Certified Payroll Reports for Contractors
Certified Payroll Reports for Contractors
Learn how to use CPR’s? Who uses CPR’s? When do contractors use CPR’s?
A Certified Payroll Report, or CPR, is a legally-required payroll reporting document. Primarily necessary for companies working on government-funded contracts, Certified Payroll Reports shouldn’t be treated the same as other payroll reports. In this post, we’ll help you better understand why CPRs exist, how to complete one, and when you should file.
What is a certified payroll report?
The Davis-Bacon Act, first passed in 1931 and amended several times over the past century, requires contractors to pay what’s known as “local prevailing wages” when performing work on federally funded government contracts. This means all waged workers performing work on that contract must be paid the average wage for others within that occupation, based on the local average.
The Certified Payroll Report (also referred to as the CPR) will show the workers’ trade and what they were paid for the job during that given week. The report will also indicate to the agency or general contractor that the workers were paid the correct hourly and benefit rates based upon their individual trades. It ultimately acts as a form of an “invoice” for the contractor to recoup the wages and any relevant benefits paid to the workers.
Submitting late or inaccurate Certified Payroll Reports often delays the contractor from receiving funds needed to pay his union or prevailing wage employees. Additionally, contractors that fail to properly submit certified payroll reports, either on time or correctly, can be subject to significant and damaging penalties.
Is a certified payroll report only required for federal contractors?
Regardless of whether you’re working on a federal, state, or local municipality contract, you may be required to submit a certified payroll report on a weekly basis. The form you use to submit the report and the information you must provide in that report may vary. There is legal precedent for this requirement at the federal level.
When must a contractor submit a certified payroll report?
Federally funded projects like the Infrastructure Investment and Jobs Act (IIJA) require contractors to submit a certified payroll report on a weekly basis, using one specific format known as the Certified Payroll Report Form WH-347. Meanwhile, contractors performing state or city-funded work must complete a different certified payroll report form that also requests different and/or additional information (such as union local number and a reporting on bona fide fringe benefits).
What form is required for a certified payroll report?
Besides having the wherewithal to calculate Union Benefits (or for non-union labor prevailing wages and fringe benefits) and Job Costing, it is important for a sub- or general contractor to be aware of any requirement in the job’s contract to provide a weekly certified payroll report. This certified payroll report will always be required for federal contracts. However, you may find that many state, city, local municipalities and some individual departments or agencies within these authorities require certified payroll reports.
Contractors may also find varying formats and forms required across these different agencies and locations. The Federal WH-347 form will be required for any federal project where a certified payroll report is needed. Outside of that, many cities and municipalities use their own format which may be similar to, but different from, Federal Form WH-347.
For example: New York City Office of the Comptroller requires a different format per City agency (Port Authority; Hospital and Dormitory Authority, and others) as well as electronic versions of Certified Payroll Reports in which the same data on a PDF Certified Payroll Report must be formatted electronically by the contractor so it can then be uploaded into the various software portals (LCMS; E-MARS). The New York City’s Office of the Comptroller form is an excellent example of how two certified payroll forms can be similar in purpose, but distinct enough to warrant care when completing. There are some instances that the Certified Payroll Report the contractor is being asked to submit is unique because it has been completely customized by the General Contractor.
If a specific format is not identified, usually the Federal WH-347 may be substituted. If there is a specific format, a sample can often be obtained on the authority’s website or possibly as an appendix to the contract.
How do I calculate certified payroll report hours and benefits?
Contracting agencies will likely only provide a minimal amount of assistance in calculating hours and benefits for a certified payroll. Contractors and subcontractors required to submit certified payroll reports will be required to have an in-house manual system in place Optionally, you can contract with an outside provider or a payroll service to guarantee hours, wages and union benefits (if applicable) are correct.
Most importantly, the system you have in place, or the third-party provider you choose to use, must know how to calculate, and complete certified payroll reports in multiple formats.
Generating a certified payroll report:
Creating certified payroll reports can be time consuming and tedious, particularly when union benefits must be included in the payroll report, although non-union prevailing wage rates and fringe benefits can also be challenging. Accuracy is by far the most important consideration when completing certified payroll reports. This includes what data is required, where this data is stored and access to it, and how this data is entered onto the form correctly and in the required format.
What’s going to be required can depend on the specified certified design.
- Job information:
This will be each certified payroll report sheet’s header and consist of:
- The name and location of the job;
- The contractor’s name and address – possibly the phone number;
- The contract number of the job;
- The sequence week number of the job.
- Employee’s information:
This information can be obtained from the employee’s personnel file:
- Name, address (or not), social security number (complete or only last 4 digits), marital status, possibly gender and ethnicity (usually coded);
- Local union number, trade (laborer, etc.), class (journeyperson, etc.).
- Weekly payroll and benefit information per employee:
This information usually can be obtained from the payroll register showing what the worker was paid and from the individual job costing and union reports:
- Hours per day (reg & O/T) worked, total hours (reg & O/T), hourly rate paid (reg & O/T)
- Gross-to-net wages – usually only what was paid for this job;
- Some Certified Payroll Reports require the job gross and then the gross-to-net paid for the entire week on all jobs;
- Benefit rate per hour: total benefits paid.
In the instance where a contractor employs non-union workers, the contractor must pay the workers the published Prevailing Wage for the trade work they are doing (laborer, carpenter, etc.). This “prevailing wage” is the sum of the trade’s hourly rate plus the benefit rate. This would then become the hourly rate used to pay the worker and to report on the certified payroll form.
Finally, the form must be signed by a company official, notarized, submitted - and then you wait for payment hoping everything was correct. And if it’s not returned for a correction and resubmission, you may not get paid until the certified payroll report is amended and resubmitted.
With certified payroll reporting: ACCURACY & SPEED = MONEY
“Time is money” may be an adage, but it remains true, especially for certified payroll reports. The longer it takes for a contractor’s staff (or provider) to access, accumulate, calculate and format the data, the longer it takes to submit the certified payroll report for reimbursement. Delays in submitting the report, or inaccuracies in the report, put you at risk of significant fines at a minimum, and at worst, potential imprisonment.
These costs and risks can be avoided when you get expert help. The type of payroll vendor or system you need is one specifically designed for the unique and complicated payroll requirements contractors often encounter. Calculating payroll & benefit data is a delicate balance, if your union-benefits, and/or prevailing wage calculations are incorrect, it contaminates data used for Job Costing, Union Benefit Reporting and results in inaccurate Certified Payroll Reports.
According to contractor payroll experts, the most accurate and time effective way to produce Certified Payroll Reports is to utilize a “one step process” which allows a contractor to enter or import an employee’s payroll by day & job, into the payroll system and then utilizes that same data to easily create Certified Payroll Reports that can be viewed in PDF or, exported as a CSV file immediately after you submit final payroll info.
Certified Payroll FAQs
Certified payroll is a complex issue. Here are some of the most-asked questions about certified payroll with some quick answers to help you demystify this topic.
Is certified payroll the same as prevailing wage?
No. Certified payroll is not the same as prevailing wage. Certified payroll is a type of payroll reporting that required by companies performing work on contracts supplied by the federal government, or some state and local governments. Instead, certified payroll reports are the document used to report on and verify that certain classes of employees working on the contract are being paid the local prevailing wage, which is the average wage paid for those jobs in the region where the work is being performed.
Does certified payroll need to be paid weekly?
Yes, although the reporting requirements may vary by location. For all federally-funded projects, certified payroll must be reported weekly. Some states or cities that require certified payroll reports may have different reporting periods.
Why is certified payroll required?
Certified payroll is required by act of law. Specifically, the Davis-Bacon Act of 1931 was created to ensure contractors paid their workers the local prevailing wage on federally-funded contracts. The law was in response to private contracting companies bringing in low-wage workers on government-funded projects, creating a form of wage discrimination and depressing local wages, a particularly problematic issue that was compounded by the Great Depression occurring at the time. In an effort to prevent underpayment of wages and to prevent contracting companies from using loopholes to avoid paying workers unionized wages.
Can I do Certified Payroll with my accounting software or ERP software?
Contractors using accounting and ERP software packages like Sage, QuickBooks, Spectrum Trimble Viewpoint and Microsoft Dynamics can import 3rd party certified payroll report data into their accounting or ERP software to avoid manual entry.
This process requires an initial mapping of the payroll, union & job cost data with the assistance of the contractor’s payroll & union reporting software provider.
Certified payroll and fringe benefits: Are fringe benefits required?
Yes. Especially in the case of state or local certified payroll reporting where worker classes are unionized, your certified payroll reports must calculate all aspects that account for the local prevailing wage. This will often include fringe benefits, which may not be included in accounting software like QuickBooks.
What Certified Payroll Form Do I Need?
For federally-funded projects, you will need Form WH-347, mentioned earlier. For state or local reporting of certified payroll, you may need a different form. Quite often, the exact form you need is difficult to track down, and is incorporated into popularly-used accounting tools. This is why companies turn to “contractor specific” payroll providers with knowledge in union payroll, and certified payroll reporting. Late or inaccurate certified payroll reports can cost your company tens of thousands of dollars, with penalties compounding for repeat infractions.