Paying Prevailing Wage

Prevailing Wage Compliance
Got You Running Scared?

By Nancy Smyth

Paying prevailing wage? Don't let prevailing wage compliance intimidate you!

Contractors are a resilient group of business owners.  There are very few things that make them want to turn tail and run for the hills.  However, the words "prevailing wage" and "certified payroll" can make even the toughest contractor cringe.

A lot of contractors and their office staff are intimidated by prevailing wage work (and the thought of paying prevailing wage) because of the wage, fringe, and overall reporting requirements that go along with Public Works construction projects.  

Prevailing wage work can provide your business with a lot of great opportunities and while compliance can be complex, paying prevailing wage can be made easier when you take advantage of the many resources that are available to you and have the right tools in place.

Labor/wages are the biggest expenses for a construction company

Estimators will work tirelessly to save money on materials, make sure that they get the best prices possible from subcontractors and then the company ends up flushing hundreds, if not thousands, of dollars of profit down the tubes due to inefficient processes in the office.

A real life story about inefficient & costly processes:

I recently spoke with a Union contractor who uses QuickBooks for their day-to-day accounting tasks. One of the Union fringe benefits is taxable and because they couldn’t figure out how to handle that in QuickBooks when paying prevailing wage they opted to use a construction specific web-based payroll service to handle payroll and create certified payroll reports.

Now on the surface that sounds like it might have been a good idea, BUT...

• The web-based payroll service didn't integrate with QuickBooks, so they were:

1. Entering employee hours in the web-based program to create paychecks, AND

2. Manually entering time, creating paychecks in QuickBooks and "tweaking payroll taxes" in order to get good job costing reports

• The printed certified payroll reports weren't 100% accurate so they manually had to correct them each week.

• They also paid to have access to an Intuit Payroll Tax table subscription.

• They needed to submit "electronic" certified payroll reports (which the web-based payroll software didn't do), so they had to take the information from the "tweaked reports" and manually enter it into the on-line labor compliance program.

The bottom line:

• One person entered the SAME data in 3 different programs

• The company was paying BOTH the web-based payroll service AND Intuit for payroll processing/tax tables

• This is extremely time-consuming (approximately 20 hours a week just spent on payroll) and highly error-prone

• The company hired an additional part time employee just for this single task

Educate yourself AND your employees

One of the first things that you should do before you start bidding on public works construction projects is to make sure that you educate not only yourself but your office staff about Prevailing Wage compliance in your state.  

There could be:

• Multiple agencies, each with their own paper certified payroll reporting requirements

• Compliance companies, with additional reporting requirements

• A requirement that you submit an "electronic" certified payroll report using an on-line compliance program designed to assure "proper pay" as required by state or federal law

Once you are familiar with the compliance requirements make sure that your internal processes and accounting systems can meet those needs – without someone having to do duplicate or triplicate data entry – in order to get the job done.

Payroll and reports for paying prevailing wage are typically a major stumbling block which prevents contractors from bidding on government funded construction projects

Start by hiring a consultant who focuses on the construction industry and make sure that you have a tax preparer that also focuses on the construction industry.  

Discuss your fears and concerns with them.  

It's likely that the advice you receive from them will provide you with guidance for everything from:

• Learning about payroll wage and fringe benefit requirements, reporting requirements

• Learning how to complete the required forms, set up your accounting software to deal with a more detailed level of job costing payroll, and

• Perhaps even recommending software programs that are designed to handle prevailing wage payroll and generate the required reports.

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You’ll find that contractors, even those using QuickBooks, have a lot of tools and resources available to help them automate and increase their efficiency when performing complex payroll tasks.

Visit the Intuit Marketplace for add-on software for QuickBooks.

Construction specific payroll services or software programs can not only increase efficiency and accuracy when it comes to the actual payroll processing and paying prevailing wage – but they can also make quick work of generating:

• Certified Payroll reports

• Worker's compensation reports

• EEOC minority workforce reports

• Union Fringe Benefit or bona-fide plan contribution reports

• "Electronic" certified payroll files that can be uploaded to an on-line compliance program

Each of these various reports can quite often take hours or days to compile manually.

When you choose a payroll service or software program for paying prevailing wage, make sure that it integrates with your current accounting program; this will eliminate duplicate (maybe even triplicate) data entry as well as eliminate the need for someone to enter the same data in one or more software programs.

What to look for when reviewing an add-on software or payroll service

Finding a good (and I mean REALLY) good payroll service or add-on software program that will help you to manage prevailing wage reporting and paying prevailing wage can be a daunting task.

Here are just a few things to ask a payroll service provider:

• How long have you been providing construction payroll services?

• Do you use software and if so, how long has it been around?

• Can you show me sample reports?

• What happens if one of your reports is rejected and is there a fee to have it corrected?

• Does your service integrate with my accounting software so I don't have to manually enter the detail in order for my payroll costs to hit my job costing reports?

Obviously cost is also a valid question.

Here are just a few things to ask a payroll add-on vendor:

• How long has this software been around?

• Can I see sample reports?

• Does your software integrate with my accounting software?

• Again, cost (including any annual maintenance or update fee) is a valid question.

• What kind of training is available to help me set it up?

Here are three major things to be on the lookout for:

• Don't let anyone tell you that there is only one certified payroll reporting form – there are several states that have multiple agencies, each with their own form with its own specific reporting requirements.  Not to mention the increasing popularity of web-based compliance software and "electronic" reports.

• If they tell you, "Yes, we integrate with accounting program X through the use of Journal Entries" or some sort of "import file" ----RUN!!!!

• Oh, QuickBooks can't handle prevailing wage payroll you need to buy Timberline, Foundation, American Contractor or some other costly construction specific accounting software.

Paying prevailing wage and processing construction payroll IS complex, but construction specific payroll service or add-on software can really take the pain out of compliance.  

Any contractor who is currently struggling with their certified payroll reporting requirements (or paying their office staff to enter the same information more than once) should look for an alternative method to increase their efficiency, eliminate transposition errors, and eliminate redundant data entry.

I hope you've found this article informative.  If you have questions please feel free to reach out to either myself or Diane.
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About the Author: Nancy Smyth has supported Intuit products and end-users since 1986, with her primary focus being commercial/government construction contractors.  

She has been a Certified QuickBooks ProAdvisor since the inception of the program in 1999; as President of Sunburst Software Solutions, Inc., she is a key player in the development of several QuickBooks Add-Ons for the construction industry.  

She is also the author of the QuickBooks for Contractors blog and the Learn to use QuickBooks in your construction business website. Here are more of Nancy's articles written for our website.

To learn more about automating certified payroll, AIA Billing and Payroll Wage Management, visit http://www.sunburstsoftwaresolutions.com/

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Diane