Certified Payroll Simplified: How to Ensure Compliance in Construction

Certified payroll plays a critical role in payroll processing for anyone contracting with the government for a labor position. Regardless of whether you work as a contractor or a subcontractor, you will need to submit a certified payroll breakdown of your employees’ wages.

Compliance with these laws, initially laid out in the Davis-Bacon Act, is essential if you want your business to avoid fines and continue to be eligible for government contracts. The laws were established to ensure contractors working with the government were paid fair wages while working on government projects.

If you are new to working in construction-related fields with the government, we will walk you through what you need to know about certified payroll and how it works.

What is Certified Payroll?

Certified payroll provides a detailed breakdown of employee wages and their benefits packages week-by-week. This is legally required when businesses in labor industries work as government contractors.

This regulation requires anyone who is involved in constructing, demolition, altering, or repairing buildings that belong to the government or public works to submit this type of documentation.

Key Requirements for Certified Payroll Reporting

To submit the proper documentation with their certified payroll, businesses need to include the following types of information:

• The company/contractor’s information, including their payroll number and their identification information
• Information about the project the employees are working on, such as the contract number and the location of the project
• The list of all the employees working on the projects, how many hours they worked, and how much they made per hour. This will require distinguishing between their ‘straight time’ and overtime. You also need to note how all the employees are classified.
• How much was paid to each employee, including any benefits they received or deductions made from their paychecks.
• Statements that certify that employees have been paid the prevailing wage. The prevailing wage is the minimum hourly wage as set by the U.S. Department of Labor for a specific type of job-based on location.

Steps to Ensure Certified Payroll Compliance

If you have not previously had to submit certified payroll reports, getting started can feel like a momentous task. However, there are some strategies you can use to keep the process manageable and prepared.

Step 1: Gather all your company information and contract information in one place so you have your reference numbers and information readily available.

Step 2: Research the applicable prevailing wage rates. The information is available from the Department of Labor or any local government agencies tasked with managing the project.

Step 3: Maintain careful, accurate records of your employees’ hours and pay.

Step 4: Prepare and submit your reports on time. You don't want your project to encounter delays because of delayed paperwork.

Our biggest tip for managing this process is to run your checks consistently. Tracking your employee information and recording pay and hours become more manageable when you do not allow tasks to build up.

Technology and Tools for Simplifying Certified Payroll

To keep pace with each of these four steps, we recommend working with payroll software. This software can help you manage all your employee records quickly and accurately, which makes tracking their information for your certified payroll reports significantly simpler. These systems will integrate your time-tracking capabilities with payroll management.

Using an integrated technology system with your payroll processes can help you compile your reports faster and with a lower risk of errors. The system will keep track of your employee information, help you track subcontractor information, and provide you with certified payroll compliance alerts.

Common Challenges and How to Overcome Them

As businesses implement their certified payroll processes, many encounter challenges. Knowing how to overcome these obstacles can keep everything moving forward successfully. Here are some of the most common troubles we see people encounter.

1. Lack of understanding of the regulations. It can be confusing to track all the different rules on the local, state, and federal level. Fortunately, working with a payroll consultant can help you get the answers you need.
   
   
2. Errors in your reports. Errors can be very easy to make, such as employee misclassifications, wage inaccuracies, or poor records. However, working with payroll software can reduce the possibility of these occurrences and make your reports more reliable.
   
   
3. Challenges with subcontractors. If subcontractors do not understand the wage and certified payroll reporting requirements, problems can arise. However, establishing clear lines of communication and making sure that the contract reflects these construction payroll requirements can help you avoid these challenges.

The Role of Certified Payroll in Maintaining Transparency and Accountability

Transparency is a critical component of successful construction projects. The government wants to make sure that all contracts and subcontractors receive fair wages for their work, which means ensuring that these laborers receive a fair income based on where they live and the work they do. Certified payroll helps to maintain this integrity so that businesses lose motivation to undercut each other in price or create unfair work conditions for their employees.

Conclusion: How to manage certified payroll for your business.

As a business owner, if you work with the government on projects involving labor, you will want to research whether you need to submit certified payroll reports. These reports require some extra work, but they help ensure that employees are treated fairly.

Working with professional assistance can make this entire process substantially easier. At Workforce PayHub, we can help you understand all the different components involved in the report and help you track all the necessary information so you know you remain compliant.

Come and explore what Workforce PayHub can offer your business. Our personalized guidance and solutions will get you started on the path to success.