Should You Outsource Certified Payroll?

Most of the work behind certified payroll can be outsourced or delegated: collecting time records, applying the wage determination, preparing the weekly report, gathering subcontractor payrolls and keeping the records in order. The responsibility cannot. Your company remains accountable for paying the required wages and for the accuracy of every payroll it certifies, and the Statement of Compliance must be signed by the contractor or subcontractor, or by their agent who pays or supervises the payment of workers.

So the useful question is not whether to hand certified payroll to someone else. It is which parts, to whom, and how you keep enough control to sign with confidence.

This guide is general information, not legal advice. Prevailing wage requirements depend on the contract, the funding source and the state, and they change. Confirm current requirements with the contracting agency or a qualified advisor.

What Is Certified Payroll?

Certified payroll is the payroll report contractors and subcontractors submit on construction projects covered by prevailing wage laws. Federally, the Davis-Bacon and Related Acts apply to federally funded or assisted contracts over $2,000 for the construction, alteration or repair of public buildings or public works, and they require laborers and mechanics to be paid at least the wages and fringe benefits in the project's wage determination (U.S. Department of Labor).

Under the federal contract clauses in 29 CFR 5.5:

• Certified payrolls are submitted weekly, for each week in which covered work is performed
• The information can be submitted on the Department of Labor's Optional Form WH-347 or in any other format that contains it
• Each payroll must be accompanied by a signed Statement of Compliance
• The prime contractor is responsible for compliance by its subcontractors at every tier
• Payroll records must be kept for at least three years after all the work on the prime contract is completed

State and local prevailing wage laws add their own layer. California requires contractors on most public works projects to submit certified payroll records to the Labor Commissioner through the Department of Industrial Relations' online system. Illinois requires contractors on projects subject to its Prevailing Wage Act to file certified payroll with the Illinois Department of Labor. Forms, deadlines and portals vary, so confirm each project's rules at the start rather than at the first submission.

What Does Certified Payroll Involve Each Week?

1. Collect time records by worker, by day and by project, including the hours spent in each classification when a worker does more than one kind of work
2. Match each worker to a classification in the project's wage determination
3. Check rates and fringe benefits against the determination, including how fringes are paid - as cash, into bona fide benefit plans, or a combination
4. Calculate overtime where it applies; on covered contracts the Contract Work Hours and Safety Standards Act requires time and a half for hours over forty in a workweek
5. Verify apprentices are registered in an approved apprenticeship program and paid at the correct rate
6. Prepare the certified payroll and the Statement of Compliance for signature
7. Collect and check subcontractor payrolls, because the prime is responsible for their compliance
8. Submit on the required schedule, through the required system
9. Respond to corrections and requests from the agency or the prime contractor
10. File and retain the records for the required period

What Can You Delegate, and What Stays With You?

The Statement of Compliance is not a formality. Under the federal rules, falsifying certified payroll can expose a contractor to civil or criminal prosecution under 18 U.S.C. 1001 and 31 U.S.C. 3729, and contractors who disregard their prevailing wage obligations can be debarred from government contracts. Whoever prepares the payroll, the person signing it needs a review process they can stand behind.

What Are Your Options for Outsourcing Certified Payroll?

For contractors with occasional public work, software or a service is often enough. Where public, institutional or union work is a regular part of the business, the weekly volume - especially subcontractor collection - can justify a dedicated role. A construction accounting assistant can own the weekly cycle inside your payroll system under the direction of your controller or bookkeeper. In companies without either, a construction bookkeeper can carry it as part of the wider financial cycle, as covered in what a construction bookkeeper actually manages.

Why Does Certified Payroll Go Wrong?

• Timekeeping that does not match the report. If field time is not recorded by project and classification, the office is guessing.
• Workers in more than one classification. Hours in each classification need accurate records to be paid at each rate. Without them, the higher rate generally applies to all the hours.
• Fringe benefit credit. Credit for benefit contributions follows specific rules, and a mistake repeats every week until someone notices.
• Late subcontractor payrolls. The prime is responsible for subcontractor compliance, and missing reports can hold up payments on the project.
• Overlapping requirements. Federal funding, a state prevailing wage law and a project labor agreement can apply to the same project, each with its own rules.
• Nobody owns it. Certified payroll handed to whoever has time gets done late, at the last minute, by someone who is also doing something else.

General contractors carry an extra layer, because every subcontractor's payroll flows through them. It is one of the tasks worth moving off project managers' desks, as covered in before you hire another project manager.

Can Certified Payroll Be Done Remotely?

Yes. Certified payroll is document work done in payroll software, spreadsheets, agency portals and email, and none of it requires being on site as long as field time records reach the office in usable form. What must stay with your company is the authority: the signature on the Statement of Compliance, decisions on classification questions, and responsibility for paying the required wages.

The load is heaviest in markets with a large share of public and institutional construction, such as Washington, DC, Northern Virginia and the rest of Virginia, Philadelphia and Pennsylvania, Chicago and Illinois, and Sacramento. It applies to every trade on a covered project, from electrical contractors to concrete and masonry contractors.

Frequently Asked Questions