Caution! Dangerous Roads Ahead for Construction Payroll and HR Administration!
No matter your industry, payroll administration is never a straight and simple path. Yet few businesses face as many curves in the road – or as much red tape – as construction and manufacturing. Stringent Union rules regarding pay rates and fringes, irregular work hours, federal and state laws, as well as immigration issues all conspire to make payroll complicated, challenging and a potential liability.
Fortunately, and perhaps unfortunately, there are as many payroll applications as there are twists and turns in the business process itself. But beware of those curves…because not all apps address the critical requirements of commercial contractors for payroll and human resources administration.
This blog focuses on key features and functionalities that contractors need to succeed.
We’ll kick things off with a review of the fundamentals: Payroll Entry, Data Collection, Processing and Distribution.
Duplicate and inaccurate data are the most common roadblocks of payroll processing. That’s because so many contractors are still stuck in the potholes of paper-based time-sheets and manual processes. These outdated methods to input labor information into payroll systems should be replaced with mobile field time entry collection software, digital forms, digital upload templates and self-service applications…the superhighway system of business processing.
Today’s apps streamline the collection of critical payroll and HR data, and then make accurate and timely information readily available in your payroll system. If your payroll software has any of these capabilities already embedded, congratulations, you’re getting better mileage than most. But even simple apps or digital forms can replace paper documents, and manual data entry and transfer.
To be efficient, effective and profitable, you must get rid of paper and manual processes, but your digital payroll workflow also needs to be able to show you what’s in the rear-view mirror as well as what’s around the corner.
To validate the accuracy of payroll information, your software should have a Payroll Edit Register feature that alerts you to exceptions… if, for example, the hours worked by an individual or crew exceed the allowed amount of hours per pay period. In addition, the software should warn you if the pay rates deviate from minimum or maximum thresholds.
Exceptions, warnings and alerts – and, in some cases, flaming red road flares – should be established as standards and adjusted as necessary. Easy-to-use reporting and data view tools should provide quick insights into possible variations. Without taking your eyes off the road or your critical business operations, your payroll software should prompt you:
- to verify I9 documentation and employee status before processing payroll
- to review invalid pay rates (minimums/maximums)
- if an employee type has been manually overwritten
- if excessive hours have been worked per day or week
- if vacation and/or sick time is greater than accrued
- to verify involuntary deductions such as garnishments, tax levies, union dues, and child support
- to confirm union fringes and employer benefits
- to approve 401K, GTL group-term limit, medical insurance, etc.
To ensure payroll security, different access levels can be granted to enter payroll data for field, salaried and hourly employees. Salaried and fixed hourly employees can be automatically selected for entry into the payroll processing system, driving added productivity for your organization. In most software applications, multiple labor distributions can be entered on a single screen, and the hours worked each day of the week can be entered on the same line or made available with an automated data input process.
Your users will be on cruise control when your software eliminates their entry of overtime hours and automatically calculates the appropriate hours and pay rates based on your company’s or customers’ business rules. The app should also automatically prompt for certain payroll calculations, such as simultaneous transactions for charging equipment time to job cost and general ledger. Labor costs can be distributed directly to a job, a department, equipment repair hours, or can include transactions in the time and material billing process. Direct labor burden can also be calculated and distributed to job cost and general ledger, and optionally, time and material billing.
To blaze the optimal trail, your payroll application must be flexible enough to allow for automation but still be configured to your unique business requirements.
When the data is in, it’s time to write checks, and the distribution should be as smooth a road as the collection process. Your payroll app should provide a simple and seamless process for manual payoff checks, vacation checks, and special (bonus) checks. Payroll taxes and disability insurance deductions should be produced automatically for all state and local taxing authorities. Multiple state and local taxes must easily be deducted on the same payroll check.
Calculations for worker’s compensation and state unemployment insurance premiums need to be in compliance with state regulations, and Federal Unemployment Insurance (FUTA) must also be simultaneously accrued. Retroactive pay calculation for union and special pay requirements must accommodate and calculate gross-to-net pay and deductions.
With data collected and checks cut, the last stop on this road trip is reporting. Your payroll system should provide custom reports that compare, analyze and communicate your labor expenses. Because labor costs are one of the largest expenses in your construction business, you don’t want to get stuck in a traffic jam – you want dynamic reports and easy-to-read dashboards to proactively manage and improve your bottom line.
For more information on to successfully navigate the dangerous roads of construction payroll and HR administration, please contact us.