Payroll is naturally more complex in the construction industry — you’re dealing with multiple pay rates, different pay rates for each trade, overtime and prevailing wage laws, union requirements, job costing, and more. Any mismanagement of payroll can cause errors, resulting in incorrect payments (and unhappy employees), delays in your construction projects, or even fines and potential legal issues if you fail to comply with state or federal regulations.  

 However, there are measures you can take to avoid payroll’s common pitfalls and get it right the first time. Ensuring your payroll process is accurate and efficient is key, from tracking time through your approval process. That’s why we’re providing six actionable steps for Payroll Managers and teams below.  

How Digital Tools Help Automate and Improve Time Tracking 

Make the foundation of your construction payroll process solid by optimizing your time-tracking process. Here’s how: 

Adopt Digital Timekeeping Systems 

Paper time cards and other manual time entry options are prone to errors and may leave your payroll team chasing after workers to complete payroll on time. Updating your time-tracking methods to a digital solution eliminates manual entry errors. It also gives your payroll team greater visibility, as they can monitor labor in real-time—even when construction crews are in remote locations.  

Digital timekeeping solutions, including Remote Payroll, use a mobile punch clock system and offer geofencing and photo verification features to ensure workers clock in and out only for themselves while on-site, improving accuracy. 

Automate Overtime and Shift Differential Calculations 

In construction payroll, you also have to deal with shift differential rates for overnight and weekend construction work and track weekly hours to know when overtime pay kicks in. Automating this process through digital time tracking tools can save your payroll team time while ensuring accurate overtime pay. It helps prevent compliance issues and payroll discrepancies. 

How to Ensure Time and Labor are Correctly Allocated to Projects 

Construction companies handle multiple projects at once — often with different pay rates and requirements, making payroll challenging if you’re not using the following tips.   

Implement Job Costing Best Practices 

It’s essential that your construction company uses job cost codes to correctly allocate labor costs to specific projects. For example, a worker would code their hours as “electrical” or “framing” depending on their duties at each job site. Doing so allows your finance team to track labor costs per project more accurately to ensure proper billing and payment. 

Use Software to Handle Multiple Pay Rates 

Construction employees often work on different tasks with varying pay rates, making payroll management more complex. Using software that allows for easy switching between pay rates for different jobs, functions, or locations is essential for simplifying the process. It improves accuracy in wage calculation while reducing payroll errors to help you maintain trust with your employees.  

How to Easily Stay in Compliance with Certified Payroll and Union Regulations 

Construction companies must comply with all payroll laws, including unionized or certified payroll, making payroll management more challenging. Here are a few ways to make this process easier.  

Stay Updated on Prevailing Wage and Certified Payroll Requirements 

If your company works on government-funded construction projects, you must submit certified payroll form WH-347 weekly to ensure workers get paid for their hours. This form documents worker classification, prevailing wages (the minimum hourly wage for your state), benefits, hours worked, and more that are required for compliance.  

It’s essential that your payroll system can handle certified payroll reporting to ensure compliance with Davis-Bacon and other prevailing wage laws. By doing so, you’ll avoid costly penalties and ensure your payroll is processed correctly for all government projects. 

Manage Union Agreements and Benefits Deductions 

Unionized construction companies have to navigate state-specific union rules around pay rates, fringe benefits, deductions, and compliance regulations. Payroll software can help you manage union payroll more effectively by automating payroll deductions for differing jurisdictions and job codes so hours and benefits are processed accurately. This step ensures compliance with your union agreements while avoiding potential disputes or legal issues.  

Leverage Technology for Payroll Integration 

Technological advances mean your construction company can automate more payroll tasks, helping increase both accuracy and efficiency in your payroll process. 

Sync Time Tracking with Payroll Software 

You can avoid payroll errors and eliminate manual data entry by automatically syncing your digital time tracking tools with your payroll software. Doing so offers many benefits, including reducing human errors, giving you more access to accurate payroll data, and speeding up your payroll processing. 

Integrate Payroll with Accounting Systems 

Many digital time tracking and payroll solutions offer seamless integration with accounting or other ERP (enterprise resource planning) software, such as Sage 300 or Procore. This allows the two tools to work together for real-time data flow. Integrating your systems allows for more accurate job costing and better financial reporting. It also simplifies your end-of-year audits.  

Reduce Delays Through Multi-Level Payroll Approval 

You can reduce payroll errors and prevent delays by using a multi-level approval process. 

Create a Robust Approval Workflow 

Setting up a multi-level approach to approve timecards is critical in the construction industry. Many payroll tools allow you to set up custom approval pathways by role, automatically routing time and other payroll data seamlessly at each step of the way. Having a clear order of approval from supervisors and project managers to payroll administrators ensures that data is reviewed and verified by the right people in the right order before payroll is processed. It also reduces bottlenecks from forming and speeds up the entire approval process. 

Stay on Track With Regular Payroll Audits and Reconciliation 

Assessing your payroll and job costing processes throughout the year can help you identify inconsistencies, errors, or other problems earlier on so you can make adjustments and keep your finances in check. 

Conduct Payroll Audits 

Regular audits of your payroll processes ensure that your information is accurate and you comply with labor and wage laws. It can also help prevent fraud and avoid costly mistakes or penalties. When conducting your audits, check for any discrepancies in hours worked, employee pay (including overtime), tax and benefit deductions, and other compliance issues. Spotting errors before they become a major issue helps you address them faster and ensures you stay in compliance.  

Reconcile Payroll with Job Costing and Accounting 

Don’t limit your audits to just the payroll process; you must also reconcile payroll data against your construction company’s job costing reports and accounting records to ensure complete financial accuracy. Not only does this help payroll managers catch discrepancies, but it also aligns labor costs with project budgets.  

Get Construction Payroll Right with hh2 

While construction payroll comes with many challenges, you can get it right the first time by taking the six steps mentioned above: streamlining your time tracking, mastering job costing, ensuring compliance, leveraging technology, implementing approval workflows, and conducting regular audits. Adopting these best practices helps ensure your payroll team avoids costly mistakes while improving payroll accuracy and keeping everyone happy.  

hh2 makes managing your construction payroll easier. Our cloud-based construction solutions, like Remote Payroll, offer a more efficient and accurate payroll process. Book your demo to see how hh2’s easy time tracking app helps you get payroll right the first time.