What Contractors Need to Know About Davis-Bacon Compliance in 2025

You’ve won a federal contract—great news. But before the celebration, let’s talk about the 30+ hours of Davis-Bacon compliance your back office just inherited.

Whether it’s your construction company’s first government job, or you’ve been working with federal contracts for a while now, your back office is about to take on an extra 30+ hours of compliance work every week. And it isn’t just a strain on your teams’ time you have to worry about. 

Without Davis-Bacon software, you grapple with the high stakes (and risks) involved with manual Davis-Bacon Act compliance (audits, penalties, delayed payments, and disqualified bids — just to name a few.)

There’s a better way to protect your business from prevailing wage compliance problems — and it’s pretty straightforward. Below, we’ll explain why Davis-Bacon software isn’t a “nice to have” in your construction business, but a necessity if you want maximum profitability and efficiency.

What Is The Davis-Bacon Act, And Who Does It Apply To?

For nearly 100 years, the Davis-Bacon Act of 1931 ensured workers were paid fair prevailing wages based on their geographic location and role specialization. With these new protections in place, businesses working on federally funded contracts must submit highly detailed WH-347 forms on a weekly, bi-weekly, or monthly basis. This is referred to as certified payroll, and doing it right is key to flourishing in the federal or governmental sector.

What is prevailing wage compliance?

Prevailing wage describes the accurate pay rate a company must pay based on the individual worker’s specialization, role on the job site, and geographical location.  Davis-Bacon regulations apply to contractors and subcontractors who are contracted to work on federally funded (or assisted) construction jobs. This could range from constructing a completely new building, to painting or repairs, as long as the project costs $2000 or more.

Abiding by prevailing wage, and processing certified payroll, requires your payroll specialists to manage several complex factors (on top of their other duties):

• Entering accurate prevailing wage rates.
• Categorize W2 employees versus contract employees, etc.
• Provide evidence and documentation that your site has appropriate journeymen-to-apprentices ratios.
• Recording and applying appropriate fringe benefits (healthcare, pension, etc.)
• Providing proof that no “Ghost Employees” are working on site.

Note: Prevailing wage does not apply to salaried employees in executive and administrative positions. Prevailing wage compliance usually only encompasses those working on a job site. However, it’s always wise to check with local officials to ensure you follow Davis-Bacon guidelines and avoid compliance violations.

If you want to master prevailing wage compliance without the hassle, the best and easiest way is with certified payroll software and WH-347 automation.

Common Pain Points of Davis-Bacon Compliance

The IRS reports that 33% of employers make payroll errors, resulting in billions of USD lost on a yearly basis. The kicker? 37% of payroll errors happen during manual data entry.

• Ensuring consistency: Manually matching timecards to the correct wage determination and job classification is key to prevailing wage compliance, but without reliable Davis-Bacon software, needing to enter hundreds of lines of data by hand creates a breeding ground for human error.
  
  
• Managing fringe benefits and deductions: In addition to federal guidelines, you may also need to comply with state and municipality-level wage, labor, and union regulations. Manually navigating these regulations can be exhaustingly time-consuming, and challenging to keep up with.
  
  
• Organizing job costing: Since your field team can visit multiple sites per day, it’s much harder for employees to accurately track multiple job sites (and their differing rates) using traditional paper timesheets or spreadsheets.  
  
  
• Wasting time on data entry: Manually entering WH-347 certified payroll reports isn’t just about the risk of errors. As we said at the start of this article, taking on federal jobs add (almost) an entire extra shift’s worth of work for your accounting team.
  
  
• Facing Tax Time: Preparing for audits and record-keeping requirements demands intense attention to detail, consistency, and unflinching accuracy. While your human accounting team is incredible, asking them to achieve all of this (in addition to the other daily tasks) is just asking for trouble.

Davis-Bacon Software Delivers Accuracy—and Data Security

Having solid and secure certified payroll systems isn’t just about protecting yourself during audits. It’s about protecting your employees, clients, and vendors' sensitive data. And with cyberattacks occurring every 39 seconds, secure certified payroll software is no longer optional.

2How Davis-Bacon Software Keeps Your Contracting Business Compliant

With these compliance challenges in mind, let’s discuss how Davis-Bacon software increases payroll efficiency and accuracy by 70% — and the many other benefits it brings to your workflows.

• Eliminate time-consuming admin work: With built-in WH-347 automation, Davis-Bacon software handles complex reporting formats quickly and accurately—freeing your back office from repetitive tasks.
  
  
• Avoid job coding errors: Using the right Davis-Bacon software automatically applies correct rates based on job code and location — meaning your certified payroll processing speeds up dramatically. 

(Those using hh2 have seen accuracy and processing time improve by 70%!)

• Catch compliance gaps before they cost you: Certified payroll software alerts you to missing classifications or errors before submission, keeping you ahead of audits.
  
  
• Improve field and back-office connectivity: Because software (like hh2) syncs with timecard entries from the field via mobile app, your site workers and your payroll specialists never have to play time sheet tag again. 

• Become audit-proof: Construction industry-specific Davis-Bacon software ensures you’re always prepared for audits and tax season by automatically creating audit-ready documentation trails.

The added benefit of certified payroll software and automation is how it centralizes your field and office information. Timesheet data is more accurate thanks to the digital mobile app, buddy punching is eliminated thanks to geofencing technology, and WH-347 forms are (practically) always submitted on time since punch data automatically updates in the cloud.

Why hh2 Is the Davis-Bacon Software Built for Contractors

When it comes to the construction industry, not all WH-347 automation, or prevailing wage compliance software, can handle your HR needs and the stringent compliance requirements. Luckily, hh2 can. 

• Handle prevailing wage compliance your way: Regardless of whether you use WH-347 forms, or an alternative, hh2 offers built-in certified payroll formats for your federal and state-level requirements.
  
  
• Increase bandwidth for your field and office team: WH-347 automation isn’t the only time-saver. Using highly intuitive Geofencing and GPS capabilities, hh2 offers automatic classification mapping, which is tied to field time data. This ensures timesheets are always accurate, and protects your business from Buddy Punching. 

• Enhance your current systems: hh2 was developed by construction veterans who understood that technology must complement what already works in your construction business — not cause friction with your pre-existing systems. hh2 was developed to seamlessly (and easily) integrate with your current ERP and accounting systems; syncing with Sage, Vista, Procore, and more.

• Improve accuracy and portability: No matter where your team works throughout the day, hh2 has you covered with easy mobile time capture and supervisor approval processes that connect your field and back office through a centralized platform.

• Protect your employees: There is no need for extra work, research, or meetings because hh2 automatically supports unions, prevailing wage, and multi-rate crews. 

How Anchor 41 Cut Certified Payroll Processing Time with hh2

See Davis-Bacon software in action by checking out how Anchor 41 optimized their certified payroll process, eliminated paper timesheets, and cut processing time from days to hours with hh2’s construction software.

Make Federal contracts a Win-Win with hh2 Certified Payroll software

Winning federal contracts is excellent for your business. However, losing revenue due to compliance issues is not. That’s why your construction company can’t afford to skip dedicated Davis Bacon software—especially when the right solution can reduce processing time, avoid penalties, and boost your bid eligibility.

Whether you’ve just won your first government job or are a veteran contractor who hasn’t tried certified payroll software yet, hh2 helps you rest easy knowing you’ll get Davis-Bacon right the first time.

Explore how hh2’s Remote Payroll makes Davis-Bacon compliance simple, accurate, and audit-ready.