Payroll for construction is more involved than it is for many other industries. Payroll for prevailing wage construction projects is even more complex. These types of public works projects come with heightened regulation and risk, with mistakes regularly leading to investigations, fines and penalties. This elevated risk, and the fact that payroll relates to your labor costs, ability to bid competitively and comply with labor laws, makes payroll a critical administrative task.
It’s easy to see how payroll and reporting mistakes are easy to make, but that doesn’t make them any less costly. We created the following suggestions to help contractors find easy ways to reduce payroll mistakes and simplify their processes.
Easy payroll tips for contractors
1. Get rid of manual steps
Overall, the construction industry is slower to adopt technology, especially information technology. This means there are many companies out there relying on manual processes for payroll. Things like handwriting hours on timecards, manually transferring hours from timecards and spreadsheets into payroll systems, and even manually processing payroll are still common. Each time you manually handle data, you’re risking errors. Instead, use a digital system that can track hours, flag potential mistakes and import data directly into your payroll and reporting system can dramatically reduce mistakes.
2. Use systems that integrate easily
Many companies rely on different systems to handle various aspects of payroll, reporting, workforce management and HR functions. This usually happens because companies add different software solutions over time in order to solve specific problems. These solutions may help with the current need, but as additional systems are implemented it becomes problematic because they don’t work together. This forces teams to log into multiple systems, manually transfer data, or otherwise try to make systems work together for even simple tasks, like inputting time and processing payroll. The solution is to use systems that easily integrate with each other, or to use a single system to track hours, process payroll and generate reports to even further limit mistakes.
3. Standardize your process with checklists
Payroll follows predictable steps including collecting hours, verifying data, verifying pay and withholdings, and issuing funds. Prevailing wage work has additional steps like verifying wage determinations, work classifications, dealing with fringe benefits and various levels of reporting. Regardless of what software you use for any of these steps, it’s important that you standardize the process from beginning to end with a checklist that everyone understands and follows. Mark off tasks as they are completed and note issues that come up along the way. This will keep everyone on track, ensure nothing gets skipped, and over time can help you identify repeat issues that need to be solved.
4. Train employees to track classifications
On prevailing wage construction projects, you have to pay workers specific wages based on the type of work they do. If a worker does low-voltage electrical work, high-voltage electrical work and drywall work during their shift, each role must be tracked and paid at different hourly and fringe rates. Failing to track this information accurately will make your payroll and reports wrong. Once the mistake is found, you have to make wage restitution, correct your reports, and resubmit them to the state or federal government.
Mistakes like this can lead to investigations and fines, so it is vitally important that workers in the field track hours for each of their roles. It is easiest to do this if you use a digital time tracking system that lets them easily punch in and out of work classifications instead of relying on handwritten timecards.
Last but not least, consider switching to construction-specific payroll software that gives you added features that make running your business easier. By utilizing one platform to help with foundational tasks related to managing your workforce, you can save time, reduce errors and limit the risk that comes from non-compliance. These features include, but are not limited to:
- Time and attendance tracking
- Direct deposit and wage restitution
- PTO tracking and management
- Expense management
- New hire onboarding
- Required workforce reporting
- Standard payroll reporting
- Certified payroll reporting
While these tips can help construction organizations of any size, they are especially helpful for companies that use small teams to manage multiple administrative tasks. Having the right processes and software in place can give your team back hours a week that can be dedicated to tasks that grow the business instead of tedious paperwork.
Additional resources for construction payroll
How to select payroll solutions for your company
Tips for implementing new software
Common Davis-Bacon mistakes and how to avoid them
The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.