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In 1931, the US Congress passed the Davis-Bacon Act to protect workers. Back then, contractors bidding on government jobs would try to win by offering low bids. These bids were made possible because the contractor planned to pay their employees minimum wages.

The act established “the prevailing wage”. The prevailing wage is the average wage paid to a type of worker in a particular area. The government mandated that contractors working government jobs had to pay their workers at least the prevailing wage.

The Davis-Bacon Act also created certified payroll reports. Contractors need to submit these reports as evidence that they’re paying their workers the prevailing wage rate while they work on federal construction projects.

To understand the intricacies surrounding certified payroll reports, we will examine the essential components, certified payroll requirements and the significance associated with these reports.

What Is The Davis-Bacon Act?

The Davis-Bacon Act is a United States federal law. It requires contractors and subcontractors to pay prevailing wages and, potentially, provide benefits to workers employed on federally funded construction projects. Covered workers include laborers, mechanics, and other construction professionals.

The U.S. Department of Labor (DOL) determines the prevailing wage based on the wages and benefits paid to workers in similar trades and occupations in the same geographic area.

The Davis-Bacon Act also requires that contractors and subcontractors keep accurate records of the hours worked and wages paid to their employees. Contractors need to submit weekly certified payroll reports to the contracting agency.

The purpose of the law is to prevent contractors from undercutting local wages. Understanding Davis-Bacon prevailing wage requirements is essential for compliance.

Only construction companies working on federal government contracts valued at $2,000 or more must complete this certified payroll. The requirement applies whether the federal government partially or fully funds the project.

State-Funded Projects and Davis-Bacon

Many states have their own prevailing wage laws, often called Little Davis-Bacon Acts. The federal Davis-Bacon Act applies to projects using federal money. Little Davis-Bacon Acts cover projects that only use state funds.

For example, installing electrical stations across the US is a federally funded project whereas local school construction is state-sponsored.

These state laws work similarly to the federal Davis-Bacon Act. But each state adds its own specific requirements. Contractors must verify whether their work qualifies as a prevailing wage job.

Some states will make rules stricter than the federal law, like setting higher wage rates or requiring prevailing wages on smaller projects. Other states match their rules exactly to the federal standards.

A key similarity between federal and state Davis-Bacon projects is the paperwork requirements.

Both federal and state laws need to submit weekly certified payroll reports. These reports show that construction workers received the correct wages and benefits for their work. Most states use certified payroll forms like the federal WH-347 form.

The main difference when it comes to submitting certified payroll reports is WHERE you submit it.

For federal projects, a construction company will submit paperwork to the Department of Labor (DOL). For a state-funded construction project, a contractor will typically submit a certified payroll report to that state’s Department of Labor.

The state’s DOL oversees compliance with state-funded projects. Because each state regulates its specific laws, contractors should contact the relevant state’s agency that manages the project for precise submission instructions.

The mix of federal and state rules creates a complex system, but the goal stays the same: ensuring fair pay for construction professionals working on public projects.

What Are Certified Payroll Reports?

A certified payroll report is a document that contractors and subcontractors must submit to the contracting agency weekly when working on federally funded projects. The report proves that the contractor is paying their employees the area’s prevailing wage. These reports must be maintained throughout project completion.

Certified payroll reports contain detailed information about the hours worked, wages paid and benefits provided to each employee who worked on the project during the reporting period.

Here are some fields typically included:

• Job information:Includes details about the specific construction project, such as the project name, location and funding agency.
• Employee information:Includes the names of every employee working on the project, their job classification(s) and the number of hours they worked during the pay period.
• Wage and benefit information:Includes information about the wages and benefits paid to each employee, including hourly rates, overtime rates, fringe benefits and any deductions made.
• Compliance information: Documentation that proves the contractor or subcontractor complies with federal and state prevailing wage laws.
• Certification:All reports must be signed and certified by the contractor or subcontractor, attesting that the information provided is accurate and complete.

When contractors sign the Statement of Compliance on the WH-347 form, they make two key promises to the Department of Labor:

1. All workers who performed physical labor received their proper local prevailing wages and benefits
2. The company follows all rules set by the Davis-Bacon Act.

This simple signature tells the federal government that everyone got paid correctly for their specific job type and location.

Form WH-347 Requirements

The United States Department of Labor’s Wage and Hour Division issues a document called the WH-347.  The purpose of the WH-347 is to record the number of hours worked by each employee, their job classification, the wages received and benefits provided.

Contractors need to submit the form weekly. It includes the contractor’s employees and any subcontractors working on the project. This ensures all project teams are properly compensated.

If your company is working on multiple government projects, a WH-347 is required for every job, and you’ll need to provide the following information:

• Name and last four digits of each employee
• Their wage
• Number of exemptions
• Work classification
• Day and date of work
• Hours worked each day
• Total hours (including overtime hours)
• Rate of pay
• Gross amount earned
• FICA
• Withholding tax
• Total deductions
• Net wages paid for the week
• Employees performing more than one craft
• The reason for the wage exception.

Use the Wage Determinations Online Search (WDOS) to find each prevailing wage by the Davis-Bacon Act wage determination number (WD). If you don’t have the WD number, search the WDOS by state or type of construction work.

(Take a look at a Sample Certified Payroll Report: An Example of a WH-347 Form)

Davis-Bacon Act Violation Penalties

The DOL enforces harsh penalties if your company neglects to submit the forms or provides incorrect information. These include:

• Barring your company from federal construction contracts for up to three years. This can severely limit your ability to bid on future projects.
• Withholding contract payments to compensate employees for unpaid wages due to them for overtime violations.
• Termination of your federal contract.
• Civil or criminal prosecution for falsifying certified payroll records. If found guilty, you could face fines and imprisonment.

You can challenge the verdict before an administrative law judge and appeal that decision to the Administrative Review Board (ARB) and the federal courts.

Exceptions to Prevailing Wage Requirements: Understanding Variations and Exemptions

Exceptions to prevailing wages in commercial construction can vary depending on each jurisdiction’s specific prevailing wage laws and regulations. However, some common exceptions include:

• Small projects threshold: Prevailing wage laws may not apply to commercial construction projects below a certain cost or size threshold. The governing jurisdiction typically defines this threshold.
• Public works exemptions: Some types of commercial construction projects, such as privately funded projects or certain types of improvements or renovations, may be exempt from prevailing wage requirements if they do not meet the criteria for public works projects.
• Owner-occupied projects: If a commercial property owner intends to occupy or currently occupies the building being constructed or renovated, prevailing wage laws may not apply.
• Designated enterprise zones: Certain jurisdictions may have designated enterprise zones where prevailing wage requirements do not apply to incentivize economic development or investment in specific areas.
• Public emergency projects: Prevailing wage requirements may be waived for commercial construction projects that are considered emergency projects necessary to protect public health, safety or welfare.

Contractors and employers should consult the prevailing wage laws and regulations in their specific location to determine the prevailing wage requirements and any applicable exceptions for their government construction projects.

Streamline Certified Payroll and Davis-Bacon Act Compliance with Payroll4Construction

Managing the complexities of the certified payroll process and complying with the Davis-Bacon and Related Acts can be challenging. However, convenient solutions, such as Payroll4Construction, a software-as-a-service (SaaS) product, are available.

With Payroll4Construction as your payroll provider, you can streamline your certified payroll reporting by entering information once and generating automated weekly payroll reports that include accurate data for each employee’s time, which simplifies compliance reporting for government agencies.

Additionally, the product offers an electronic WH-347 form, simplifying compliance with just a few clicks. Unlike generic payroll services, this solution is specifically designed for construction companies.

Save valuable time and effort by exploring the benefits of Payroll4Construction today.