LCPtracker Blog

The Difference Between Multi-Tiered and Single-Contractor Certified Payroll Solutions

There comes a time in every young contractor’s life when they’re faced with the question: Should we consider working on publicly-funded projects?

Making that leap can be a bit nerve racking, especially considering all the implications that such a decision brings. Understandably, there’s often hesitation before taking on a public works project. We get it: Davis-Bacon and prevailing wage compliance doesn’t exactly elicit the most excited response.

However, as scary and convoluted as it might seem on the surface, prevailing wage compliance isn’t the nightmare it once was prior to the digital revolution. And if a contractor is looking for an electronic certified payroll solution, there are a few things they should understand.

It’s Not a “One-Size-Fits-All”

First thing’s first. You should know that there are two main categories of compliance solutions that will help with certified payroll: multi-tiered applications and single-contractor applications. Each one is catered to a specific type of user base and priced accordingly. Understanding which one is right for you typically boils down to one question: Do you need to create the certified payroll reports (CPRs), collect them, or do both?

Multi-Tiered Solutions

Multi-tiered systems are the more complex of the two solutions; not because they are harder to use, but because of how they are structured. We all tend to think in linear terms when it comes to inputs and outputs for software. I have ‘X’ and I need to turn it into ‘Y’. And I need a tool to help me do that. But with construction compliance, it’s not always that straightforward because the success of one organization might be dependent on the success of another.

General/prime contractors (GCs), for example, can be held liable for a prevailing wage violation, regardless of whether the violation can be attributed to the GC or any one of the subcontractors working on the project. To effectively mitigate their risk, they need every contractor on the job to be compliant. Therefore, they would not be getting the output they need with a simple certified payroll solution for just their own employees.

This is where multi-tiered systems come into play. Contractors purchasing this kind of solution have two gaps to fill. On one hand, they need to create and submit accurate CPRs to the project owner (typically a public agency). And on the other, they need to monitor the compliance of the other contractors working on their project. This means collecting, reviewing, and validating hundreds (if not thousands) of CPRs. A multi-tiered system works as an umbrella license, allowing every contractor working on a project to create and submit their CPRs under the prime contractor’s software contract. The most efficient applications will automatically check every CPR before it’s submitted to warn contractors of violations. For a prime, this is a huge win on both fronts.  

Multi-tiered solutions allow the entities to set up multiple tiered user roles, effectively establishing a hierarchy – from administrators and approvers (those who regulate and accept CPRs), to prime contractors, subcontractors, lower-tier subs, and so on. In a way, primes that choose this solution are operating very much like public agencies. In fact, public agencies will often purchase multi-tiered applications for their contractors to use as well, as it facilitates a much easier process on the agency’s end for monitoring compliance. Because of this, these solutions do far more than just certify payroll. They give the license owners the ability to meet a plethora of other conditions in their contracts, like tracking worker demographics to meet hiring requirements, building dynamic summary reports, etc.

The Users’ Experience

Since multi-tiered solutions do more than just certify payroll, subcontractors are generally not the ones purchasing this type of solution. If they are using one, they are simply doing so because they are required to under the agency’s or prime contractor’s software license. Consequently, they are subject to playing by the administrators’ rules.

This doesn’t necessarily mean that contractors won’t benefit from these kinds of solutions; it just means that the account owner is the one in charge. The administrators (agency or prime) create the settings and customize the contractor requirements. This affects how the contractor uses and interacts with the software. On one hand, it might result in a warning that a report contains an error or violation. On another, it might cause a hard stop for the contractor so that they will not be able to proceed without correcting the mistake. Because of this, it’s very important that the administrator communicates effectively with the contractors about the requirements. If a user does not understand why the application is restricting them from continuing, it can cause a lot of frustration. Despite the app telling the user where the violation occurred, correcting it may not be intuitive for the average person, especially if you are new to compliance and don’t understand the regulations.

Single Contractor Solutions

The second kind of certified payroll solution is much simpler and straight forward. Single-contractor applications are designed specifically for contractors that only need to certify payroll. The contractor owns the account, has full control, and does not need to bother with tiered user roles for other contractors. The main purpose of the tool is to help streamline the time-consuming process and leverage technology to double check the contractor’s work. The contractor can then take these CPRs and submit them to any requesting body straight from the system. This means that this application is better suited for subcontractors, or more specifically, contractors that do not need to monitor the compliance of other contractors to mitigate risk, like primes. 

The Users’ Experience

Although these applications can be a fantastic supplement to cover the subcontractor’s compliance needs when a multi-tiered application is not adopted by a project owner, it’s important that subs remain privy to all the compliance requirements specific to the project. Whereas the multi-tiered solution involves the project owner setting the requirements in the system and the contractor following those rules, single-contractor solutions provide contractors free reign to set up their account. It’s ultimately their responsibility to make sure they are upholding compliance.

Whether you are a GC or a subcontractor, there is a solution that will fit your specific compliance needs. To learn more about multi-tiered and single-contractor applications, visit https://www.lcptracker.com.