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Run the Payroll Fee Auditor →Blog · Payroll Management · Engineering
Engineering & Professional Services Firms: Payroll Setup Guide (2026)
Setting up engineering firm payroll means the standard registrations, an EIN, state withholding and unemployment accounts, new hire reporting, plus the engineering firm specifics: pay codes for prevailing wage for government projects and billable hour payroll allocation and a documented classification for engineers and project managers. BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Step 1: accounts and registrations
Every engineering firm starts with an EIN, a withholding account in each state where someone works (unless that state has no wage tax), an unemployment insurance account in each of those states, and access to each state's new hire directory. New employers deposit federal employment taxes monthly during the first calendar year because there is no lookback period yet.
Step 2: classify engineers and project managers before the first check
Under Davis-Bacon regulations, the term laborer or mechanic covers workers whose duties are manual or physical; workers whose duties are primarily administrative, executive or clerical, and persons employed in a bona fide executive, administrative or professional capacity under 29 CFR part 541, are not laborers or mechanics. Forepersons who spend more than 20 percent of a workweek on laborer or mechanic duties are covered for that time.
Step 3: build the engineering firm pay codes
Prevailing wage for government projects, billable hour payroll allocation, PE license classification and field vs office payroll each become a pay code with its own taxability and overtime treatment. Building them before the first run is cheaper than correcting a quarter of 941s afterward.
Employers use Form 8974 to determine the qualified small business payroll tax credit for increasing research activities that can be claimed on the employment tax return; related forms listed by the IRS include Forms 941, 943, 944 and 6765.
Step 4: set the records up to be kept
For every week in which Davis-Bacon covered work is performed, the contractor or subcontractor must submit a certified payroll with a signed Statement of Compliance to the contracting agency; the prime contractor is responsible for all subcontractor submissions, and certified payrolls and basic payroll records must be preserved for 3 years after all work on the prime contract is completed.
Use of Form WH-347 itself is optional, but the weekly certified payroll information is required; weekly submissions must not include full Social Security numbers and instead use an individually identifying number such as the last four digits.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- Under Davis-Bacon regulations, the term laborer or mechanic covers workers whose duties are manual or physical; workers whose duties are primarily administrative, executive or clerical, and persons employed in a bona fide executive, administrative or professional capacity under 29 CFR part 541, are not laborers or mechanics. Forepersons who spend more than 20 percent of a workweek on laborer or mechanic duties are covered for that time. [29 CFR 5.2]
- Employers use Form 8974 to determine the qualified small business payroll tax credit for increasing research activities that can be claimed on the employment tax return; related forms listed by the IRS include Forms 941, 943, 944 and 6765. [IRS About Form 8974]
- For every week in which Davis-Bacon covered work is performed, the contractor or subcontractor must submit a certified payroll with a signed Statement of Compliance to the contracting agency; the prime contractor is responsible for all subcontractor submissions, and certified payrolls and basic payroll records must be preserved for 3 years after all work on the prime contract is completed. [29 CFR 5.5(a)(3)]
- Use of Form WH-347 itself is optional, but the weekly certified payroll information is required; weekly submissions must not include full Social Security numbers and instead use an individually identifying number such as the last four digits. [DOL WHD Form WH-347 instructions]
Read the full guide to how to set up payroll for a new business, and the rest of the engineering firm payroll library.
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Frequently Asked Questions
What registrations does a new engineering firm need before running payroll?
An EIN, a state withholding account and a state unemployment account in every state with an employee, and new hire reporting access. State registrations are the slow step and can take weeks, so they start before the first hire date.
How are engineers and project managers classified at setup?
Under Davis-Bacon regulations, the term laborer or mechanic covers workers whose duties are manual or physical; workers whose duties are primarily administrative, executive or clerical, and persons employed in a bona fide executive, administrative or professional capacity under 29 CFR part 541, are not laborers or mechanics. Forepersons who spend more than 20 percent of a workweek on laborer or mechanic duties are covered for that time.
What records must an engineering firm keep from day one?
For every week in which Davis-Bacon covered work is performed, the contractor or subcontractor must submit a certified payroll with a signed Statement of Compliance to the contracting agency; the prime contractor is responsible for all subcontractor submissions, and certified payrolls and basic payroll records must be preserved for 3 years after all work on the prime contract is completed.
What does managed payroll cost for an engineering firm?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Prevailing wage for government projects, billable hour payroll allocation and PE license classification are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Engineering & Professional Services Firms. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: U.S. Department of Labor: Wage and Hour Division
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