How To Run Certified Payroll As An Electrical Contractor

Key Takeaways

• Certified payroll is a weekly report required for certain government-funded projects
• Form WH-347 is the document used for certified payroll reporting, including payroll information and a statement of compliance
• Proper classification of workers and accurate tracking of hours across different job types is critical for compliance
• Electrical contractors must maintain detailed records for at least three years after project completion
• Understanding prevailing wage rates, including fringe benefits, is essential for accurate payroll reporting and avoiding penalties

Electrical contractors working on government-funded projects must understand the requirements for certified payroll and prevailing wages. This guide provides clear information to help you navigate these important aspects of your work.

Understanding Prevailing Wage Requirements for Electrical Contractors

What is Prevailing Wage?

Prevailing wage is the minimum amount that contractors must pay their workers on certain federally funded projects. This wage is determined by the government based on what most workers in the area earn for similar jobs.

Key components of prevailing wage include:

• Base Hourly Rate: The amount paid to a worker for each hour of work.
• Fringe Benefits: Additional benefits such as health insurance, retirement plans, and paid time off. Often, fringe benefits are paid out in cash instead of being contributed to a company benefits plan.

Setting standardized labor rates serves two purposes:

1. Prevents government contracts from lowering regional wages
2. Creates fair competition in the bidding process.

Each project and area has an official "Wage Scale" document that lists the specific prevailing wage rates for each trade.

Certified Payroll Requirements

Certified payroll is a weekly report contractors submit for government projects using Form WH-347. This report demonstrates fair payment according to prevailing wage laws.

Form WH-347: The Standard for Reporting

Form WH-347 includes two main parts:

1. Payroll Information: Details employee wages, hours, and deductions
2. Statement of Compliance: Contractor's signed certification of accuracy

Submit certified payroll reports within seven days after each pay period ends.

Information to Include in Certified Payroll Reports

• Employee name, address, and social security number (though the last four digits are only required)
• Job classification
• Hourly pay rates (including fringe benefits)
• Daily and weekly hours worked
• Total wages earned (gross pay)
• Deductions made
• Actual wages paid (net pay)

Determining Prevailing Wage Rates

To find the correct prevailing wage rate:

1. Access wage determinations through the SAM.gov website.
2. Look up the rate for "Electrician" or related job classifications.
3. Take note of both the base hourly rate and fringe benefit rate.

Keep in mind that these rates are minimums; paying more can help attract skilled workers.

Fringe Benefits Explained

Fringe benefits are an essential component of prevailing wage rates, including:

• Health insurance
• Life insurance
• Retirement plans
• Vacation and holiday pay
• Apprenticeship training programs

Contractors can either provide bona fide benefits or pay the cash equivalent as additional wages. When calculating fringe benefits, make sure the total value meets or exceeds the amount specified in the wage determination.

Compliance and Penalties

Failing to comply with prevailing wage laws can lead to serious consequences:

• Payment withholding
• Fines
• Back wages owed to workers
• Possible exclusion from federal contracts
• Damage to your business reputation

To avoid these issues, electrical contractors should:

• Use reliable timekeeping systems
• Train payroll staff on prevailing wage laws
• Conduct regular audits of payroll practices

Best Practices for Electrical Contractors

Staying compliant with certified payroll requirements involves several best practices:

1. Stay Informed: Keep up with changes in labor laws by checking resources like OSHA and attending industry events.
2. Save Records: Keep certified payroll records for at least three years after completing a project.
3. Utilize Software: Consider using specialized software designed for certified payroll reporting to improve accuracy.
4. Understand Overtime Rules: Check your states overtime rules. For example, In Texas, electricians are eligible for overtime pay at 1.5 times their regular hourly rate for hours worked over 40 in a week. However, overtime rules may not apply to fringe benefits.
5. Customize Proposals: Tailor your project proposals for specific electrical requirements.
6. Prioritize Safety: Develop clear safety procedures, provide training for employees, and regularly check compliance with safety regulations.

Record Keeping Requirements

Proper record-keeping is a must for compliance with prevailing wage laws. Contractors must retain certified payroll records for at least three years from the date of contract completion. These records should be readily accessible for audit purposes and include:

• Original payrolls
• Time cards
• Employee interviews
• Canceled checks

Permissible Deductions

While certified payroll aims to protect workers' wages, certain deductions are allowable without prior approval from the U.S. Department of Labor. These include:

• Taxes required by law (e.g., income tax, Social Security)
• Court-ordered garnishments
• Employee-authorized deductions (e.g., union dues, health insurance premiums)
• Reasonable cost of board, lodging, or other facilities

Always check that any deductions do not reduce the worker's wages below the required prevailing wage rate.

Software Solutions for Certified Payroll

Manually filling out Form WH-347 on a weekly basis can be tedious and time-consuming, especially as the number of projects requiring certified payroll expands over time. As such, many contractors utilize software programs such as eMars or LCP Tracker (among others) to partially automate the weekly reporting process. As an electrical contractor, setting up your back-end systems such that you can upload payroll data directly into one of these software providers can be a game changer.

Managing Special Situations

Apprentices and Trainees

Apprentices registered in approved programs may earn a percentage of the journeyman electrician rate based on their training agreements. If no fringe benefits are specified in the agreement, apprentices must receive the fringe package listed in the federal wage determination.

Multi-Class Work

If workers perform tasks across different classifications, contractors must track the time spent on each job and pay accordingly based on those classifications.

One-Megawatt Tax Credit Exception

Electrical contractors should be aware of the one-megawatt tax credit exception for certain renewable energy projects:

• Applies to solar and wind projects under one megawatt
• Requires meeting apprenticeship requirements
• Can significantly increase tax credit value

Understanding this exception helps in making informed decisions when bidding on renewable energy projects.

Running Certified Payroll by State

Texas

• For electrical contractors in Texas, specific regulations apply regarding certified payroll and prevailing wage requirements. For detailed information, see our complete guide.

Running certified payroll as an electrical contractor requires attention to detail and a solid understanding of prevailing wage laws. By following best practices and staying informed about regulatory changes, you can maintain compliance and support fair pay for your workers.

For further assistance, consult the Department of Labor or industry experts for guidance tailored to your specific needs.