Grant Administration: Section 8.6. Certified Payroll Report RequirementsOnce construction is underway, the general contractor must obtain weekly payrolls (including signed Statements of Compliance) from all subcontractors as they work on the project. The payrolls must be reviewed by the general contractor to ensure that there are no discrepancies or underpayments. Remember that the prime contractor is responsible for the full compliance of all subcontractors on the project and will be held accountable for any wage restitution that may be found. This includes underpayments and potentially liquidated damages that may be assessed for overtime violations.
NOTE: A construction manager that executes the contracts with other construction firms is considered a general contractor. The references in this chapter to general contractor include such construction managers or construction management firms. These construction managers have the same responsibilities to comply with labor standards as a general contractor.
Certified Payroll Reports
Grantees must obtain copies of all general contractor and subcontractor weekly payrolls (accompanied by the Statements of Compliance that include completed statements of how fringe benefits will be paid), and review them to ensure that there are no discrepancies or underpayments in accordance with HUD guidelines. See Attachment 8-11: Payroll Falsification Indicators, for HUD guidance on detecting falsification through frequent payroll review and interview comparison. If contractor/subcontractors use an approved apprentice or training program, verify that the ratio between trade journeymen and apprentices complies with the approved apprenticeship program.
Certified Payroll Reports must be submitted by the contractor to the grantee within seven to eleven working days of the end of the payroll period. A Payroll Form and Statement of Compliance is provided as Attachment 8-7. This form is also commonly called a Certified Payroll Report (CPR). Note that an employee’s full social security number and address are not to be included on these Certified Payroll Reports. Instead, an alternative individual identity number should be used, such as the last four digits of the employee’s social security number or an employee ID. This form does not have to be used, but alternative payroll documentation must include all of the same elements in order to determine compliance with applicable regulations. A Statement of Compliance must accompany each payroll submission.
Payroll reports must be reviewed by the grantee upon receipt so that any necessary corrective action can be initiated before the problem multiplies. Payroll forms must be initialed by the grantee to indicate that they have been reviewed.
In addition to the falsification indicators described in the HUD guidance, items to be spot-checked should include:
- The correct classification of workers;
- A comparison between the classification and the wage determination to determine whether the rate of pay is at least equal to the rate required by the determination;
- A review to ensure that work by an employee in excess of 40 hours per week is being compensated for at rates not less than one and one-half times the basic rate of pay;
- Review of deductions for any non-permissible deductions; and
- The Statement of Compliance (part of the weekly Certified Payroll Report form in Attachment 8-7) has been completed and signed by the owner or an officer of the firm.
HUD Handbook 1344.1 is a good resource for labor standards information.
Any discrepancies and/or willful falsification indicators resulting in underpayments of less than $1,000 should be addressed by the grantee. Where underpayments of wages have occurred, the grantee is responsible to make sure the correct wages are paid and that the employer will be required to pay wage restitution to the affected employees. Wage restitution must be paid promptly in the full amounts due, less permissible and authorized deductions. As part of this process the grantee must request that the employer submit a Correction Certified Payroll Report (Form 347) showing the restitution and a signed restitution form. Whenever an employer is found to have underpaid its employees by $1,000 or more or committed willful falsification, grantees should contact CDFA staff for assistance. See Taking Corrective Actions and Wage Restitution in Section 8.7 Labor Standards Compliance Requirements.
The contractor and subcontractor(s) must number and date each Certified Payroll Report. The first week in which work is performed, the Certified Payroll Report must be marked ‘Initial’ or 1 and the last payroll report must be marked ‘Final’. Contractor(s) and subcontractor(s) are required to submit a Certified Payroll Report for each consecutive week from the Initial Report to the Final Report. ‘No work’ Certified Payroll Reports must be submitted whenever there is a temporary break in the work on the project. If a contractor completes a portion of the work identified in his contract and is required to be off the job site for a period of time while project construction continues to the point where he can complete the remainder of the work identified in his contract, this contractor may submit a written statement to the grant administrator, signed by the owner or officer of the company that no work will be performed on the job site from Month, Day, and Year to Month, Day and Year. When this statement is received, the contractor is not required to submit weekly Certified Payroll Reports until their work on the project resumes.
All Certified Payroll Reports must have an original signature by the owner, or an owner designated representative. DOL has authorized the acceptance of certified electronic signatures. Please contact CDFA for further guidance if you have contractors that wish to utilize electronic signatures.
Caution: Owner-operators of power equipment, like self-employed mechanics, may not submit their own payrolls certifying to the payment of their own wages but must instead be included on the responsible contractor’s Certified Payroll Report.
Fringe Benefits listed on the applicable wage determination must be paid to the employee or for the employee for every hour worked on the federally assisted project. Those benefits may be provided to the employee in the form of a fringe benefit package or the cash equivalent of the fringe benefits due may be added to the amount of the base wage with the total amount due reflected in the hourly rate column on the Certified Payroll Report.
Paragraph (a) or (b) on the Statement of Compliance must be marked on every Certified Payroll Report to indicate the method by which fringe benefits will be paid. If the fringe benefits are being paid to a bona fide fringe benefit plan, the grant administrator must obtain verification from the contractors or subcontractors of the calculation of benefits paid and proof of plan validity. Bona fide fringe benefit plans are identified at 29 CFR4.171. Examples include but are not limited to:
1. Health, life or other similar insurance premiums paid by the employer. Documentation includes:
a. Most recent insurance statement with a breakdown of each covered employee’s premium, and
b. A signed letter by an officer of the company that states how much of the premium they cover (percentage or dollar amount).
2. Pension or retirement contributions recognized by the Internal Revenue Service (IRS) and contributed by the employer. Documentation includes
a. Letter from Pension Provider stating which employees participate in the program,
b. Signed letter by an officer of the company that states what percentage of contributions they match, or if it is automatically given to the employee even if they do not contribute, and
c. Monthly statements throughout the project that show how much the employee contributed and how much the employer contributed.
3. Holiday and/or vacation pay contributed by the employer. Documentation includes:
a. Copy of Employee Handbook that states the number of paid vacation and holidays provided to employees and
b. Copy of employer’s calculations for the amount of fringe benefit credit claimed for vacation and holiday pay listed by employee.
4. Union Fringe Benefit Packages. Documentation includes:
a. Copy of the Union Benefits Breakdown provided by each specific Union to the contractor, and
b. Monthly statement listing covered employees and verifying payment to the plan.
Fringe benefits do not include employer payments or contributions required by other federal, state, or local laws, such as the employer’s contribution to Social Security or Workmen’s Compensation. The grant administrator must verify that the base rate plus fringe benefit amount paid to each employee is equal to or greater than the amount stated in the wage determination assigned to the project. To determine the hourly amount of fringe benefits being paid by the contractor for the employee, the annual amount paid must be divided by 2080 hours.