What Is Certified Payroll?
Certified payroll is a process of recording wages and benefits paid to an employee working on a government-funded job. Common in the construction industry, certified payroll ensures that set wages are paid in accordance to contract documents.
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History
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The Davis-Bacon Act of 1931 established that prevailing wages be paid on government-funded projects exceeding $2,000. Prevailing wages are determined through surveys or union information in particular areas. Prevailing wages include the hourly rate an employee must be paid and a cash value for fringe benefits.
Certified payroll is a reporting method that employers use to show that they are paying wages correctly and to "certify" that the information they are provided is correct and true.
Function
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Using certified payroll, contract owners can ensure that employees are paid the proper wages and benefits. In most government-funded jobs, the bid documents will list prevailing wages that must be met. These wages ensure that workers are being paid a wage standard in the area. This also ensures that bidders have a fairly level playing field and cannot low-bid jobs by paying minimal wages. It protects local workers in that an employer can not bring lower earning workers from another location to work on the job.
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Features
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The most common form used to report certified payroll is the federal WH-347. On this form, employers list information about the company and the project, the employee's name, last four digits of his Social Security number and his job classification.The form must show each employee's hours worked for the week, rate of pay, gross wages, deductions and net pay. An authorized official of the company must sign that the certified payroll is accurate.
Considerations
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Copies of certified payroll need to be available at the main office of the employer. As a rule of thumb, payroll records should be kept for seven to 10 years. The federal or state labor departments have the right to audit employers regarding certified payroll. This generally occurs only if a complaint is filed. Complaints can be filed by employees or other businesses.
Time cards and any other proof of employee hours should be kept to verify the information shown on certified payroll.
Misconceptions
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Many employers make the mistake of only reporting, through certified payroll, their own employees' work. Prevailing wages also apply to subcontractors.
If a company uses subcontractors, it is the company's responsibility, as contract holder, to ensure that the subcontractor complies with certified payroll record-keeping and meets prevailing wage requirements. The subcontractor will need to turn in certified payroll to the general contractor who will, in turn, submit it to the project owner.
This process ensures that a company cannot avoiding paying the proper wages and benefits by outsourcing the work.
Warning
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Heavy fines can punish anyone who falsifyies certified payroll. Correct wages would also have to be back paid to the employees, with interest. Payroll rates may be enforced by the federal government (through the Davis Bacon laws and rulings) or through state governments. This is determined by the funding source and percentage.
If you are new to prevailing wage work and certified payroll, make sure you understand the rates and the reporting requirements prior to bidding for work.
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