Payroll compliance in the construction industry can be complex and time-consuming, with severe consequences for non-compliance. But that doesn’t mean it has to be overwhelming or stressful. With the right processes in place, you can work through payroll smoothly and ensure compliance.
Why is payroll compliance so important? It includes following federal, state, and local regulations to ensure employees are paid fairly and taxes are submitted properly. When payroll is out of compliance, it can throw your entire finances out of whack, leading to issues with your accounting — not to mention the challenges it leaves for employees and the consequences of not filing taxes correctly.
One of the major challenges for payroll compliance is that it includes so many aspects. Compliance isn’t just one box construction companies can check; it consists of many processes and systems that must work together seamlessly to stay in compliance, including benefits, taxes, wages, and employee records.
A lack of payroll compliance doesn’t always happen purposefully. But regardless of whether the mistake is intentional or not, companies are responsible. When payroll is out of compliance, construction companies risk the following potential consequences:
While payroll compliance is complex in any industry, construction brings unique challenges:
Even with all the challenges of construction payroll compliance, there are also opportunities and best practices.
State and federal laws that dictate wages and other compliance issues change regularly. Get in the habit of checking on current regulations. Many construction companies designate an employee to stay current on laws or check in with industry groups for the most current regulations. These regulations cover everything from prevailing wage and minimum wage to union agreements and employee requirements — all of which directly impact payroll compliance.
Many payroll compliance issues arise during onboarding when a new employee is hired and put into the system. Creating an onboarding process that ensures you collect the right employee information and that it is accurate can save compliance headaches in the long run. One of the most important pieces is to ensure employees are classified correctly as employees and not contractors. Employee classification impacts the taxes that are withheld on paychecks. Mistakes can be costly for companies and lead to issues for employees.
Payroll issues often arise when employees aren’t paid correctly, either because their time was tracked incorrectly or not properly coded as overtime or special pay. The best practice to avoid this is a time-tracking system that is easy for employees to use. With construction employees frequently working at different job sites and clocking in and out from different locations, a strong mobile or digital system instead of paper or manual entry can streamline processes and help avoid errors. As part of the time-tracking system, ensure managers can easily approve timecards without slowing down the payroll process.
Perhaps the ultimate way to stay in compliance is to use construction payroll software that automates much of the process and ensures all the information is included and accurate. These systems can help you stay organized and alert you to any payroll issues before making payments. Payroll software can be integrated into other accounting systems for seamless processes. And with automation, the digital tools can easily calculate payroll, make payments, and file taxes — leaving less room for errors and compliance issues.
The best tool to have for your company to avoid compliance issues? hh2’s time-tracking software. Designed specifically for the unique challenges of the construction industry, our tool helps payroll get done easier and more accurately — and 70% faster. hh2’s automated system collects all data in one place and integrates it into accounting systems so that time cards are always coded correctly and processed accurately.
Instead of worrying about maintaining payroll compliance, hh2 helps construction companies focus on growth and operations. Click here to learn more and schedule a free demo.