Misclassifying construction workers, making pay rate errors, or failing to submit certified payroll on time can significantly harm your construction company’s profitability and long-term financial health. On top of that, the industry’s large, dispersed workforce, varying pay rates, and strict government regulations make collecting and submitting an accurate, timely payroll even more complicated for GCs. Manually handling payroll raises the risk of errors and inefficiencies further, leading to compliance issues that may result in hefty fines, project delays, or contract terminations.
Thankfully, GCs can meet these challenges head-on with the right tools. Construction payroll software is designed with the industry’s unique needs in mind, helping to streamline payroll for a remote workforce. Learn about the top challenges GCs face regarding payroll and how technology can help you achieve an accurate, efficient construction payroll below.
Top Construction Payroll Challenges for General Contractors
The construction industry’s complex regulations and dynamic, dispersed workforce make managing payroll much more challenging for GCs. You may be dealing with one or more unions, operating projects in different states, or have changing reporting requirements. Below, we break down the biggest payroll challenges in construction and the potential consequences of not getting it right.
Certified Payroll and Prevailing Wage Compliance
Government-funded construction projects are required to submit certified payroll each week per the Davis-Bacon Act. These detailed reports are a way to ensure that GCs are adhering to the prevailing wages for their jurisdiction and depend on accurate information. To stay compliant, GCs need to include much more than just hours worked and wages paid in their reporting. Worker classifications (employee vs. independent contractor), fringe benefits, deductions due to taxes or union dues, and accounting for overtime must also be accounted for.
Certified payroll for general contractors is more challenging if you use manual payroll processes. Paper timesheets can be handed in late or misplaced, leading to reporting delays. Human error is also common with manual data entry, where transposing a number could lead to over or underpayment. Most significantly, any error or delay increases your compliance risk, potentially resulting in penalties.
Union Payroll and Multi-Tiered Wage Rates
The construction workforce is diverse, with job sites hosting numerous trades simultaneously, such as plumbers, electricians, carpenters, and sheet metal workers, to name a few. On top of that, it’s common for crews to contain both union and non-union workers. Trades and unions may have differing prevailing wage rates or multi-tiered wage structures where pay depends on experience level.
On top of that, you also need to adhere to contractual obligations in each union’s collective bargaining agreement, which may include separate overtime rules or benefits you need to account for. Managing different benefits, deductions, and reporting requirements for union payroll across multiple projects is complex, and an accurate and timely payroll process is necessary to avoid potential legal issues and compliance risks.
Multi-State and Local Tax Compliance
Construction projects often expand beyond their local markets, meaning workers may cross state lines in a single pay period. Mutli-state operations bring further complexity to the payroll process, as every state has its own tax regulations. GCs need to be aware of and properly account for different withholding, income tax, payroll tax, and reporting requirements for each state in which they operate.
Your tax calculations must be precise to avoid over or underpayment of taxes, which puts you at risk for costly penalties, back payment with interest, and IRS audits. Manually handling your taxes increases this risk, as it can be more difficult to track and manage numerous tax rates accurately. Physically handling files can also slow down workflows and make it more likely that information falls through the cracks.
Job-Costed Payroll Processing for Accurate Financial Tracking
As a GC, it’s your responsibility to ensure the company’s financial health and profitability. Monitoring payroll and its associated labor costs and aligning them with a project’s cost codes and budget enables you to understand each project’s true costs.
With accurate project cost data, you reduce the risk of cost overruns and can make informed decisions regarding resource allocation, project estimates, and cash flow management to improve overall profitability. Access to accurate and timely data here is key, as incorrectly allocating costs can lead to poor project management or making important decisions based on outdated data — hurting your bottom line.
Field Time Tracking and Payroll Processing Delays
Keeping track of workers out in the field is another challenge GCs face. Paper-based and other manual timekeeping methods can be slow to come in for review and are more prone to error. Inaccurate time tracking data and delays in payroll processing can lead to major problems, from project delays and financial losses to compliance issues.
To avoid these consequences, mobile solutions are key. Digital punch clocks or timesheets allow field workers to submit their hours more accurately and in real-time. With a timekeeping solution like hh2’s Remote Payroll, time-tracking data automatically syncs into your system, allowing site supervisors, payroll administrators, and GCs to immediately review and approve it — avoiding payroll delays.
How To Achieve More Accurate, Simplified Payroll With Construction Payroll Software
Many of the biggest payroll challenges GCs face can be solved through construction payroll software. Solutions like Remote Payroll simplify construction payroll and let GCs manage projects in real-time and from anywhere. Construction payroll software offers numerous features that streamline payroll workflows and increase transparency between your field and office, including:
- Mobile time tracking tools: Digital timesheets and punch clocks eliminate manual entry errors and help speed up payroll processing.
- Automation: Payroll automation for construction’s customizable overtime calculators and automated certified payroll reports ensure compliance with the Davis-Bacon Act and other regulations.
- Cloud-based processing: You can process, review, and approve your payroll in real-time, eliminating bottlenecks from workflows while achieving greater accuracy.
- ERP Integration: Your job-costed payroll data syncs with accounting and ERP software in real-time (including Sage 300, Trimble, and Foundation) for an accurate, holistic view of your project data so you can make informed decisions.
- Built-in tax tools: Integrated tax calculators do the hard work for you, ensuring seamless multi-state payroll compliance.
Why General Contractors Need Construction Payroll Services
It’s critical that construction companies invest in the right payroll solution. Contractors that choose general payroll software are likely to come across limitations, as it’s not designed to handle the payroll complexities construction companies face. Construction payroll software, on the other hand, is built to handle industry-specific needs like certified payroll reports, in-field time tracking, multi-tiered union wage rates, and job costing — ensuring compliance and accuracy.
Solutions like hh2’s Remote Payroll also provide seamless integration with top construction ERP and accounting systems, which enables real-time data syncs and reduces errors. Integration also powers its tailored automation, which reduces manual payroll tasks, and its construction-specific compliance tools like prevailing wage payroll services.
Streamline Construction Payroll with Cloud-Based Solutions
The adoption of technology in the construction industry has grown tremendously over the past decade — a trend that’s expected to continue as GCs look for ways to increase productivity and cost efficiency across the board. That’s why more general contractors are choosing automated, cloud-based payroll solutions to enhance payroll accuracy while eliminating time-consuming, manual workflows.
hh2’s Remote Payroll does just that. Our cloud-based construction payroll services for general contractors help you scale and streamline payroll operations from time entry through approval. It eliminates manual time tracking and integrates with ERPs to speed up workflows while ensuring accuracy. And with access to real-time data, GCs can better manage projects and make smarter decisions to drive growth.
Eliminate payroll errors and delays with hh2. Book a demo to discover how Remote Payroll can enhance payroll accuracy, provide real-time insights, and ensure compliance.
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