Payroll will always be one of the top priorities for any company. After all, its management directly impacts the relationships with its employees and the quality of work. Unfortunately, construction payroll is one of the most unique and complex payrolls due to the multiple factors you need to consider when processing them.
With construction payrolls, there are specific requirements that vary by location and employment status. One of these requirements is called prevailing wage payroll. This legislation requires contractors to pay a standard compensation based on classifications and similar jobs in the area. It varies from state to state and time to time. Another requirement for prevailing wage payroll might be non-cash compensations like health care or continued education. Under this legislation, a single employee might have multiple wage rates based on what they are doing each hour.
Union contracts have similar requirements to prevailing wage contractors. When working with union payroll, employers need to track and report wage and fringe obligations to the union local. It gets complicated with multi-union payrolls, for example: when a crew works on another location with a different union jurisdiction. Here, each union has additional claims, and it all depends on the site of the union, place of residence, and location of work. By checking with the local union business manager, it is easy to determine each requirement.
Another factor you should be aware of is the multiple tax withholdings a single payroll can have, based on job site location. Double taxation can become a problem when an employee resides in a different state than their employer. It is essential to watch over accidentally overpaying taxes for employees who work in multiple states. It is necessary to pay careful attention to timecards and pay stubs, and employee location to avoid any possible errors.
Payroll management can be one of the most significant expenses, it affects your company’s cash flow, and if not done correctly, a mistake could cut your revenue more than it should. The best practice to cut down on cost would be outsourcing your payroll process. For example, a big construction company might handle this on its payroll department, but even for them, sometimes they would save more money by outsourcing this step. It is common to think that dealing with this in the house might be the best option, but it takes way more time and money than expected; the risk elevates, and penalties could be charged, especially if it involves the IRS. Outsourcing will not only cut costs but give you time to research changes in regulations and forecast cash flow, which will develop the chances to grow and capitalize on your business.
We also recommend automatizing timekeeping and scheduling software to increase productivity and avoid overpaying. Inaccurate time tracking can significantly increase wages and taxes; automated time tracking can cut administrative cuts and avoid overpaying. Poor scheduling also has the same consequences, with sometimes not having enough or too many employees on location. With automated scheduling software, you can reach a smooth and efficient operation on the construction site.
In conclusion, outsourcing your payroll process is the best choice for your business to save money and avoid penalties. With this, you won’t have to worry about missing regulations and will have more time to focus on your other company’s needs. We also recommend automatizing your processes to get better results and increase your growth opportunities.
How Can Accounting for Construction Help?
Our financial professionals are experienced in everything involving construction companies and implement tangible solutions that impact the bottom line for any organization within the trades. In addition, we offer full-service accounting solutions like bookkeeping, accrual accounting, payroll, controller and CFO services, and consulting. If you would like to get more tips about the best practices for your business, check our blog or contact us to get started!