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Top Payroll Tips for Construction Businesses

6/3/21 – Allison Steiner

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Construction payroll is complex – job costing, localities, unions and prevailing wage rates all make it stressful for employees and accounting staff alike. The decision between processing payroll in house or utilizing an outside payroll service involves an evaluation of how you can save time and money, better manage payroll tax compliance, produce timely and accurate reports, and integrate systems for timekeeping and accounting.  Here are some best practices to consider:

Identify Your Payroll Needs

Are employees are getting bogged down by paper processes, software bugs or other inefficiencies? When choosing a new solution, you'll want to think about future projects and choose options that will not only meet current demands, but also grow with your business as it expands and evolves.

A user-friendly platform is a high priority for most construction companies, and remote access is a must for both socially distanced on-site workers and work-from-home employees. Certified payroll reporting may be necessary if you perform federal government jobs or take on public works projects. Multiple location processing is needed if you operate in multiple locations with varying tax and labor regulations.

Other construction-specific features that might make your payroll process more efficient include:

  • Multiple pay-rate processing on a single time report to handle wages for employees who work on several jobs with different pay rates,
  • Union reporting, which is similar to certified payroll reports, and is required by many unions, and
  • Job costing to automatically track and attribute labor expenses per project.

Whatever solution you choose, it must integrate well with time-tracking, general accounting and other software for seamless information-sharing. When different systems are able to cross-communicate, you can unify functions such as inventory management, document management, estimating and reporting. So be sure to include your company's department and project managers in payroll decisions.

Evaluating Payroll Service Providers

Your payroll service provider needs to understand your industry and cash flow cycles to deliver exactly what you need. Find what a prospective vendor's current customers are saying by checking social media pages and online review sites. If possible, get in touch with some of these customers to ask about their experiences using the provider's services.

Payroll is time-sensitive, which makes it imperative that your vendor can act swiftly to fix problems when they arise. Find out whether you'll have a dedicated account manager or a pool of support agents. Ask how knowledgeable they are, how you can reach them (phone, chat, email) and what their average response time is.

Also look for options that give you a trial period before you commit. Using the solution in a typical pay period allows you to determine whether it can handle your specific needs and workload. Many providers allow access to certain software features before running your first payroll, which may be a better option than a full-blown test drive — particularly if you're looking at several options or if you operate in a jurisdiction where running payroll during a trial can trigger compliance with a set of regulations.

Before making a buying decision, be sure you understand what the payroll service provider will require in order to use the data from your time tracking or accounting software.  If a significant amount of data scrubbing, converting or double entry is involved, you may want to pursue another vendor.

Get the Support You Need

The provider you choose should offer training and support to help your accounting staffers master the system before they need it to process payroll. Also, before full implementation, inform workers outside of your accounting function about the new payroll system — including what they can expect and how it's likely to improve payroll processes. In particular, notify them about changes related to time-entry procedures and deadlines.

Where to Start

If you're uncertain about the best way for your business to process, consider working with a professional familiar payroll and familiar with the construction industry. He or she can help you assess your current system to identify what's working and what isn't.  Taking a long look at how you are processing payroll is an investment worth making – VonLehman is here to help. Contact Allison Steiner at asteiner@vlcpa.com or 800.887.0437.