Payroll for construction is unique and complex. Things like certified payroll, job costing, and complex taxes make it a challenge for any accountant or controller! Here are the top 5 do’s and don’t’s of construction payroll.
- Get accurate job costing – Labor costs need to be accurate so you know where you’re at with your budget. Update this information weekly to ensure your costing is accurate. Detailed cost reports by job and cost code are essential for this. Knowing that you’re going over budget on your jobs may indicate that you are underestimating your labor costs. Knowing this will set you up for success for your next project.
- Pay all local taxes from job sites – No one wants the IRS knocking on their door! Keep an eye out for all tax liabilities, they may vary depending on the job site. Automatic accounting for local taxes based on the job site’s GPS location is a must.
- Ensure IRS compliance – In addition to local taxes, be sure to pay your federal and state taxes on time! Track accurate tax liability and get payments in on time to avoid penalties, late fees, and interest charges. These add up over time and can be very costly.
- Know the true cost of payroll – Payroll costs are more than the gross paycheck amounts. Workers’ compensation and liability insurance, union benefits, and any additional fringe benefits add up and need to be accounted for at the job level.
- Outsource payroll to professionals who know construction – Construction payroll is complex requiring detailed tracking of labor costs along with tax and government agency reporting requirements. Experience in general payroll processing isn’t enough. Your payroll provider has to be able to keep track of and accurately process all the complexities of construction-specific payroll. Make sure whoever is running your payroll knows how to report to all government agencies and do prevailing wage reports and union/fringe benefit reporting correctly.
- Overpay insurance-related costs– This can happen when you don’t break down your costs by pay type (such as overtime) and work description for workers’ compensation and liability insurance. If you don’t break costs down by what they’re doing, all workers may get lumped into the highest insurance cost bracket and you’ll end up overpaying on insurance.
- Forget certified payroll – Certified payroll comes up on county, state, and federally funded projects. When certified payrolls are required, progress billing payments on a project may be withheld until the certified payroll reports are submitted. Any delay in turning in your certified payroll reports can delay payment on a project, directly affecting your company’s cash flow.
- Enter duplicate data – When data needs to be entered multiple times, it’s easy to make mistakes and generate errors. If an error is generated, it can be hard to track down and you waste valuable time looking for the source since there are multiple entry points for the same data. Ideally, you want one simplified data entry point that has all the information you need to transfer that data to your accounting software.
- Pay too much for payroll – Prevailing wage rates can vary between jobs and it’s easy to overpay if you don’t know the correct pay rates and benefits for each job. Avoid paying top tier for everything and unnecessary additional liability with unions and other reporting agencies. Automated rates based on job and work classification are a must.
Outsource to someone who doesn’t know construction – If your payroll provider doesn’t understand the complexities of payroll for construction, you will spend more time and money dealing with payroll-related reporting issues. They can’t handle the detail and level of knowledge needed to run your business correctly and efficiently. Like any specialized field, you want an expert. You don’t want the dentist doing your open heart surgery. They may be a great doctor, just maybe not for that specific need.
Ultimately, payroll for construction has complicated needs that may not be met by a generic payroll provider. If you want to eliminate frustration, late fees, and uncertainty from your payroll while processing up to 20x faster, give ConstructionPayroll.com a try.
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