Why is Certified Payroll So Important to Construction?

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Joanie Hollabaugh

It's the law!

Should your company win a federally funded construction project, you must understand government-imposed payroll practice regulations. Failure to adhere to specific standards can impose fines. Such projects require contractors to pay at least a minimum rate determined by the federal government or the state—whichever is higher. To adhere to these standards, contractors must document wages in a certified payroll report.

Certified Payroll Qualifies Companies for Federal Contracts

Why do most construction companies recognize Certified Payroll as a standard accounting practice?

The US Chamber of Commerce states:

Certified Payroll is a requirement stemming from the Davis-Bacon Act. In 1931, Congress passed the Davis-Bacon Act to protect workers from low hourly pay.
You must comply with Certified Payroll requirements if your business works on a federal contract over $2,000. The law applies to contractors and subcontractors hired to complete construction, alteration or repair of public buildings or public works. The law applies to contractors and subcontractors hired to complete construction, alteration or repair of public buildings or public works.

Prevailing Wage

Prevailing wage, a benchmark for similar work performed in surrounding geographical areas, establishes an even playing field for employers and laborers; it eliminates low-balling wages and offers higher pay to steelworkers.

Interestingly, prevailing wage only applies to hourly laborers and not salaried individuals. It protects workers from exploitation.

Certified Payroll stipulates weekly pay for employees. This unusual arrangement—outside the restaurant industry—benefits cash flow-based businesses.  

Certified Payroll Affects which Segments?

The US Government requires the following four main categories of construction to use Certified Payroll: *(Source: https://blog.completepayroll.com/the-importance-of-certified-payroll-for-construction-waste-disposal-and-manufacturinghttps://blog.completepayroll.com/the-importance-of-certified-payroll-for-construction-waste-disposal-and-manufacturing)

• Residential construction

• Heavy construction

• Building construction

• Highway construction

*Additionally, the Act covers contracts that include the following:

• Plumbing

• Carpentry

• Masonry

• Concrete finishing

• Electrical work

• Insulation work

• Laborer work

• Lathing

• Painting

• Power equipment operation

• Roofing

• Sheet metal work

• Truck driving

• Welding

Non-compliance Consequences

Employers must file Form WH-347, which reports the type of labor performed, hours worked, and the prevailing wage paid (along with other data).

The Department of Labor reviews Certified Payroll reports and may issue severe penalties for violating the Davis-Bacon Act, including civil or criminal prosecution. Other consequences can include fines or loss of government contracts.

How your software Can Help

Your accounting software should provide the instructions and data you need to complete Form WH 347.

Payroll setup should be configurable by state, work classifications, pay rate tables (straight and overtime), fringe benefits, and hours for your employees and subcontractors.

Data should flow seamlessly from a timekeeping app to your accounting system.

hh2 Setup for Certified Classes

hh2 Remote Payroll simplifies the process by providing an easy way to move certified classes from your accounting system through a synchronization client. Once configured, the hh2 Synchronization Client works in the background to update the hh2 Remote Payroll website and mobile apps with the latest certified classes for use on the project.

hh2 then streamlines the process of using Certified Classes for time tracking through the configuration of each payroll group.

Click ‘Enabled’ or ‘Required’ on the app’s Payroll Group Setup screen to activate Certified Classes.

You can also determine the Certified Classes you want each group to use. This ensures the correct prevailing wages are used for employees within the group.

Certified Classes within the Timecard

The payroll group now has access to certified classes. Labor performed on the project can be set up to include certified classes for each code.

When adding jobs or codes to the time card or while punching in and out of the app, Certified Classes can be selected for coding.

Compliance Best Practices

When your company bids on public works or government-funded projects, consider using hh2 Remote Payroll, a cost-effective solution that complies with Certified Payroll stipulations. Risk aversion and peace of mind mean everything to your controller or CFO in a competitive bidding world.

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Want to see how easy it is to set up Certified Payroll in hh2 Remote Payroll?

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