Construction payroll is extremely different from most industries. Ranging from how the accounting is done to even paying employees. Below are areas that should be focused on for all Construction Payroll.
Weekly Pay is the Norm for the Construction Industry
Construction Payroll typically runs on a weekly pay period. Most companies have the ability to run payroll on a bi-weekly (every other week), or semi- monthly (twice a month) frequency. Most Construction Payroll is ran on a weekly basis for one of two reason. First, unlike other industries, employees in the Construction Industry have been accustomed to receiving weekly paycheck. Since many employees tend to “come and go” from one Construction Company to the next, this causes a hardship on the employee when coming into a new Construction Company that does not pay on a weekly basis. Due to the turnover in the Construction Industry, paying on a weekly frequency has become almost mandatory for Construction Payroll. Click here for a quote on payroll.
“Why is Construction Payroll run weekly instead of twice a month?”
Certified Payroll, LCP Tracker and More
The second reason Construction Companies pay weekly, is due to Certified Payroll requirements. Certified Payroll is a special kind of payroll that is required from
Construction Companies who win Government Contracts. Also known as the Davis Bacon Act, Certified Payroll records daily hours, employee deductions, employee taxes, employee classification, projection location and the prevailing wage. Certified Payroll is reported on form WH – 347. Some contracts may require the Construction Company to report their Certified Payroll through a program such as LCP Tracker or a proprietary state system like Maryland requires. Payroll Services LLC integrates with both Certified Payroll systems for your convenience. Construction Companies are required to provide data on a day by day basis and are recommended to utilize a timekeeping system to ease the administrative burden. This form of Construction Payroll has strict requirements and Companies need to fully understand the Project’s requirements. Click here to learn more about certified payroll.
“Certified Payroll has special requirements that all Contractors must follow.”
Employee Work Eligibility: I-9 vs E-Verify
Construction Companies face the burden of working in an industry where illegal employment is common. Due to this commonality, Construction Companies run the risk of increased I-9 audits. An I-9 is a required form that all employee must fill out to determine eligibility to work in the United States. Employers are required to have the I-9 completed within 3 days of their employee’s hire date. The I-9 is different than E-Verify. The I-9 only requires the employer to ensure that the documents provided by the employee match. E-Verify authenticates the identity of the employee through the Government’s system. If E-Verify cannot authenticate the identity the Employer is required to take action which may include dismissing the Employee. Payroll Services recommends that Construction Companies should use the I-9 until E-Verify becomes mandatory. Click here to get started with payroll services.
“The Construction Industry is in the top three industries prone to Employee Work Eligibility audits.”
ITIN vs SSN
The biggest error most Construction Companies make, is that they do not understand the difference between a ITIN and a SSN. A ITIN or an Individual Tax Identification Number is a number issued by the IRS to an individual for reporting income on but does not equate to permission to work in the United States. The ITIN is identifiable by looking at the first digit and the fourth digit. All ITINs start with a “9” and the fourth digit is a “7” or a “8”. A SSN is issued to a legal citizen of the United States or individuals that are legally eligible to work in the United States. If an Employee presents an ITIN to an Employer, the Employer should not accept this as a form of identification. All documents should match the requirements of the I-9. Click here for a free quote.
“Should Construction Companies use the I-9 or E-Verify?”
“Eliminate the surprise audit bill and use Pay As You Go Workers Comp to manage cashflow.”
Pay As You Go Workers Compensation
Construction Payroll is prone to spikes in labor which leads to unexpected cost of worker’s comp. Traditional workers comp requires the company to pay large down payments followed by installment payments throughout the year based on estimated wages. At the end of the year an audit is conducted to reconcile the estimated wage versus real wages. Typically this results in a large bill to the Construction Company. Pay as you go workers compensation eliminates the down payment and charges the Construction Company for the premium due on each payroll ran. This increases cash flow and prevents unexpected bills when the policy expires. Pay as you go workers comp is a free service to all Payroll Services’ Clients. Payroll Services is one of the few Payroll Companies in Maryland that can offer Pay as you Go Workers Comp in conjunction with Chesapeake Insurance, Maryland’s State Insurance provider. Contact us to get a free workers compensation quote or get started with pay as you go workers comp.
“Integrate your accounting and payroll from start to finish”
Job Costing and Accounting
Construction Payroll is also different due to the accounting required. Many Construction Companies require Job Costing. Job Costing breaks out payroll wages as well as other overhead charges called “burden”. Burden is the cost of Employer Taxes, Workers Comp and other Company Benefits. The most common method of Job Costing, is to break out the expense by hours worked which correlate to the Employee’s hourly rate. Once payroll is processed our system allocates the appropriate amounts to the Job that the hours correspond to. This is also known as Labor Distribution. Many Construction Companies utilize Quickbooks for their accounting. Payroll Services integrates the job costing transactions with Quickbooks so that the Employer does not have to re-enter information. Additionally, larger Construction Companies utilize other systems such as Jonas,Frontier, Foundation, Great Plains, Timberline and more. Payroll Services can build custom exports which integrates with these programs reducing double entry. Click here to contact a representative to learn how we can integrate with your accounting system.
“Controlling Unemployment Claims reduces cost drastically.”
Controlling Unemployment Claims
One of the largest controllable expenses for a Construction Company in regards to employee burden, is the Company’s Unemployment Insurance rate. Whenever employee separation occurs, employees will file for unemployment. Each Employer has a State Unemployment Insurance rate which is based off of total claims made against the Company. The higher the claims the higher the Unemployment Insurance rate which in turn increases cost for the Company. The goal should be reducing Unemployment Claims in cases where the Employee was terminated for cause. In order to control this cost Construction Companies should institute develop a solid Employee Handbook outlining Company policy as well as the disciplinary process. Once an Employee Handbook is developed, the Company should document all Employee related events. If a termination for cause occurs, the Company can then present a well documented case as to why the Company terminated the Employee which will help in reducing the amount of Unemployment Claims. Contact your Payroll Services HR and Benefits Specialist today to get started on your Employee Handbook with our HR WorkPlace
“Union dues can be confusing to new Construction Companies.”
Union Deductions and Union Benefits
Construction Payroll also faces the challenge of administering Union Deductions and Union Benefits. Deductions and Benefits have a wide variety of calculation methods ranging from per hour calculations to a flat dollar amount. Union Deductions and Benefits also require to be paid almost immediately to the Union Administrator. It is important to have these items implemented correctly with each new employee and have a streamline method to pay these amounts. Payroll Services can set these deductions and benefits up for you with an automated payment method.