How Payroll Software Simplifies Prevailing Wage Compliance

Operating a construction business can be challenging, even with the most straightforward projects—and then there are federal contracts. 

Taking on federal construction projects can offer more profitable and prestigious opportunities, but they also introduce an exhaustive list of compliance hurdles to overcome. One of the most notable is prevailing wage compliance.

With several risks to look out for, meticulous attention to detail is crucial to avoiding violations. Coupled with strict submission timelines, manually calculating and entering prevailing wage compliance isn’t just difficult—it’s inefficient and creates a breeding ground for costly mistakes. 

The IRS reports that 33% of employers make payroll errors, resulting in billions of USD lost each year. The kicker? 37% of payroll errors happen during manual data entry.

Having covered the many nuances of certified payroll in this article, the following will dig deeper into the complexities of prevailing wage, the most common violation risks, and how prevailing wage software dramatically increases payroll efficiency and accuracy by 70%.

The Challenges of Manual Compliance

Introducing automation into your payroll processes, especially when it seems like everything is already running smoothly, can feel risky. After all, if things seem like they’re going smoothly, why chance a disruption? Unfortunately, when it comes to certified payroll, it can actually jeopardize business growth when you avoid payroll software for construction. 

With prevailing wage software, your payroll specialists can avoid the following obstacles while simultaneously optimizing their overall workflow.

Time-consuming calculations

Even when you aren’t focusing on the specific compliance requirements of a prevailing wage, processing construction payroll is complex. Accurate job coding, timesheet management, correcting mistakes, and chasing approval can stymie time and productivity. 

Even the most detail-oriented accounting specialists can make mistakes, but companies that utilize software for timekeeping and payroll are 44% less likely to commit errors. 

Risk of audits and penalties

Managing compliance is par for the course in construction, which is why data integrity must be prioritized. Wrestling with analog processes like paper timesheets and manual spreadsheets isn’t just a productivity issue—it can also impact the health of your business. Common prevailing wage violations include (but aren’t limited to): 

• Entering inaccurate wage rates, which causes issues with certified payroll and conflicts with employees.
• Failing to include fringe benefits (healthcare, pension, etc) under the Davis-Bacon Act.
• Forgetting to categorize W2 employees versus contract employees, etc.
• Failing to have enough journeymen to compensate for apprentices on a job site.
• Not including employees working on a job site on the certified payroll (referred to as “Ghost Employees.”)

It’s strongly advised that you investigate your state’s prevailing wage laws to ensure compliance. You could also integrate prevailing wage software that continuously updates at the federal and state levels.

How Payroll Software Simplifies Compliance

Each construction business has specific needs, team compositions, and goals. Adopting prevailing wage software and automation is beneficial because construction-specific solutions adapt seamlessly to individual requirements, as well as industry standards and regulations. 

Regardless of your trade, team size, or scaling goals, the benefits of automated prevailing wage software help maximize operational efficiency.

Automatic calculations for wage rates save time and money

As discussed earlier, managing prevailing wage compliance is tricky because of the innumerable variables to consider. Sure, a payroll specialist can create checklists and subscribe to resources with updated wage rates and laws. However, those measures alone demand a lot of time and focus—and they still aren’t a way to completely prevent payroll errors. 

GNSA reports that manual payroll entry accounts for 35% of payroll errors. Integrating prevailing wage software automatically and accurately calculates all of those details for you–and hh2’s certified payroll software operates via the cloud, which means your data is always up-to-date.

Streamlined certified payroll reporting reduces strain on resources

Automating payroll can increase payroll efficiency by 70% by digitizing employee punches; payroll software makes it seamless and easy for your team to communicate and collaborate during each step in the payroll process.

That means employees are less likely to make errors when they have 24/7 access to a digital time clock. Job codes are automatically assigned and categorized, and approval is far easier because stakeholders can access the centralized platform from anywhere and anytime.

Centralized information improves data integrity

Certified payroll isn’t the only area where compliance can be an issue. Due to stringent compliance restrictions and manual bookkeeping challenges, tax season is another obstacle for construction companies. 

Payroll software automatically categorizes, organizes, and accurately records payroll information for certified payroll submissions and tax audits. That way, your accounting team is always prepared for tax season, and a clear picture of your financial health positions you for growth.

Case Study: How Anchor 41 Increases Accuracy and Efficiency of Certified Payroll with hh2

It’s easier to visualize the benefits of prevailing wage software by sharing a real story from a contractor who solved their compliance issues—and all but eliminated manual data entry—with hh2’s Payroll Software.

How Anchor 41 Increases Accuracy and Efficiency of Certified Payroll with hh2

“We can’t live without hh2 Remote Payroll, period.” 
— Lorraine Searcy, Accountant and Payroll Administrator 

Transform Your Certified Payroll and Prevailing Wage Processes In a Few Simple Steps

Ultimately, you know your business needs best, and you may still choose to keep payroll processes analog to fit your budget and goals. However, with potential legislative change coming in 2025 and technology’s ever-expanding entanglement with business operations, integrating industry-specific prevailing wage software is a cost-effective way to position your business for success no matter what lies ahead.

In summary, the risks of manual payroll entry are costly, with billions of dollars lost annually from 33% of employers making payroll errors—again, 37% of those payroll errors happen during manual data entry. 

When it comes to prevailing wage, there’s no room for error, even though violations are easy to incur during a busy payroll process:

• Entering inaccurate wage rates
• Forgetting to include fringe benefits (healthcare, pension, etc)
• Incorrectly (or forgetting entirely to) categorize W2 employees versus contract employees, etc.
• Lacking a compliant distribution of journeymen to apprentices on a job site.
• Having “Ghost Employees” on a job sit

Here’s a reminder of how dedicated prevailing wage software can help you avoid those issues:

• Increase accuracy with automatic wage calculations.
• Increase efficiency by digitizing and automating job coding and hours worked.
• Increase bandwidth and collaboration by optimizing payroll processes and collaboration.
• Increase the growth and security of your construction business thanks to enhanced data integrity and a full picture of your financial health.

And that’s just the beginning.

Revolutionize your payroll processes today with hh2’s Prevailing Wage Software.