In New Jersey, for example, contractors must file Form MW-562 weekly with the New Jersey DOL. 

How to do a certified payroll report: 4 tips 

Even experienced HR professionals may find certified payroll daunting. The following suggestions can simplify the process:

1. Consider working with an accredited payroll specialist

An accredited payroll specialist has received special training and accreditation from the American Payroll Association that qualifies them to manage the certified payroll process. Adding an expert pair of eyes to the process can help you avoid errors in your filings.

2. Review prevailing wage data

The DOL’s Wage and Hour Division regularly publishes updated prevailing wage information for different occupations nationwide. Regularly monitoring wage determinations for your workers’ classifications ensures you don’t inadvertently underpay.

3. Use time and attendance tracking software

Automating the time and attendance process with a solution like Rippling can give you valuable peace of mind when calculating the number of hours worked and when. Particularly for large crews working on asynchronous schedules, a time and attendance solution dramatically decreases the risk of oversights.

4. Keep records of all your payments

The Fair Labor Standards Act (FLSA) requires employers to maintain payroll records - including certified payroll records - for a minimum of three years. Consider a digital solution like Rippling that makes retrieving records straightforward if you’re required to provide them. 

The requirements for state-funded projects vary but typically fall within a two- to four-year timeframe.

What are the consequences of non-compliance?

The federal government takes wage and hour protections seriously, and violations of the Davis-Bacon Act can have serious consequences. If you are found to have underpaid your workers, you will owe back pay and damages. The government may also terminate your contract and bar you from bidding for new work for three years.

In more serious cases, where the government believes you willfully submitted false information, you may face criminal liability and additional financial penalties.

Simplifying certified payroll with Rippling

The prospect of completing certified payroll shouldn’t hold you back from bidding on or accepting government contracts. Solutions like Rippling can remove much of the stress of preparing these reports and save your business hours spent preparing them each week. 

Rippling has partnered with Points-North, a dedicated certified payroll solution, to make completing and submitting your WH-347 a seamless part of your overall payroll process. In addition to Rippling’s time and attendance tracking features, which simplify calculating hours worked, you’ll benefit from automatic filing with the appropriate municipal, local, state, and federal agencies. Rippling’s employee information management system ensures you correctly identify your workers without sharing confidential details.

This blog is based on information available to Rippling as of July 2nd, 2024.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.