For many types of businesses, outsourcing payroll is considered a “no brainer”. The benefits from eliminating the recurring, time consuming activities related to payroll processing are typically well worth the cost, to say nothing of the burden of tax reporting responsibilities.
Payroll for construction companies on the other hand is very different from other typical business payroll. Processing construction payroll typically includes such challenges as:
- Employees working in different locations and/or tax jurisdictions
- Shifting pay rates depending on the type of work and/or number of hours worked
- Special external reporting for unions, workers’ compensation, certified payroll, etc.
- Internal reporting requirements such as job costing
Even collecting time cards is more difficult for a contractor than other typical businesses.
If you are a contractor, it may still make sense for you to outsource your payroll processing, as long as you can find the right service partner. Many traditional payroll service companies do not provide many of the reports that construction companies need to run their business and comply with various reporting requirements. When evaluating a service or solution, make sure they can provide the following reports:
Job cost reporting –If your payroll solution cannot break payroll data down by job, you will spend a lot of time manually entering labor hours into spreadsheets in order to calculate each job’s labor component. Look for a solution that will track labor hours, dollars and burden (FICA, FUTA, SUTA, workers' compensation, etc.) by job. A comprehensive service or software package will offer more sophisticated reports, such as tracking by cost code, estimate vs. actual, percent complete, production, unit pricing, projected costs to complete and more.
Compliance Reporting – Including new hire, EEO minority compliance, and workers' compensation reporting. Trying to manually track employees who routinely change jobs and workers' compensation classifications, for example, can be a time-consuming job. Make sure to select a payroll solution track changes automatically and create accurate reports.
Union reporting -Unions require detailed reporting for their members. If you work with multiple unions, your reporting requirements can quickly become overwhelming. A good construction-specific payroll service or software solution should be able to handle all of these complex requirements.
Certified payroll reports – If you work on federally-funded prevailing wage jobs (and similar state jobs), you will need to be able to create certified payroll reports. Certified payroll reports can be complex and time consuming to prepare without the help of an automated system. A construction-specific payroll service should be able to produce these reports in accordance with the rules of the U.S. Department of Labor's form WH-347, as well as specialized forms for individual states and municipalities.
You may not need all of these reports and there may be other types of reports that are essential to your business. Use this list as a starting point and modify it to meet your needs before you begin searching for a solution.