Payroll for construction may sound boring or mundane, but it can be a real nightmare if you don’t know what you’re doing. Just ask anyone who has tried to juggle:
- prevailing wages,
- union-wage reports,
- multiple city/state requirements,
- and certified payroll
If these terms send a shiver down your spine because you understand how complicated and time-consuming they can be, or if they make you scratch your head because you’re not really sure what they mean…you’ve come to the right place.
In this post, we’ll unpack the unique issues surrounding payroll for construction as well as point you to several solutions that can make your life a whole lot easier. First, let’s look at what construction payroll services do and what they can help you with.
Construction Payroll Services
Payroll services are probably the number one outsourced service in any small business. The time you save as an owner and the peace of mind knowing it’s handled accurately by professionals alone make it worth every dollar (and it really doesn’t have to be very expensive)!
These companies streamline your payroll needs by taking care of:
- Tracking employee time and pay rates
- Calculating and deducting payroll taxes from each paycheck
- Cutting paychecks or initiating direct deposits
- Helping with local, state, and federal taxes
- Preparing and sending out tax forms (W-2s, 1099s, etc.)
While you can certainly find good payroll software that lets you have more direct involvement in the process by inputting information yourself, it doesn’t save you that much time in the long run. And time, as we all know, is money.
Last year, we did a webinar on How to Avoid Costly Mistakes When It Comes to Payroll. The replay is available on our site, and you can watch it at your convenience. If you’re considering outsourcing your payroll vs. hiring someone to do it in-house, it is definitely worth watching!
Construction payroll services do everything a regular service would do, but they have to be prepared to accurately and effortlessly manage several additional things that are unique to the construction industry. They’re the things we mentioned at the beginning of this article:
1. Prevailing Wages
While minimum wage is the lowest allowable pay rate for a particular job, prevailing wage refers to the rate of pay that contractors must provide their workers when they are working on a government/public project.
If the government job you are bidding on is greater than $2,000, you are required to pay those rates and file a form WD-10 for each worker. It’s a system that was put in place in the 1930s to prevent contractors from making “low ball” offers that would win them the contract but harm their employees.
Each state’s Department of Labor sets rates for various trades doing work in their jurisdictions. Additionally, rates are determined by several federal regulatory agencies. (More details are available from the Department of Labor’s Wage and Hour Division.) In short, what that means for the construction payroll accounting is that there’s a lot to keep up with!
2. Union Wage Reports
Payroll can get even more complicated when an employee is a member of a trade union and therefore subject to collective bargaining agreements.
3. Multiple City/State Requirements
If you are based in one city or state, but the job you are working on is across the border in another you need to be aware of all of the local pay requirements and regulations that your crew will be subject to.
4. Certified Payroll
When your company is working on a government-funded federal or military project, you are also required to fill out a weekly certified payroll form (WH-347) for each of your employees. Without it, you won’t get paid!
Construction Payroll Issues
As you can see, construction payroll is a lot more involved than simply tracking a worker’s hours and writing a check. Because of the complexity, there are several issues that you need to pay attention to in order to avoid problems:
- Accuracy – This is hands-down the #1 issue construction accountants must deal with. If the numbers aren’t right, nothing else will be.
- Time Tracking – There was a time when you needed to collect time cards or individual timesheets for everyone. That left a lot of room for error or misplacing things. Thanks to apps (and even GPS trackers), you can much more easily automate when work starts and stops and verify the hours your workers report. (Some of the “Best Receipt Tracking Apps” we recently highlighted can also help with time tracking as well.)
- Accountability – Never let your employees simply tell payroll how many hours they worked. As a way of providing an extra level of accountability, build in levels of approval. The easiest way to implement this is to make sure all time reporting goes to a manager first for verification. Once he/she makes sure everything is correct, then it gets passed on to your payroll provider.
Best Payroll Service for a Small Construction Company
While there are several companies that can help you take care of your payroll needs–we compared 7 of the largest payroll outsourcing companies in another blog post you may want to read next–here are a couple that we think are ideal for a small construction company:
- Payroll4Construction – As the name implies, construction payroll is what they do. In fact, it’s all they do. It’s a company that was formed out of another construction accounting giant, Foundation Software. They are built to let you easily and accurately handle all of the payroll issues unique to contractors. Every report you need is available online from anywhere.
- ADP – This construction-specific payroll software option comes from probably the biggest company in the business payroll space…regardless of industry. They take their understanding of time tracking, compliance, and payroll and add several features that are helpful to contractors.
One of the things we think is especially nice is the ability to pay employees who don’t have bank accounts through prepaid debit cards.
We Can Help You Handle Payroll for Construction With Confidence
At CRS CPA, we’ve been helping contractors and other small business owners with their payroll complexities for over 40 years. Our team understands how important it is to you for your team to be paid on time every time…and how avoiding the headaches of endless regulations helps you sleep better at night.
Schedule a call today to learn more about the Payroll & HR Support we offer!
