You’ve been there—the project is behind schedule, crews are clocking extra hours, and your inbox is filling up with change orders and frustrated messages from the field. It feels like the only way to stay on track is to keep the team working overtime. But at what cost?
Overtime in construction is a financial and operational leak that quietly eats away at your profit margins, increases compliance risks, and can send your labor costs spiraling out of control. In many cases, teams have to keep working past scheduled hours to complete projects, or they risk a domino effect of delays on other projects.
Many construction companies don’t realize how much overtime is draining their budget until it’s too late.
Overtime can be costly for contractors and construction companies—but it’s not just about reducing labor costs in construction. Overtime can also contribute to productivity loss and compliance risks. If not managed properly, excessive overtime can erode profit margins.
In this article, we’ll break down how construction overtime impacts your bottom line, where the hidden costs are hiding, and — most importantly — how you can control overtime before it controls your project. We’ll also show how hh2’s Remote Payroll can give you the real-time visibility and automation you need to rein in labor costs and stay compliant.
The most obvious construction overtime impact is financial. According to the Fair Labor Standards Act, which applies to nearly every construction company, overtime pay is 1.5 times the standard wage. For example, if a worker typically earns $20 an hour for their contracted 40 hours per week, any time over 40 hours must be paid at $30 an hour.
Wages for unionized workers are set according to their Collective Bargaining Agreement (CBA). Many union workers have higher overtime wages according to the CBA that companies need to honor, sometimes up to twice their standard wages for overtime work.
These significant cost increases for overtime work can lead to budget overruns. A project has a set budget for labor, but overtime work can quickly move that total above the budget. Excessive overtime can lead to inaccurate job cost tracking and budget mismanagement. In many ways, overtime has a budget ripple effect: it can overrun a current budget and cause issues and miscalculations for future projections that can lead to issues on other projects. Imagine a crew working 12-hour days to finish a school build before the first bell rings. Sure, the project gets done — but the overtime bill eats your margin and risks compliance penalties. hh2 Remote Payroll empowers teams to stay on track with budgets and schedules, preventing overtime costs before they occur.
Aside from the overtime wage increases, overtime work can lead to other hidden financial costs, including the following:
Aside from the financial impact, overtime also brings compliance challenges. Construction companies already face a wide range of compliance requirements, but overtime calculations and paperwork take it to the next level. Contractors must calculate wages correctly and keep the right records to avoid penalties and punishments.
Overtime introduces several compliance risks, including:
Understanding the compliance challenges unique to overtime payroll helps construction companies know their risk and required documentation and processes. Leveraging integrations of hh2 Remote Payroll, construction companies can keep accurate records and avoid compliance issues.
Clearly, construction overtime is costly and opens the door to compliance issues. The best way to handle construction overtime is to avoid or reduce it as much as possible. Here are three ways to make that happen:
Because overtime is tracked and calculated at a different pay rate than normal hours, it can be challenging to track manually. Plus, manual forms have to be completed and collected after overtime is done and everyone is tired. Automated time tracking solutions like mobile time clocks and geofencing streamline time tracking so supervisors know exactly who is working at any given time. With hh2 Remote Payroll, contractors can see overtime hours as they happen — allowing them to reassign crews, adjust schedules, and prevent labor costs from spiraling out of control. The system also ensures certified payroll compliance and accurate job costing, taking the guesswork out of overtime calculations.
Data-driven scheduling can maximize each employee’s schedule without adding unnecessary overtime. Construction companies can use historic project data to anticipate labor needs and hire and schedule accordingly. Technology-based workforce planning helps allocate crews efficiently across projects to prevent overworking teams.
Overtime can cause significant issues with a company’s budget. Integrating payroll with job costing software ensures accurate labor expenses, even with overtime. hh2 Remote Payroll helps automate overtime calculations to reduce errors in wage calculations that lead to compliance risks.
Ultimately, your best tool in managing overtime in construction is technology. Cloud-based payroll solutions help manage overtime proactively to address labor and budget issues in real time. These systems leverage AI and automation to predict and prevent excessive overtime and make recommendations on how to allocate workers to stay on schedule and budget.
Integrating hh2 with ERP software like Sage and Trimble streamlines payroll processes and construction payroll overtime tracking by providing a real-time view of time tracking and ensuring all calculations are accurate.
For decades, construction has been synonymous with overtime. But it doesn’t have to be that way. By using data-driven workforce management to make efficient staffing decisions, contractors and construction companies can have a better and more agile view of staffing.
Automating payroll and time tracking not only streamlines processes and ensures more accurate payments, but it also helps avoid excessive overtime that could be costly.
There’s no better tool than hh2 Remote Payroll to reduce overtime costs. With robust AI and automation tools and numerous integrations with construction workforce management software, hh2 Remote Payroll makes it easy to manage labor costs and make real-time changes to avoid potential issues.