Avoid Penalties and Delays on Public Works Construction Projects

Contractors who work on federally-funded building projects are required to file weekly payroll reports detailing the wages and benefits paid to all employees who work on the projects. The “certified payroll reports” are required under the Davis-Bacon Act of 1931, a federal law that governs wages paid on public works projects.

The purpose is to ensure that workers who work on federal building projects are paid the prevailing wages and benefits for the area where the project is located. In government contracting, the term “prevailing wage” is defined as the hourly wage, which is typically defined as the benefits and overtime rates paid to the majority of workers, laborers and mechanics within the applicable geographic area. This is usually reflective of union wages in the region. Regulatory agencies and state departments of labor usually determine prevailing wages for each trade and occupation employed in the performance of public work.

In addition to Davis-Bacon, a majority of states have their own prevailing wage laws that mirror some of the requirements of the federal law.

Certified Payroll Reporting

A key requirement of Davis-Bacon is that contractors and subcontractors must submit weekly certified payroll reports detailing the pay and benefits earned by every worker on a public works contract. Typically, the subcontractors submit their reports to the contractor, who forwards them to the U.S. Department of Labor.

In addition to the wages and benefits paid for their work on public works projects, the certified payroll reports also require compensation data for any hours spent working on other non-certified payroll projects.

For example, if Joe works 22 hours on a project constructing a new federal building, and 18 hours working on construction of a shopping mall, all of his 40 hours of work must be reported on the certified payroll report. But the hours, wages and benefits he earned on the federal building project are reported separately from those earned on the shopping mall job. Moreover, even if all of Joe’s weekly work hours are spent working on federally-funded projects, they must be reported separately. Consequently, if Joe spends 10 hours in a particular week working on the federal building project, and another 16 hours working on construction of a new university biotechnology lab that received federal funding, and the remaining 14 hours of his work week on construction of a new U.S. Postal Service facility, each one of those federal jobs must be reported separately on their own certified payroll report.

A certified payroll report must include:

  • Employee information, including name, job classification, hours worked (both regular and overtime), wage rates, gross earnings and deductions.
  • Fringe benefits, including contributions to or cash equivalents for benefits like health insurance and retirement.
  • Statement of Compliance, signed by a company representative confirming accuracy and compliance with prevailing wage laws.

Common Mistakes

The certified payroll reporting requirement is complex and mistakes are often made, such as:

  • The certified payroll reports are numbered, and when you start submitting reports it’s important to keep the number system in order. If there is a week off the job — say, you give everyone the week off between Christmas and New Year’s — you still need to submit a zero-hour weekly payroll report.
  • The reporting of both certified and non-certified wages is an area where many contractors make mistakes, the most common one being the belief that they need only report certified wages.
  • If you catch your own mistake and file a corrected certified payroll report, the owner and general contractor are generally patient. However, repeated mistakes or repeated failures to report can result in payment delays, fines and loss of eligibility for future federal contracts. In cases of continue failures to properly report wages, the DOL and other federal agencies that fund construction projects will visit a worksite to audit wage payments and reporting.

For small contractors and subs, of course, this is just one more thing that needs to be done. It’s tempting to put it off, but these reports must be done diligently.

  • In the beginning, make time to learn the rules that govern certified payroll reporting.
  • Get set up to do these reports on a weekly basis and stay on top of them. If you’re doing the reports yourself (as opposed to having your payroll service help), create a spreadsheet with cells for each type of data the report requires. Have your bookkeeper or payroll specialist fill in the wage data each week as soon as the payroll is done.
  • Use all the online resources available. You can find a detailed set of instructions from DOL online. Additionally, there are fillable PDF forms and some projects use a web portal to make filling out the form and submitting it easier.

Work With an Experienced Payroll Provider

If your company already works with a payroll provider, ask whether they are experienced in completing and submitting certified payroll reports. If they are not experienced, it may be worthwhile to switch to a payroll provider that regularly produces certified payroll reports.

Generally, the payroll provider will prepare the data, but it’s not on the official DOL WH-347 form. They will forward the payroll data to you, and you are responsible for formatting and submission. The submission method is typically dictated by the owner or general contractor. This can be either manually (on the DOL forms) or via a portal like eBacon or LCPtracker. Even with the portals, minor changes to data are often required.

Questions?

If you have questions about how to keep your company on track for submitting accurate, timely certified payroll reports, contact an Adams Brown construction advisor.