What Is Certified Payroll?

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Contractors and subcontractors working on government projects typically provide a certified payroll to prove they are paying their workers a prevailing wage, as required in federal, state and local governmental construction and service contracts. A prevailing wage is based on the local base wages and fringe benefits paid to workers performing similar work on private projects that don't get taxpayer funds.

Certified Payroll

Contractors and subcontractors working on federally funded or assisted projects are required to send specific information every week to the U.S. Department of Labor's Wages and Hours Division certifying the workers on the project are being paid in accordance with applicable prevailing wage laws and regulations and that all the information is correct. Providing false information can expose a contractor to civil and criminal penalties, including fines and imprisonment.

Prevailing Wage Legislation

On the federal level, the prevailing wage requirement falls under the Davis-Bacon Act and affects contractors performing at least $2,000 worth of work to construct, repair or alter public works or buildings. The McNamara-O'Hara Service Contract Act covers contractors providing services to the federal government. The acts are administered by the U.S. Department of Labor’s Wage and Hour Division. Thirty-one states have established prevailing pay requirements for contractors with requirements similar to the federal government.

Recordkeeping Requirements

Contractors are required to keep information on each employee, including name, address, Social Security number, worker classification code, base hourly rate of pay including cost of fringe benefits like health and life insurance, and number of hours worked per day and week. The total actual pay plus any payroll deductions should be recorded. Information regarding fringe benefits that were presented to workers in writing might be required, along with information regarding training and apprenticeship programs.

Payroll Forms

Form WH-347 is used by the U.S. Department of Labor’s Wages and Hours Division for federally funded or assisted projects. The form includes all the required recordkeeping data on each employee along with the name and address of the contractor or subcontractor submitting the information). A contractor might be asked to fill out Form WD-10. This form is voluntary and used to determine the prevailing wages in local communities. State and local governments will typically use the federal forms, or a facsimile of them, to verify payroll data from contractors.