How To Run Certified Payroll As A Texas Electrical Contractor (2024)

Key Takeaways:

• Proper prevailing wage compliance requires accurate worker classification and fringe benefit calculations
• Weekly certified payroll reports must be submitted using Form WH-347
• Texas follows federal regulations but may have higher local prevailing wage rates
• Technology solutions can automate and simplify the certified payroll process
• Non-compliance can result in payment delays, fines, and debarment

When you’re an electrical contractor, one of the easiest ways to bring peace and clarity to your operations is to have a strong plan of action for running certified payroll.

This comprehensive guide walks Texas electrical contractors through everything needed to manage prevailing wages and stay compliant with federal and state requirements.

Understanding Prevailing Wage Requirements for Electrical Contractors

What is a Prevailing Wage?

Prevailing wage refers to the standard rate of pay that contractors and subcontractors must pay to their workers on certain federally funded construction projects. The government determines this wage rate, which is based on the wages that the majority of workers in a given area make for a particular kind of work. The aim of the prevailing wage is to ensure that government contracts do not drive down the wages in the region where the project is located and to promote fair competition by standardizing the labor costs included in bids.Prevailing wages are typically specified in an official "Wage Scale" document, which will outline all of the prevailing wage rates by trade for a specific project/area.

Understanding Fringe Benefits in Texas Prevailing Wages

What Is Fringe Pay?

Fringe Pay or "Fringe Benefits" are an important part of most prevailing wage rates. They're one of the main reasons why prevailing wages can be tricky for contractors to manage.

To understand this, let's break down the two main components of a prevailing wage: the basic hourly rate plus fringe benefits.

Basic Hourly Rate: This is the wage that a worker earns per hour before any fringe benefits are added as defined in the corresponding Wage Scale document. It's important to note that overtime hours will earn workers 1.5 times this regular hourly rate.

Fringe Benefits: These benefits are designed to cover benefits that are typically provided by employers in addition to the basic salary. Fringe benefits can be paid in two ways:

• Direct Payment to WorkersPaid directly to the worker as part of their hourly wage. For example, if the basic hourly rate is $20 and the fringe benefits are $4, a worker will be paid $24/hour.
• Third-Party Benefit PlansPaid into third-party benefit plans on behalf of the worker.

Note on Overtime: Because fringe benefits are not subject to the standard 1.5x increase, a worker in the example above would make $34/hour for overtime hours worked, which is $20 x 1.5) + $4.

Understanding Certified Payroll Requirements

What Is Certified Payroll?

Certified payroll is a weekly report that contractors must submit when working on certain prevailing wage projects to demonstrate that you're paying your electricians and apprentices the applicable prevailing wage rate for the area. This isn't just paperwork—it's a legal document that you're signing to vouch for the accuracy of your payroll information. As such, reporting certified payroll requires filling out specific payroll figures (gross wages, taxes, deductions) for every worker who performed labor in a given week. When projects get large and/or when workers begin moving between prevailing wage and non-prevailing wage projects, this weekly reporting can quickly become very time consuming and difficult.

Federal Laws Texas Electrical Contractors Need to Know

Three main federal laws govern certified payroll:

1. The Davis-Bacon Act: This law sets the standard for prevailing wages on public works projects. It ensures that electrical workers on government jobs aren't paid less than they would earn on similar private sector projects in the same area.
2. The Contract Work Hours and Safety Standards Act: This act mandates overtime pay for any hours worked over 40 in a week. For electricians, this often comes into play during rush jobs or emergency repairs.
3. The Fair Labor Standards Act: While this act covers broader employment standards, it's relevant to certified payroll because it establishes minimum wage and overtime pay standards.

Texas-Specific Certified Payroll Requirements

Texas follows federal regulations for certified payroll, but there are some Texas state-specific differences:

• The Texas prevailing wage law applies to public works contracts awarded by the state and its political subdivisions. This includes projects for counties, cities, school districts, and public authorities.
• If a state or local agency has a higher prevailing wage rate than the federal rate, you'll need to pay the higher rate.
• You must submit certified payroll reports weekly to the contracting agency, mirroring the information required on the federal Form WH-347.

Understanding Form WH-347 Requirements

Form WH-347 is the standard form for certified payroll reporting. This document is the heart of certified payroll and is where you'll document:

• Your company's name and address
• The project details
• Each worker's name, classification, and hourly rates
• Hours worked and wages paid (gross and net)
• Deductions and fringe benefits

This form isn't just about numbers—it's about transparency. You're showing that you're treating your electrical workers fairly and following the law.

Step-by-Step Compliance Guide for Electrical Contractors

To keep your certified payroll process smooth:

1. Make sure you have a good way to keep records. You need to keep track of how many hours each employee worked, how much they were paid (including all payroll deductions), and whether their fringe benefits were paid in cash or paid through an approved benefits plan or program
2. Classify your workers correctly according to the Wage Scale. An apprentice electrician will likely be subject to a different prevailing wage than a journeyman. Furthermore, prevailing wages are often assigned based on the type of work that is being performed. An electrician who only performs low-voltage Voltage Wiring work will typically be assigned a different wage rate than someone who excludes low-voltage work, even if they are both apprentices.
3. Calculate overtime and fringe benefits accurately. These rates can vary based on the specific government contract.
4. Submit your reports on time, every week. Late or incomplete reports can lead to payment delays or even penalties.
5. Regularly audit your payroll process. This can help catch errors before they become larger issues.

Leveraging Technology for Certified Payroll

Investing in certified payroll software is well worth the price of admission. These tools can automate a lot of the process, reducing errors and saving you time. Look for software that:

• Integrates with your existing payroll system
• Automatically calculates prevailing wage rates
• Generates compliant reports with minimal input
• Outputs data specifically formatted for direct upload into common certified payroll reporting systems (E-Mars, LCP Tracker, etc.)

When choosing software, make sure it's up-to-date with both federal and Texas-specific requirements.

Avoiding Common Certified Payroll Mistakes

Watch out for these common mistakes:

1. Misclassifying workers: Make sure you correctly assign workers to their corresponding prevailing wage rate based on their level and the type of work they are performing (Low Voltage Wiring Only, for example).
2. Overlooking fringe benefits: These are part of the prevailing wage and must be accounted for correctly.
3. Inaccurate timekeeping: Precise tracking of hours worked is required, especially for overtime calculations.
4. Incomplete reporting: Every detail matters. Missing information can lead to rejected reports and payment delays.

Understanding Non-Compliance Penalties

The stakes are high when it comes to prevailing wage laws and certified payroll reporting. Non-compliance can result in:

• Withheld payments
• Substantial fines
• Debarment from future government contracts
• Legal action, including potential criminal charges

These consequences can be damaging for an electrical contracting business, affecting your reputation and bottom line.

Resources for Texas Electrical Contractors

To stay on top of certified payroll requirements:

• Regularly check the U.S. Department of Labor website for updates on federal regulations.
• Consult the Texas Workforce Commission for state-specific guidance.
• Consider joining industry associations like the Independent Electrical Contractors Texas Chapter for support and education.

Certified payroll doesn't have to be a burdensome load on your system. By understanding the requirements, using simple technology, and prioritizing payroll checks, you can rest assured that your electrical contracting business remains compliant and competitive. Remember, accurate certified payroll isn't just about following rules—it's about valuing your workers and maintaining the integrity of your electrical business.