6 Construction Payroll Best Practices

Payroll is the total amount of wages and salaries paid to employees by a company and it impacts every industry and employer. However, there are extra layers of complexity to consider when it comes to construction payroll, such as managing multiple worker classifications and cash flow while juggling multiple projects at once. With decades of experience in the construction industry, we have identified six construction payroll best practices to help you stay compliant and pay your employees on time.

1. File reports accurately and on time: If you do not file payroll reports accurately and on time, you will fall behind and the amount of work you missed along with the work you need to do to stay up to date may seem insurmountable. Certain construction-specific software, like Deltek ComputerEase, will help streamline this process, making it easier to file and prevent massive fines.
2. Make sure employees are classified correctly: It’s important to keep a close eye on worker classifications and ensure they are being done correctly. Many construction crews are made up of employees that could have one or more worker classifications on the same day and on the same job. For example, an employee could spend two hours driving a truck and six hours on general labor tasks, where the pay rate for the two tasks differ. Another example is if there are two apprentices on a job and no journeyman, one of the apprentices needs to then become a journeyman and be paid at that rate.
3. Calculate the fringe credits for each employee: If you are on a job that requires prevailing wage, it’s important to calculate the fringe credits because if you are providing fringe benefits, you do not have to pay the entire fringe package—you can take credit for that. For example, on a prevailing wage job, the base rate for a journeyman electrician is $30 plus an $8 fringe package. You as an employer provide $5 worth of fringe benefits for the employee. You are allowed to take credit for the $5 against the $8 and only provide them an additional $3 in fringes, saving you $5 per hour.
4. Keep all reports and make sure they match: With construction-specific software you can reproduce reports on demand. While there are federal and state laws that require businesses to keep payroll records for multiple years, these reports allow you to track expenses and provide documentation in case an employee claims incorrect or unfair payment. Like most financial reports, keeping payroll reports and making sure they match is beneficial if you are going through an audit and need to provide documentation to the IRS.
5. Pay weekly on federal (and some state) jobs: In 1931 the Davis-Bacon Act was created, noting that any construction worker working on a project covered by this act must be paid weekly. Many states also have their own prevailing wage laws that require weekly payroll on state government projects. It is important to stay compliant with these laws, otherwise, you could be subject to civil and criminal penalties such as fines and debarment from future federal contracts.
6. Have employees sign off on all deductions: Beyond the mandatory deductions taken from an employee’s paycheck, like state and federal income taxes, employers can deduct money from an employee’s paycheck under certain conditions. The conditions can include but are not limited to, cash advances, personal loans, or child support. Having signed agreements from your employees acknowledging these deductions creates a paper trail.

Deltek ComputerEase Payroll Services has been supporting the construction industry for more than 35 years, helping customers seamlessly pay their construction payroll on time. We can help you streamline and deliver taxes, employee payments, direct deposits, and year-end documents as well as consult on prevailing wage and certified payroll. Our industry-leading solutions help you maintain compliance with union requirements, worker’s compensation, and certified payroll laws—giving you time to focus on what matters most: your workforce.