Explaining Certified Payroll
In accordance with the Copeland Act, contractors and subcontractors performing work on federally licensed or federally assisted construction contracts are required to provide a weekly statement “with respect to the wages paid” to each employee.
The US Department of Labor (DOL) requires contractors to submit a weekly copy of all payrolls to the federal body that is financing their project.
This needs to be accompanied by a Statement of Compliance which guarantees that the information provided is correct and that each worker has been paid an amount that satisfies the Davis-Bacon prevailing wage.
Consequently, you are required to file and submit a completed Form WH-347 for any week that your company completes federally funded work in addition to your standard payroll forms.
This allows the federal agencies which fund these projects — and the DOL — to ensure that all of your employees have received the wages and fringe benefits which they are legally entitled to.
How Certified Payroll Works
Form WH-347 primarily requires information that you will already have from other payroll forms (e.g., Form W-4) and includes two pages:
Certified Payroll Report: Page 1
At the top of the first page, you will be required to enter information that relates to your federally funded project. This includes:
- Your company’s name
- Your company’s address
- Your payroll number
- The end date of your workweek
- The city and state of your project
- The contract number of your project
Column 1: Name and Identifying Numbers
You should enter your employees’ full names, as well as the last four digits of their Social Security numbers. These are used as their identifying numbers.
Column 2: Withholding Exemptions
This relates to any withholding exemptions that you may wish to include. Even though this part is optional, keep in mind that it should always reflect the same information that is provided on your employees’ Form W-4s.
Column 3: Work Classifications
List the classification of work that is performed on your federally funded project for each employee.
If an employee has worked in more than one classification (e.g., working two different types of jobs in the same week), you will need to present each one as a separate entity by noting the hours worked for each one.
Column 4: Hours Worked
Provide the times and dates of all hours worked within a certain week. You should include overtime hours in the separate boxes provided.
Note: Contracts in certified payroll are commonly subject to the Contract Work Hours Standard Act. You can find more information on this on the Department of Labor website.
Column 5: Total Hours Worked
This part is self-explanatory: add the total number of your employees’ hours (including those classed as overtime) and calculate the “total weekly hours” worked on your federally funded project.
Column 6: Rate of Pay
Include your employees’ rate of pay. As this includes fringe benefits, you should enter the hourly rate that each classification of your employees received in conjunction with any cash paid to them instead of fringe benefits.
Column 7: Gross Amount Earned
You will need to provide the total amount that your employees earned on your project during the last week of work before deductions are made.
This is known as employees’ gross pay.
If your employees earned supplementary income from other projects, you should include both:
- The amount earned by your employee on your federally-funded project during the last week
- The total amount earned by your employee during the week (taking into account all of the projects they worked in).
Column 8 and Column 9: Calculating Net Pay
You must include your employees’ pre and post-tax deductions. This will allow you to calculate their net pay in column nine by subtracting them from their gross pay.
Examples of pre-tax deductions include:
- 401(k) retirement plans
- Medical benefits
- Disability insurance
- State income taxes
Examples of post-tax deductions include:
- Union dues
- Charitable donations
This information will likely already be available to you since it’s needed to calculate your payroll taxes.
Certified Payroll Report: Page 2
Statement Required by Regulations
This part includes the Statement of Compliance required by the DOL. Once you have signed it, your certified payroll report will be officially certified.
Note: By signing, you legally guarantee that the information provided is accurate. If this is not the case, you may face fines, back taxes, or even possible imprisonment of up to five years.
Fill in the fields with:
- The date
- Your name
- Your title
- Business name (for “Contractor or Subcontractor)
- Business project (for “Building or Work”)
- Project’s starting and ending dates
Items 2 and 3
These statements indicate that by signing, you legally guarantee that provided payroll information is accurate and that all parties are registered correctly with the Department of Labor.
You will need to include the fringe benefits that your employees receive. This amount will need to satisfy the DOL’s prevailing wage determination provisions.
To determine your employees’ prevailing wages, you can:
- Submit a request to the National Prevailing Wage Center (NPWC)
- Access other “legitimate sources of information” (e.g., Online Wage Library, etc.).
You can find more information on prevailing wages on the DOL’s Prevailing Wages page.
Note: If you have not paid your employees the fringe benefits that they are entitled to, you must compensate them in cash with a proportional amount to what they would have received.
For more in-depth information on filling out Form WH-347, see the DOL’s instructions.
Frequently Asked Questions
Which payroll taxes do I have to withhold?
You are required to withhold the following payroll taxes from your employees’ wages:
- Social Security taxes
- Medicare and Additional Medicare taxes
- Local, state, and federal income taxes
You will additionally be required to contribute 6.0% of your employees’ wages towards FUTA taxes. However, this can be reduced by up to 5.4% if your employees have paid your state’s unemployment taxes (where applicable).
When do I start withholding Additional Medicare tax?
You are required to withhold Additional Medicare tax from your employees’ wages as soon as they have received more than $200,000 in any given year.
The additional Medicare tax rate is a flat rate of 0.9%.
What is a Form W-4?
According to the IRS, a Form W-4 is an employee’s withholding certificate.
It details the number of allowances and tax credits that they can receive per their filing status and provides information that is essential to calculate their net pay and total withholdings.
Do my employees need to pay Social Security tax?
Yes, but only for the first $147,000 that they receive per annum. After this, the Social Security tax is no longer applicable.
The current Social Security tax rate is 6.2%. Employers are required to contribute an additional 6.2% independently.
Can I calculate my payroll taxes by myself?
While you can calculate your payroll taxes yourself, it’s not always recommended. This is because any mistakes you make that lead to an insufficient amount of deposited and reported payroll taxes can result in high fines.
If you do not want to calculate your payroll taxes independently, you can:
- Use a payroll service
- Work with an accountant
- Hire a tax attorney