What is Certified Payroll? Avoid these Common Mistakes for 2019
What is certified payroll, and how have the most recent round of updates to the government regulations made the reporting requirements even more complicated? Whether the person who prepares and submits payroll for your company is a certified payroll professional or not, it's still necessary to meet all the 2019 filing requirements.
That means each weekly payroll submission must contain all the pertinent data. But before you do any of that, you'll need to know the basics of what certified payroll is and what the latest filing requirements are.
The Davis-Bacon Act of 1931, updated dozens of times since it was first promulgated, requires any company that does work on a government contract to submit weekly payroll data to the government agency overseeing the project. Furthermore, there are stringent and detailed guidelines about what types of data must be submitted and the format for submission.
In order to "help" contractors, the federal government created a standard form called WH-347 that companies can use when reporting wage and payroll information.
One of the key requirements of the Davis-Bacon Act, often forgotten in the rush to submit detailed payroll reports in specified formats, is that workers be paid at the "prevailing wage rate" or an amount higher than that. A prevailing wage is defined as the hourly wage, benefits, and overtime paid to the majority of workers and laborers in a particular area.
The "certified" part of the definition has to do with the entire payroll report not only being complete, properly formatted and filed on time, but also signed by the person responsible for assembling the data in the report.
Requirements for 2019:
Note that regulations do not require companies to use the "official" Form WH-347, nor is it mandatory for payroll preparers or signatories to be certified payroll professionals (CPPs). Even though the law doesn't force you to use a CPP or to submit payroll data on the government form, doing so will help prevent most of the common errors.
As you'll see in the list of common mistakes, below, contractors tend to either omit key pieces of information, submit incorrect data, fail to file on time, or make formatting and calculation errors when submitting weekly payroll reports. Rules about how to file and what details must be included in a report change from year to year.
For 2019, the basic points to remember include the following:
1. Include the full name of every employee who earned wages during the reporting period
2. List the exact rate of pay and total wages for every worker
3. Categorize workers by the type of work they performed
4. Include specific figures for hours, benefits and gross wages for each employee
5. In addition to gross wages, accurately delineate all amounts withheld from each worker's paychecks
With the right software and competent payroll personnel on your team, the details mentioned above are usually not the biggest challenge when making a certified payroll submission. The data collection phase of the task is typically the most formidable aspect of payroll certification reporting.
What Makes Certified Payroll "Certified"?
When people ask the question, "What is certified payroll?," they sometimes get confused by the definition of the word "certified." There's no requirement for a certified payroll professional to prepare and submit weekly reports to the federal agency overseeing a specific project.
The certification aspect is met by having a responsible person, someone who can attest to the accuracy of the report's data, sign and date the form used for a weekly payroll submission.
As long as the report contains all the required information and the person doing the signing knows that it is complete and correct, then it is considered "certified" according to federal regulation.
Ten Mistakes to Avoid When Creating Certified Payroll Reports
Anyone responsible for submitting payroll data should be aware of the most common mistakes made on this complex form. Every certified payroll professional understands the importance of filing accurate, timely reports. Here are 10 errors that show up on payroll reports:
1. Ignoring State-Specific Requirements for Payroll Certification
In addition to all the federal regulations for payroll reporting, many states have extra rules. Some states, for example, mandate electronic filing on a weekly basis. Whenever you bid on a job, double-check on the state rules so you'll know what you're up against in terms of payroll red tape.
2. Assuming a Certified Payroll Professional Must Complete the Form WH-347
In fact, it doesn't matter who completes the form as long as a "statement of compliance" is included. The statement must be signed and include wording to the effect that the submission complies with the rules, all the information is correct, and that every worker was paid at least the prevailing wage.
3. Expecting Your Current Software to Handle Payroll Certification Filing
There are hundreds of payroll software products, many of which have been customized by companies for various reasons. Most standard, out-of-the-box payroll software is not compliant with federal and state rules for certified submissions. Be sure to check and see that your software meets all the specific criteria for certified payroll reporting.
4. Using a Reporting System That's Not Compliant
Contractors are free to use any payroll reporting form or system they prefer as long as it includes all the data called for in the WH-347 form. This is a frequent oversight that often leads to the omission of details like overtime amounts, pay rates, and subcontractors' names and addresses. The WH-347 is designed to make filing easy but many contractors insist on using their own forms.
5. Putting Incorrect Sequence Numbers and Project Numbers on Payroll Forms
Federal forms can be picky. Anyone who has ever filed a tax return for a corporation knows that even the smallest numeric detail can wreak havoc. Federal payroll forms are no different. They require sequential form numbers and accurate project numbers on each week's payroll submission. One piece of required information, for example, is the exact day that a payroll week ends. The sequence/form number for that week must exactly follow the number used for the prior week's submission. Any sequence number that is out of order can lead to rejection of the entire payroll form.
6. Forgetting to Sign the Form
As is the case with personal tax filings, many companies submit payroll reports that include an unsigned statement of compliance. The consequences of this common mistake are serious. The government records unsigned forms as late submissions. It's as though you didn't submit a payroll report at all.
7. Filing Forms with Incomplete Data
Perhaps the most frequent mistake among companies doing jobs for the federal government is submitting payroll forms that are incomplete. The reason it's so easy to make this kind of mistake is because the forms require such a large volume of information. Leaving out one category, or even one piece of data for an individual worker, can mean having to resubmit the weekly payroll report.
It's one thing to file incomplete forms, but there are some companies that fail to file any payroll reports at all. As incredible as this appears, it does happen. Contractors are then forced to file "catch up" reports within 30 days or risk losing the contract or being debarred from future government work. Note that in cases where intentionally false payroll data is submitted, contractors are susceptible to large civil and even criminal penalties.
8. Using Incorrect Work/Job Classifications
Even experienced certified payroll professionals fall victim to this error, and it leads to an additional mistake. With hundreds of workers on a job, it's easy to inadvertently place someone in the wrong job category.
Unfortunately, that also leads to using the wrong prevailing wage rate to calculate that person's weekly earnings. This is a good example of how making a single error on a complex federal document can have a chain-reaction effect and throw other calculations out of whack.
9. Omitting Fringe Benefit and Other Calculations
When workers receive fringe benefits, the payroll report needs to disclose the method used to calculate them. For each worker, the report must show total wages for the week, including wages paid for jobs not related to the government contract. That means the report must detail how much each worker was paid and what portion of that amount was for the government contract. Additionally, the report's calculations must include each type of withholding for every worker as well as the methods used to arrive at fringe benefit totals.
10. Not Using Automated Payroll Certification
As noted above, it's not the reporting but the collection of data that seems to cause all the headaches with payroll reporting. The ClockInEasy mobile and web app is one example of a system that can assist businesses with collecting accurate wage and hour data for any number of employees. Old-fashioned methods for collating payroll information are time consuming and prone to multiple errors.
Companies that use automated reporting and data collection apps can avoid all the common mistakes that appear on payroll reports.
Payroll Certification Done Right
What's the secret for creating error-free payroll reports? With or without a certified payroll professional, companies can avoid all the routine mistakes and submit weekly payroll reports without spending countless hours chasing down pieces of data and worrying about filling out lengthy forms. Data collection apps can make the entire process worry-free and leave time for managers to attend to other tasks.