If you’re in construction, you undoubtedly know that successfully fulfilling federally funded public work projects means meeting labor-intensive compliance requirements. At the heart of it: prevailing wage and certified payroll rules. It can be detrimental to future federal contracts if you do not submit the required documentation correctly.
But meeting these requirements isn’t always easy. For example, how do you determine the appropriate prevailing wages for each project’s geographic location? Moreover, once you have a solid understanding of your obligations, how can you ensure your data collection and payouts are consistent and precise? This is not something you can afford to leave to chance!
Understanding prevailing wage requirements
It goes without saying, but prevailing wage is the minimum wage for construction workers working on public or federally funded projects. Prevailing wage is specific to geographical location, as mandated by the Davis-Bacon Act of 1931. This law requires the U.S. Department of Labor to determine local prevailing wage rates for federal and public developments. The objective: to even the bidding field so that one business can’t undercut the competition, freezing out local workers by using cheap, non-local labor.
So, under the Davis-Bacon Act, contractors and subcontractors on federal jobs must pay workers at—at minimum--the local prevailing rates. But, how does the federal government guarantee you’re playing by the rules? That’s where certified payroll comes in.
Understanding certified payroll requirements
For a payroll report to be certified, it must include certain government-required information as well as a Statement of Compliance. The goal is to document everything affecting wage payment on your job site and submit that data weekly to the government agency tracking your current public project. Contractors are requirement to complete the Federal WH-347 form which, includes all payroll requirements.
The form requires the following information:
- The name and ID number of all employees operating on site.
- Each employee’s job classification—i.e., electrician, carpenter, etc.
- The number of hours each employee worked, including overtime.
- Each employees' rate of pay based on the prevailing wage, including fringe benefits.
- Each employees' gross earnings.
- Each employees' deductions or withholdings.
- Each employees' net wages paid.
Payroll becomes certified when the signed Statement of Compliance is attached to your report. This document is merely a statement that the person submitting this certified payroll has complied with all necessary rules. This guarantees to your federal sponsor that all forms are correct and that no employee is paid less than the prevailing wage for their contribution to the project.