What is Certified Payroll Reporting? A Beginner’s Guide
What Is a Certified Payroll Report?
A certified payroll report, or “CPR” as it is more generally called, is a specialized report that contractors and subcontractors are required to submit when working on federally funded, federally assisted, state, or local projects that are subject to the Davis-Bacon Act or state/local prevailing wage laws. The report provides a detailed account of employee wages and hours, ensuring that workers are being paid the correct prevailing wage and benefits as required by law. It’s called “certified” because the person preparing it must sign a statement of compliance, certifying under penalty of perjury that the information is accurate and that all workers have been paid in accordance with the regulations.
Why Does Certified Payroll Reporting Matter?
Certified payroll reporting is a critical part of ensuring fair competition among contractors and protecting workers from being underpaid. It provides government agencies and project owners with a mechanism to monitor and enforce prevailing wage laws, which helps to maintain a level playing field for all bidding contractors. For contractors, accurate and timely reporting is essential for maintaining a good reputation and avoiding financial and legal repercussions.
When Is Certified Payroll Required?
Certified payroll is required for many public works projects, including those funded or assisted by federal programs as well as projects covered under state and local prevailing wage laws. This can include construction, alteration, or repair of public buildings or public works. The requirement applies to both prime contractors and all levels of subcontractors involved in the project. Certified payroll reports must typically be submitted on a weekly basis.
How Are Certified Payroll Reports And The Davis-Bacon Act Related?
The Davis-Bacon Act (DBA) is a foundational piece of legislation that mandates that contractors and subcontractors on federally funded construction projects valued at over $2,000 must pay their laborers and mechanics no less than the local prevailing wages, including fringe benefits. Certified payroll reporting is the primary tool used to demonstrate compliance with the wage and benefit requirements set forth by the Davis-Bacon Act.
Further, many states and municipalities have passed their own “Little Davis-Bacon” or local prevailing wage laws that mirror these federal requirements. In those cases, certified payroll reporting plays the same role – it’s the official record that contractors and subcontractors are complying with state or local prevailing wage standards. Additionally, many of these state and local prevailing wage counterparts have their own thresholds and requirements that must be followed. Whether at the federal, state, or local level, certified payroll reporting is the primary tool agencies and project owners use to verify wage compliance on public works projects.
What Is The Difference Between A Certified Payroll Report And Regular Payroll Report?
While both certified payroll and regular payroll reports are used to calculate wages and withholdings, they serve distinct purposes and have different requirements. For example, regular payroll applies to all employees in the private sector for general business operations. Certified payroll reports, on the other hand, is specifically for employees working on public works projects that fall under federal, state, or local prevailing wage laws. Additionally regular payroll adheres to standard tax laws and general labor regulations.
Certified payroll reports, however, have much more stringent reporting requirements, including the submission of a signed statement of compliance to the contracting government agency. A generic CPR template won’t always be enough, as different states and localities may have their own laws and formats they will accept. Furthermore, differences are also found in the wage rates. For example, the wage rates for CPR compliance are not determined by the employer, but are instead based on the prevailing wage rates for a specific geographic area and job classification, as determined by the U.S. Department of Labor (and their state counterparts).
How Long Do I Have To Maintain Certified Payroll Report Records?
The Davis-Bacon Act (DBA) requires record retention for at least three years after the completion of a project. An auditor could request these records at any time. State and local prevailing wage laws, on the other hand, often have different requirements for certified payroll recordkeeping. For example, the requirement is five years in California and six years in New York. The bottom line is, contractors need to follow federal Davis-Bacon rules and the stricter state or local requirements, if applicable.
What Are The Penalties For Non-Compliance With Certified Payroll Reporting?
The penalties for non-compliance with certified payroll reporting are severe and can have significant financial and reputational consequences for both agencies and contractors. For example, non-compliant contractors may be required to pay back wages, and they can face hefty fines. Further, non-compliance can lead to legal issues and debarment from future federal or other public contracts. Finally, violations are often a matter of public record, which can lead to reputational damage that affects a company’s ability to secure future projects.
Final Thoughts
Certified payroll reporting is a complex, but essential, part of the public works contracting industry. It is a critical component of labor compliance that protects workers and ensures fair competition. While manual processes can make certified payroll reporting tedious and prone to errors, a modern, cloud-based solution like eComply is designed to simplify and automate these processes. With features like real-time tracking, automated review of CPRs, wage determination updates, and seamless data integration, eComply helps agencies and contractors to minimize administrative burdens and reduce the risk of non-compliance, allowing these organizations to focus on the work itself.
For agencies, it provides a verifiable framework for oversight, allowing agencies to confidently manage a network of contractors while upholding legal and ethical standards. This transparency builds trust with stakeholders and protects the agency’s reputation. For contractors, eComply is more than just a requirement; it’s a competitive advantage.
By demonstrating a proactive commitment to compliance, contractors can win more contracts and avoid costly penalties. Additionally, it simplifies a contractor’s operations by centralizing all necessary documentation, training, and reporting, turning a potential administrative burden into a streamlined system for growth. Ultimately, embracing eComply isn’t just about following the rules – it’s about creating a more efficient, secure, and trustworthy environment for everyone involved. Request a demo and learn more about how eComply can support your organization by automating and streamlining certified payroll and labor compliance.
