Construction Payroll and Compliance Glossary: Certified Payroll, Prevailing Wage, and Union Terms Explained

Construction payroll carries terminology that does not exist in standard business payroll. A back-office administrator processing payroll for an electrical contractor on a federally funded project needs to understand what a wage determination is, how fringe benefits differ from labor burden, and why a WH-347 is not just another payroll report. Misunderstanding even one of these terms can lead to an underpayment, a misclassification, or a failed compliance review.

The glossary below covers the terms that appear most frequently in ​certified payroll reporting, prevailing wage compliance, union payroll processing, and construction job costing. Each definition reflects how the term is used in practice on active construction projects.

Prevailing Wage and Federal Compliance Terms

Prevailing wage requirements govern how contractors must pay workers on publicly funded construction projects. The terms below define the core framework.

Davis-Bacon Act

A federal law enacted in 1931 requiring contractors and subcontractors on federally funded construction contracts exceeding $2,000 to pay laborers and mechanics no less than the locally prevailing wages and fringe benefits for corresponding work. The U.S. Department of Labor's Wage and Hour Division administers and enforces the Act.

Davis-Bacon and Related Acts (DBRA)

The Davis-Bacon Act combined with approximately 60 other federal statutes that extend prevailing wage requirements to federally assisted construction projects funded through grants, loans, loan guarantees, and insurance. Most federally funded highway, housing, and infrastructure projects fall under DBRA.

Prevailing Wage

The minimum hourly rate, including fringe benefits, that contractors must pay workers on covered public construction projects. Rates are set by the DOL for federal projects and by state agencies for state-funded projects in states with their own prevailing wage laws. Rates vary by trade classification and geographic location.

Wage Determination

The official document issued by the DOL (or a state agency) that lists the prevailing wage and fringe benefit rates for each trade classification on a specific project. Wage determinations are published on SAM.gov for federal projects and are included in the contract specifications before bidding begins.

Copeland Anti-Kickback Act

A federal law that requires contractors on covered projects to submit weekly certified payroll reports and prohibits employers from requiring workers to return any portion of their wages. The weekly reporting obligation under certified payroll originates from the Copeland Act (40 U.S.C. § 3145).

Contract Work Hours and Safety Standards Act (CWHSSA)

A federal law requiring contractors on covered federal contracts to pay time-and-a-half for hours worked over 40 in a workweek. The overtime is calculated on the basic rate of pay, not including fringe benefits. Violations carry liquidated damages of $10 per worker per day.

Certified Payroll and Reporting Terms

Certified payroll reporting is the mechanism that proves prevailing wage compliance. The terms below cover the reporting process and its components.

Certified Payroll Report

A weekly payroll report submitted by contractors and subcontractors on prevailing wage projects, certifying that workers were paid no less than the required prevailing wage and fringe benefits. On federal projects, the report is typically submitted using Form WH-347.

WH-347

The standard certified payroll form provided by the U.S. Department of Labor for Davis-Bacon covered projects. While use of the form is technically optional, the information it captures is mandatory. A revised version took effect January 6, 2025.

Statement of Compliance

A signed certification accompanying each weekly certified payroll report, attesting that the payroll is correct and complete and that each worker was paid the proper prevailing wage rate. The statement appears on page two of the WH-347 form.

Conformance Request

A formal process for adding a job classification to a wage determination when the work classification needed on a project does not appear on the existing determination. The contractor submits the request through the contracting agency to the DOL for approval.

Union Payroll Terms

Union payroll introduces additional complexity around compensation structure, reporting, and fund remittance. Trade contractors performing union work encounter these terms regularly.

Collective Bargaining Agreement (CBA)

A written contract between a union and an employer (or group of employers) that sets the terms of employment, including wage rates, fringe benefit contributions, overtime rules, work rules, and apprenticeship provisions for each job classification.

Union Fringe Benefits

Employer-paid contributions made to union trust funds on behalf of each worker, as specified in the CBA. Common union fringe categories include health and welfare, pension, annuity, apprenticeship training, and supplemental unemployment. Unlike standard employer benefits, union fringes are remitted separately to trust funds managed by the labor union, not included in the worker's paycheck.

Journeyman

A fully qualified worker who has completed all apprenticeship requirements or meets the trade standards for a specific classification. Journeyman status determines the base prevailing wage rate for that classification on covered projects.

Apprentice

A worker enrolled in a registered apprenticeship program approved by the DOL Office of Apprenticeship or a recognized State Apprenticeship Agency. Apprentices on prevailing wage projects may be paid a percentage of the journeyman rate based on their progress step, provided the apprentice-to-journeyman ratio is maintained.

Apprenticeship Ratio

The maximum number of apprentices permitted relative to journeyworkers in the same trade on a jobsite. Ratios are defined by each apprenticeship program's approved standards and are enforced daily at each worksite. Apprentice hours worked in excess of the ratio must be paid at the full journeyman prevailing wage rate.

Job Costing and Payroll Allocation Terms

Accurate ​job costing depends on how precisely labor costs are allocated to projects. The terms below define the financial structure that connects ​construction payroll to project accounting.

Labor Burden

The total indirect cost of employing a worker beyond the base wage, including employer-paid payroll taxes (FICA, Medicare, unemployment insurance), workers' compensation, health insurance, retirement contributions, and other benefits. Labor burden typically adds 20–40% to the base hourly wage and must be included in job cost estimates.

Fully Burdened Labor Rate

The base hourly wage plus all labor burden costs, expressed as a single hourly figure. A worker earning $35/hour with a 35% labor burden has a fully burdened rate of $47.25/hour (illustrative). ​Payroll reports that calculate burdened rates by project give controllers an accurate picture of actual labor cost.

Cost Code

A numeric or alphanumeric identifier used to categorize expenses within a project. Cost codes break down job costs by type of work (e.g., demolition, rough-in, finish) so contractors can compare actual spend against estimates at a granular level. Every labor hour on a project should be coded to a specific cost code.

Retainage

A percentage of each progress payment (typically 5–10%) withheld by the project owner until the work reaches substantial completion. Retainage must be tracked separately from standard ​accounts receivable and payable because it represents earned revenue that is not yet collectible.

Work-in-Progress (WIP) Schedule

A financial report showing the status of every active project, including contract value, costs to date, earned revenue, billings, and overbilling or underbilling position. Banks, sureties, and auditors rely on the WIP to evaluate a contractor's financial health.

How Trayd Puts These Terms Into Practice

Trayd is a back-office operating system built for construction that unifies ​payroll, HR, compliance, and job costing into a single platform designed for the complexity of trade contracting. For back-office teams managing prevailing wage projects, union payroll, multi-rate crews, and certified payroll submissions, Trayd connects the terminology above to working systems, so wage determinations, fringe obligations, labor burden calculations, and certified payroll reports are handled within one connected workflow.

​Schedule a demo to see how Trayd handles construction payroll and compliance terminology in practice.

Frequently Asked Questions

What is the difference between prevailing wage and certified payroll?

Prevailing wage is the required pay rate on a covered project. Certified payroll is the weekly report that proves workers were paid that rate. Prevailing wage is the obligation; certified payroll is the documentation.

Who sets prevailing wage rates?

The U.S. Department of Labor sets rates for federal projects through wage determinations published on SAM.gov. States with their own prevailing wage laws set rates through their respective labor departments.

What is the difference between fringe benefits and labor burden?

Fringe benefits are specific compensation components (health, pension, training) required by a wage determination or CBA. Labor burden is the broader total of all indirect employment costs, including fringe benefits, payroll taxes, and insurance.

How is a journeyman different from an apprentice on a prevailing wage project?

A journeyman is a fully qualified worker paid the full prevailing wage rate. An apprentice is enrolled in a registered program and may be paid a percentage of the journeyman rate, provided ratio and registration requirements are met.

What is a cost code in construction accounting?

A cost code is an identifier that categorizes expenses by type of work within a project. Cost codes allow contractors to track actual spend against estimates at a detailed level for each scope of work.

What does a WIP schedule show?

A WIP schedule shows the financial status of each active project, including costs to date, earned revenue, billings, and whether the project is overbilled or underbilled. Sureties and lenders use WIP data to assess a contractor's financial position.