5 certified payroll reporting mistakes that will cause delayed payments – learn how to avoid them.
Filling out weekly certified payroll reports can be a time-consuming and frustrating task, especially if you complete them by hand or have to manipulate data in order to create them. Transposition errors and other mistakes are bound to happen, no matter how careful you think you are being. Making mistakes on certified payroll reports will lead to more frustration and you’ll end up spending more time correcting the errors; mistakes will also put your company’s good standing in jeopardy with the General Contractor or Project Administrator.
Certified Payroll/Prevailing Wage reporting can be complex and varies by state. Learning how to avoid the following mistakes and submit the reports properly the first time will benefit you and your company.
- Your reports are rejected as inadequate or incomplete – you may not have submitted the proper form or some of the required information is missing. You’ve been told that you need to correct the forms and resubmit them by a new deadline or your company, and the General Contractor, will have to wait longer to receive payment. Delayed payments have a negative affect on everyone’s cash flow. The Labor Standards Clause of the final contract (and the bid package) for each job usually provides you with a sample of the certified payroll reporting form that you will be required to submit; it will also inform you if you are required to file your reports electronically.
- You didn’t pay your employees prevailing wage and you didn’t submit certified payroll reports - you’ll need to make wage restitution to your employees to bring their rate of pay up to the prevailing wage rate required on the job and then you’ll need to submit ALL of the certified payroll reports within 30 days from the time that the General Contractor was notified. Payments to both your company and the General Contractor can be delayed. The requirement to pay prevailing wages and submit certified payroll reports is included and usually discussed in the Labor Standards Clause of the bid package and the final contract.
- You didn’t pay your employees the rate of pay listed in the Wage Decision – you’ll need to make wage restitution to your employees, provide proof of the wage restitution, and submit corrected certified payroll reports within 30 days from the time that the General Contractor was originally notified. A Wage Decision is a listing of all the different Work/Trade Classification and minimum wage rates (base PLUS fringe) that must be paid to anyone performing work on the jobsite. Some Wage Decisions cover several counties and/or types of construction (residential and commercial) and can be difficult to read – in instances such as this, the Contract Administrator may prepare a Project Wage Rate Sheet or issue a Wage Bulletin, which will only show the Work/Trade Classifications and wage rates for a specific project. The Wage Decision is found in the Labor Standards Clause of the bid package and the final contract.
- Your employees Work Classifications do not match those listed on the Wage Decision – you’ll need to correctly classify your employees according to the Work/Trade Classification found on the Wage Decision, and quite possibly make wage restitution to your employees. You’ll need to provide proof of any wage restitution, if applicable, and provide corrected certified payroll reports within 30 days from the time that the General Contractor was originally notified. Each employee must be classified and paid accordingly, based on the type of work they are performing. If the Wage Decision doesn’t contain the correct Work Classification; a written request must be submitted. The written request must identify the Work Classification that is missing, recommend a wage rate, and provide a description of the actual work being performed. This written request should be submitted/discussed at the bid qualification meeting.
- Your reports have incorrect computations, unclassified “Other Withholdings”, or do not indicate how the fringe benefit portion of the prevailing wage is paid – you will need to submit corrected reports within 30 days of the date that the General Contractor was originally notified. While these items may seem trivial, they are all part of the requirements of certified payroll reporting. Always check the “math” on the final reports before submitting them, for example, the Federal WH-347 certified payroll report should match the employees paycheck exactly for gross wages ALL jobs, withholdings and net wages paid for the week, even if you use a software program to generate your reports you should verify that these numbers match before you submit the reports.
Learning to avoid these mistakes is in your best interest because will you avoid extra paperwork and be paid in a timely manner.
If you are manually creating the reports or having to manipulate large amounts of data to generate the reports, you aren’t saving any time (or money) and need to automate the process in order to eliminate the transposition errors and save valuable time that could be better spent on other tasks. I see many QuickBooks users discussing on the Intuit forums how they generate the built-in QuickBooks certified payroll report and either manually make corrections or print the report and then enter that data into a fillable Federal or State Specific certified payroll report on a weekly basis.
Make sure that you have thoroughly reviewed the Labor Standards Clause of the bid package AND the final contract package and provide your payroll administrators with the information that they need to correctly pay your employees. If you continue to submit incorrect certified payroll reports you will be in violation of certified payroll reporting requirements and this can mean that you will be disbarred; not allowed to bid on or perform work on prevailing wage projects for up to 3 years. Additionally, you may be passed over in favor of another company (even if you do top quality work) if you have a “checkered past” in meeting the reporting requirements.
Wage Restitution is the difference between what the employee should have been paid (base PLUS hourly fringe) and what they were paid.
If you are new to certified payroll reporting requirements, sign up for a 2-hour Certified Payroll Reporting Training webinar, $69.00 per person.
If you use QuickBooks and want to automate the entire certified payroll reporting process, request a Free 30-Day Trial of Certified Payroll Solution.
Taking a credit against the full prevailing wage fringe benefit for company paid 401k contributions and reporting it correctly on the Federal WH-347 Certified Payroll Report can be very confusing. This question was asked by a reader who recently requested our 4 Ways Contractors Pay Prevailing Wage Fringe Benefits eBook.
We are a non-union shop working on prevailing wage jobs; our Company offers a 401k plan and the company contributes 4% of our employee’s gross wages to the 401k. We understand that the 401k plan is considered a bona-fide plan, but how do we take an hourly credit when our contributions are based on a percentage of gross? Currently we just look at an employee’s gross wages for the month and make the calculations and contributions.
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Taking a credit against the full prevailing wage fringe benefit IS confusing, it’s NOT just you.
The fact that you are a non-union shop, and your employees are probably also work on non-prevailing wage jobs adds another layer of complexity to this. And if you also take credit for other company paid contributions, such as health insurance – well, that to will add complexity. If the credits that you take do not equal the FULL prevailing wage fringe – well that too adds an additional layer of complexity.
From what “I” know (and realize that I’m in Vermont and know enough about prevailing wage rules & regulations to be dangerous – I may not know all the fine print for your specific state). I will explain what I know and you should then verify it with the Prevailing Wage Unit of your local Department of Labor just to make sure. I also want to point out that this methods is not 100% accurate and extra work will need to be done if the combine credits that you can take do NOT equal the full fringe benefit rate.
Step 1 – Convert the percentage into an hourly rate
First you are going to need to convert the percentage into an hourly rate.
This is done by taking the prevailing wage hourly base rate and multiplying it by 4%. So if the base rate is $35.00 per hour multiply this by 4%, which equals $1.40.
Step 2 – Set up a company contribution item in your accounting software to track the hourly rate
While you probably already have a company contribution item in your accounting software, you’ll want to add another one specifically for the prevailing wage credit, this will make it easily identifiable in the event of an audit.
If you use QuickBooks to do your payroll, go to the Lists menu -> Payroll Item List -> click the Payroll Item button (bottom left of this window) -> choose New -> Custom Setup -> choose Company Contribution -> enter the name that you want to use in checks and reports (PW 401k) -> make sure the track expenses by job option is checked -> currently the Tax tracking type should be set to None -> on the Taxes tab, nothing should be checked -> select the Calculate based on quantity option -> and on the last window set default rate to 1.40 with no annual limit AND be sure that the This is an annual limit option is NOT checked. Click Finish.
Add this new company contribution item to the Payroll & Compensation Info tab of all employees in the Additions, Deductions and Company Contributions section.
Step 3 – When creating paychecks
This is where it gets really complex, especially if the credits you take against prevailing wage do not equal the full fringe rate and you pay a portion of the fringe in cash – which will then increase the hourly rate of pay.
EXAMPLE: John J. Equipment, your employee works 25 hours at $35.00/hr on a prevailing wage job and 15 hours at $28.00/hr on a non-prevailing wage job during the week.
Against the company contribution item for the prevailing wage 401k you will enter a quantity of 25 (for 25 hours worked on a prevailing wage job). This entry is pretty straightforward.
To determine the “normal” 4% of gross 401k contribution, you’ll need to take the total gross from all hours worked multiply it by 4% then SUBTRACT out the prevailing wage contribution, and enter that dollar amount.
- 25 prevailing wage hours x $35.00/hr = $875.00
- 15 non-prevailing wage hours x $28.00/hr = $420.00
- equals $1,295.00
- times 4% = $51.80
- MINUS 25 prevailing wage hours x $1.40/hr credit = $25.00
- $51.80 MINUS $25.00 = $26.80 remaining 401k contribution
You’ll enter the $26.80 in the RATE column for the “normal” 401k contribution.
Important Note: If the items that you are allowed to take credit for do not equal the full prevailing wage fringe; consider adding a bona-fide plan to handle the balance of the fringe benefit contribution. A very good plan to consider is the one offered by Prevailing Wage Contractors Association (PWCA), the employees have access to the fringe contributions if you have to lay them off for a short amount of time. For additional information please contact us or contact PWCA directly, indicating that you found them through Nancy Smyth from Sunburst Software Solutions, Inc.
California prevailing wage laws and certified payroll reporting requirements are quite complex and can be mandated by any of the following agencies or organizations, each with their own unique set of reporting requirements.
- The California Department of Industrial Relations (DIR) and the filing of Form A-1-131.
- The California Department of Transportation (CALTRANS) and the filing of a modified WH-347 form.
- The U.S. Department of Labor and the filing of a standard WH-347 Form.
- Electronic filing requirements on specific construction projects through the use of LCPtracker, TRS Consultants, and/or Elation Systems, Inc. D-BAS Labor Compliance Software.
- Additional “paper filing requirements” by Labor Compliance Organizations, such as, Golden State Labor Compliance, LLC or CalLCP.
- Electronic filing requirements being introduced on August 1, 2010 through the California Department of Industrial Relations Compliance Monitoring Unit (CMU), which will utilize the TRS Consultants Inc., on-line Labor Compliance Program
Because of these complexities, contractors frequently ask these questions about California Prevailing Wage Laws.
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Q. What is the methodology for determining the prevailing wage rate?
A. The prevailing wage rate is the basic hourly rate paid on public works projects to a majority of workers engaged in a particular craft, classification or type of work within the locality and in the nearest labor market area (if a majority of such workers are paid at a single rate). If there is no single rate paid to a majority, then the single or modal rate being paid to the greater number of workers is prevailing.
Q. How does the prevailing wage affect me?
A. California’s prevailing wage laws ensure that the ability to get a public works contract is not based on paying lower wage rates than a competitor. All bidders are required to use the same wage rates when bidding on a public works project. California law requires that not less than the general prevailing rate of per diem wages be paid to all workers employed on a public works project.
Q. What is a general prevailing wage determination?
A. When the director of the California Department of Industrial Relations determines that the general prevailing rate of per diem wages for a particular craft, classification, or type of worker is uniform throughout an area, the director issues a determination enumerated county by county, but co vering the entire area. General determinations are issued twice a year on February 22 and August 22.
Q. What is a special prevailing wage determination?
A. When a particular craft, classification or type of worker is not covered by a general determination, the awarding body may request a special prevailing wage determination. Requests must be made at least 45 days prior to the bid advertisement date.
Q. What is an issue date?
A. The date upon which copies of the determination of the director are deposited in the mail. Determinations are issued twice a year – Feb. 22 and Aug. 22.
Q. Why is there an expiration date for each prevailing wage determination?
A. The expiration date indicates when the determination of the director of the California Department of Industrial Relations is subject to change.
Q. What does it mean when there is a single asterisk (*) after the expiration date of a prevailing wage determination?
A. Prevailing wage determinations with a single asterisk after the expiration date, which are in effect on the date of advertisement for bids, remain in effect for the life of the project. Interested parties should contact the Division of Labor Statistics and Research at (415) 703-4774 for the new rates after 10 days from the expiration date (if no subsequent determination is required) or visit our website.
Q. What does it mean when there are double asterisks (**) after the expiration date of a prevailing wage determination?
A. Prevailing wage determinations with double asterisks after the expiration date indicate that the basic hourly wage rate, overtime, holiday pay rates and employers’ payments for work performed after this date have been predetermined. If work is to extend past this date, the new rates must be paid and should be incorporated in contracts entered into now.
Q. What is a predetermined change?
A. Definite changes to the basic hourly wage rate, overtime, holiday pay rates and employer payments which are known and specified in the applicable collective bargaining agreement at the time of the bid advertisement date and which are referenced in the general prevailing rate of per diem wages.
Q. What is the effective date of a prevailing wage determination?
A. The date upon which the determinations of the director of the California Department of Industrial Relations go into effect. This date is 10 days after the issue date of the determination.
Q. What is a residential project?
A. Projects consisting of single-family homes and apartments up to and including four stories are subject to payment of prevailing wages when paid for in whole or in part out of public funds, including federally funded or assisted residential projects controlled or carried out by an awarding body.
Q. What is a commercial project?
A. All non-residential construction projects including new work, additions, alterations, reconstruction and repairs. This includes residential projects over four stories.
Q. What is a coverage determination?
A. A process in which the awarding body or any other interested party (such as a contractor, employee, union or labor-management compliance organization) may request a written determination by the director of the Department of Industrial Relations about a specific construction project or type of work to be performed.
Q. When does overtime apply?
A. Compensation for all hours worked in excess of eight hours per day and 40 hours during any one week should be not less than one-and-one-half times the basic rate of pay. For specific overtime requirements, please refer to the prevailing wage determinations.
Q. What are the threshold requirements for a public works project?
A. Prevailing wages must be paid to all workers employed on a public works project when the public works project is over $1,000. If an awarding body elects to initiate and enforce a labor compliance program, that has been approved by the Director of the Department of Industrial Relations, for every public works project under the authority of the awarding body, prevailing wages are not required to be paid for any public works project of $25,000 or less when the project is for construction work, or for any public works project of $15,000 or less when the project is for alteration, demolition, repair, or maintenance work.
For more details, please refer to the applicable statutes and regulations regarding the payment of prevailing wages and General Prevailing Wage Determination(s) including the footnotes. Such information is available on the Department of Industrial Relations’ website at http://www.dir.ca.gov/.
