The Inflation Reduction Act, signed into law in 2022, focuses on growing the economy and curbing inflation — benefiting the working class by reducing the deficit by $305 billion through 20311. The Act also improves climate control efforts, being the largest investment in green jobs the U.S. has ever seen. The act looks to provide more than 9 million jobs over the next decade2 — bringing with it new opportunities and tighter labor regulations.
But what does the Inflation Reduction Act mean for construction? To put it simply: more government-funded projects. Contractors looking to bid these jobs should start preparing now by familiarizing themselves with requirements like prevailing wage and certified payroll.
HOW THE INFLATION REDUCTION ACT RELATES TO CONSTRUCTION
The Inflation Reduction Act directly impacts the construction industry with the creation of new jobs in energy, manufacturing, energy-efficient building development and transportation, among other climate-friendly areas. The Act delivers the most robust labor protections and incentives ever with new clean energy tax credit programs1. The programs are meant to promote these new clean energy jobs and keep employees safe from employer deception by incentivizing prevailing wages, enforcing strict penalties, and improving American sourcing for materials and jobs.
Two key takeaways from these protections include:
- Prevailing wage — Prevailing wage will now be better managed due to the newly provided bonus credits for businesses who work on — and hire for — clean jobs. These bonus credits incentivize companies to ensure prevailing wages are appropriately applied.
- Penalties — Companies who don’t pay the promised prevailing wage will now be penalized by paying workers the difference in what they are actually owed and be responsible for paying interest on the prevailing wage.
WHAT TO KEEP IN MIND AS THE INFLATION REDUCTION ACT ROLLS OUT
As your company moves into the new year and starts bidding new projects, there are a few items from the Inflation Reduction Act to keep in mind. While the Inflation Reduction Act is not only a historic bill for climate change procedures and job creation, it’s also a law that helps regulate the pay of those jobs to meet prevailing wage standards
The Inflation Reduction Act applies new tax credit incentives to encourage companies to fall in alignment with its proposed wage protections. And while this could mean savings for your company, it also calls for more awareness. You need to be more attentive to prevailing wages and more conscious of where you’re sourcing your products and labor.
Inflation Reduction Act Tax Credits – How They Will Affect You
Many contractors are already familiar with prevailing wage jobs and the regulations that come with these projects. Historically, prevailing wage regulations are set in place to protect laborers from unfair bidding practices. The Inflation Reduction Act is the first of its kind to connect prevailing wage to clean energy tax credits with potential bonus credits that can be earned by employers.
While bidding new projects, contractors should consider exploring these new tax expansions. They branch out into territories that include energy-efficient commercial buildings, new energy-efficient homes and electric vehicle charging infrastructure. Tax expansions like bonus credits are potential savings your company could earn if certain prerequisites are met, like ensuring that 10% of a project’s workforce are registered apprentices3.
Inflation Reduction Act and Certified Payroll
The other key aspect employers should consider is the prevailing wage guarantee. There are now strong laws in place to ensure labor standards are met on these jobs. That means that each company participating in a job created by the Inflation Reduction Act will be required to pay the prevailing wage in their local region. If companies try to avoid paying prevailing wage, penalties like paying the difference in prevailing wage owed plus interest are expected4.
But with the addition of prevailing wage, there’s also the responsibility for submitting certified payroll reports. These reports prove you’re paying employees the proper local prevailing wages according to the Davis-Bacon Act.
For those contractors who’ve never worked federally funded projects, certified payroll reports can be complicated. Companies need to diligently fill out certified payroll reports each week that includes details like:
- Employee info
- Hours worked
- Taxes and deductions
- Fringe benefits
- And more
Some agencies may even require you to take additional steps when submitting certified payroll reports. Often, completing certified reports by hand can be incredibly time consuming and lead to reporting errors.
Certified payroll reporting may sound overwhelming at first, but there are options available to help.
If you’re looking to get into federally funded projects like the jobs proposed in the Inflation Reduction Act, construction-specific payroll services, like Payroll4Construction, can help with tasks like certified payroll reporting.
PAYROLL SERVICES FOR CERTIFIED PAYROLL
Certified payroll can be made easy when you outsource your payroll to a construction-specific payroll service. With a construction-specific payroll service, you’ll have the ability to automatically generate reports — including job costing, EEO and certified payroll — in a matter of seconds. After each week, all you need to do is click a few buttons, and your certified payroll reports are done and ready to submit.
Payroll4Construction can even produce multiple certified payroll formats for a variety of agencies, so whether you’re working on a project at the local, state or federal level, you have the reports you need.
If you’re a contractor thinking about getting started with new government projects introduced by the Inflation Reduction Act, it’s never too early to start preparing. We’re here to help.
Get a free quote, or give us a call at (800) 949-9620 to explore how the #1 payroll service for contractors can help make your prevailing wage and certified payroll requirements a breeze.
1Comittee for a Responsible Federal Budget (2022, July 28). What’s In the Inflation Reduction Act?. Committee for a Responsible Federal Budget. https://www.crfb.org/blogs/whats-inflation-reduction-act
2Bluegreen Alliance (2022). 9 Million Jobs From Climate Action: The Inflation Reduction Act. Bluegreen Alliance. https://www.bluegreenalliance.org/site/9-million-good-jobs-from-climate-action-the-inflation-reduction-act/
3Spengeman, S. (2022, Sept. 28). Inflation Reduction Act Benefits: Good Paying Jobs and Revitalized U.S. Manufacturing. Forbes. https://www.forbes.com/sites/energyinnovation/2022/09/28/inflation-reduction-act-benefits-good-paying-jobs-and-revitalized-us-manufacturing/?sh=7fafc9606ff9
4The White House. (2022, Aug. 19). FACT SHEET: The Inflation Reduction Act Supports Workers and Families. The White House. https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/19/fact-sheet-the-inflation-reduction-act-supports-workers-and-families/