8 Payroll Considerations for Your Construction Company
October 19, 2023
Running a construction company involves managing a multitude of tasks, from securing projects and materials to overseeing workers. Among the many responsibilities of running your business is payroll management, which is a critical function. Contrary to popular belief, payroll is not just about paying employees. It encompasses various aspects such as compliance with labor laws, accurate record-keeping and ensuring timely payments.
Below are eight payroll considerations contractors need to be aware of to ensure compliance and keep employees paid.
- Classification of Workers – Construction companies must adhere to various federal and state labor laws, including minimum wage regulations, overtime rules and workers’ compensation requirements. Ensuring workers are classified correctly helps the company comply with labor laws, tax regulations and contractual agreements while ensuring workers receive the benefits and protections they deserve.
- Union and Prevailing Wage Considerations – Many construction projects are subject to union agreements and prevailing wage laws. These regulations dictate specific wage rates and benefit contributions for workers on public projects. Compliance with these requirements is essential to avoid disputes, fines or contract termination. Construction companies must accurately track hours worked and ensure workers receive the appropriate wages and benefits as per the agreement.
- Record-Keeping – Accurate record-keeping is crucial in the construction industry. You need to keep detailed records of hours worked, overtime, wage rates and any deductions made from employees’ paychecks. Payroll records should be maintained for several years to ensure compliance with auditing and reporting requirements. Implementing a robust payroll software system, like ours at DM Payroll Solutions, can help you streamline the record-keeping process and minimize errors.
- Taxation and Withholding – Construction companies must accurately withhold and remit federal and state taxes for their employees. Additionally, consider any local tax obligations that may apply. Failure to properly withhold and remit taxes can result in fines and penalties. Regularly review tax codes and consult with a tax professional, like our CPA and advisory affiliate Doeren Mayhew, to ensure compliance with current tax laws.
- Benefits and Deductions – Offering competitive benefits can help attract and retain skilled workers. Common benefits include health insurance, retirement plans and paid time off. Construction companies must manage these benefits efficiently, including tracking contributions, managing deductions and ensuring timely payments to benefit providers.
- Seasonal and Project-Based Employment – Construction work can be highly seasonal, and employment often depends on the availability of projects. Companies need to plan for fluctuations in staffing needs, which may require hiring or laying off employees accordingly.
- Bonuses and Incentive Programs – Many construction companies implement bonus and incentive programs to motivate employees and reward exceptional performance. When administering these programs, clearly define the criteria for earning bonuses and ensure the payments are accurately processed. Mismanaged bonus programs can lead to employee dissatisfaction and disputes.
- Payroll Software and Technology – Consider investing in payroll software and technology to streamline payroll processes, reduce errors and enhance efficiency. These systems can automate calculations, generate payroll reports and integrate with other business software, making payroll management more efficient and accurate.
Effective payroll management is essential for the success and sustainability of a construction company. DM Payroll Solutions’ easy-to-use software is equipped to handle unique construction payroll and reporting needs to help drive efficiency and ease the burden. From prevailing wages and certified payroll reporting, to calculating fringe benefits and job costing, our system breaks down the complexities of doing payroll as a construction company. Boost your company’s payroll management performance with a solution built for your industry. Contact us today to learn more about how we can help.