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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.
What additional administrative requirements does the Act impose on contractors?
Beyond setting wage standards, the Act necessitates that contractors working on federal projects submit certified payroll reports. These reports are crucial for proving compliance with the prevailing wage requirements stipulated by the law.
What are the implications of the Act for contractors?
Contractors are required to adhere to the Act by submitting certified payroll reports. These reports serve as proof that they are compensating their workers according to the prevailing wage standards while engaged in federal projects.
Why was the Davis-Bacon Act enacted?
The Act was passed in response to the practice of contractors submitting low bids for government projects by planning to pay minimal wages. This law was intended to prevent such underbidding that compromised fair labor wages and conditions.
What exactly does the Davis-Bacon Act require?
The Davis-Bacon Act mandates that contractors and subcontractors involved in federally funded projects pay workers the prevailing wages and potentially benefits that are standard for similar roles in the geographical area. This standard is determined by the U.S. Department of Labor.
How does the Act influence wage determination?
The Davis-Bacon Act introduced the concept of a "prevailing wage," which is essentially the average wage paid to workers of the same type in a particular area. This helps in maintaining a standard wage level for similar work across various regions.
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.
What are some exceptions to prevailing wage requirements in commercial construction projects?
Threshold for Small Projects: There’s a specific criterion concerning the size or cost of the project. If a commercial construction falls beneath this predefined cap, it is generally exempt from prevailing wage laws.
Public Works Exclusions: Commercial constructions that are mainly privately funded or fall into certain renovation or improvement categories might not qualify as public works. Such projects, therefore, could be exempt from following prevailing wage standards.
Owner-Occupied Exemptions: Projects where the commercial property owner is the occupant or plans to be the occupant of the building post-construction might not require adherence to prevailing wage laws.
Designated Enterprise Zones: In efforts to boost development in specific areas, certain designated regions known as enterprise zones might be subject to relaxed prevailing wage mandates to encourage investment and economic growth.
Emergency Projects: For urgent construction needs deemed necessary for public safety, health, or welfare, prevailing wage statutes might be waived, allowing for immediate action without the typical wage requirements.
These exceptions are designed to provide flexibility and account for various scenarios where strict adherence to prevailing wage laws might hinder progress or economic development.
What are the penalties for violating the Davis-Bacon Act, including failure to submit certified payroll reports or providing incorrect information?
Violating the Davis-Bacon Act, particularly in regards to certified payroll reporting, triggers severe penalties. Should your business miss filings or submit incorrect payroll information, it faces substantial consequences imposed by the Department of Labor (DOL).
Here’s what could happen:
Federal Contract Prohibitions: Your company may be barred from entering federal contracts for a period of up to three years.
Financial Penalties: The DOL may withhold payments on current contracts. This ensures that funds are available to compensate employees for any owed overtime wages.
Contract Termination: The failure to comply with the act can lead to the immediate termination of ongoing federal contracts.
Legal Consequences: Providing false information might result in civil or criminal legal actions. Convictions can carry fines and even terms of imprisonment.
If penalized, businesses have the right to contest these decisions. Initially, an administrative law judge will hear your case. Should you need to further contest the ruling, you can appeal to the Administrative Review Review Board (ARB), and potentially, the federal courts.
Certified Payroll Affects which Segments?
The US Government requires the following four main categories of construction to use Certified Payroll: *
• 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
What information is typically included in certified payroll reports submitted by contractors and subcontractors?
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.
To elaborate further, certified payroll reports must include comprehensive details to ensure compliance with federal regulations.
These reports feature several key fields:
Job Information: This section captures specifics about the construction project, including project name, location, and the agency providing the funding.
Employee Information: Here, every worker's name, their job classification, and total hours worked during the pay period are documented.
Wage and Benefit Information: Detailed information about the wages paid is required, which includes hourly rates, overtime compensation, fringe benefits, and any deductions.
Compliance Information: This part includes documentation that the contractor or subcontractor is adhering to federal and state prevailing wage laws.
Certification: Finally, the report must be signed and certified by the contractor or subcontractor, attesting to the accuracy and completeness of the information provided.
Each of these categories is crucial for a thorough understanding of the payroll and labor dynamics on federally funded projects, ensuring transparency and adherence to legal standards.<
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.
How can construction companies streamline certified payroll reporting and ensure compliance with the Davis-Bacon Act using solutions like hh2?
Streamlining Certified Payroll Reporting in Construction, managing certified payroll and ensuring compliance with the Davis-Bacon Act can be complex and time-consuming. However, employing solutions like hh2 can significantly simplify this process.
Here's how:
Efficient Data Management: hh2 allows users to input employee time data just once. This information is then used to automatically generate weekly payroll reports. These reports are not only fast to produce but also minimize the likelihood of errors.
Automated Compliance Tools: The platform includes built-in features such as the electronic WH-347 form needed for compliance. This automation streamlines the submission process, reducing the manual workload and helping ensure accuracy.
Time and Cost Savings: By integrating these tools, companies can save a significant amount of time and effort previously spent on manual payroll tasks. This efficiency translates into cost savings and allows staff to focus on other critical areas of the business.
Leveraging a specialized tool like hh2 can transform a traditionally cumbersome process, ensuring construction companies meet federal requirements with ease while optimizing their workflow.
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.
Rolls into Accounting and Project Management Software
Best of all, hh2 Remote Payroll seamlessly integrates with Sage 300 Construction and Real Estate, Sage 100 Contractor, and Procore solutions.
