Construction Payroll Issues and How to Overcome Them

Business accounting and payroll are complex and stressful, and doing so for a construction company is no exception. With the constant regulatory changes and updates, coupled with the ever-changing landscape that exists in the construction industry, it’s important to stay vigilant and proactive in how contractors account for their business and pay their people. Learn more below on some common construction payroll challenges and how to overcome them.

Common Construction Payroll Issues

1. Harmful Scams and Ransomware
   Phishing and wire fraud scams are becoming more and more common and can be incredibly sophisticated. Scams that can target you and your employees include W-2 phishing scams, wire fraud scams targeting direct deposit information, fraudulent requests for direct deposit changes and viruses. Be sure to review your company policies with your employees and provide training so they follow best practices to prevent fraud.
   
   When it comes to banking information, it’s important to verbally verify any request for change, rather than solely rely on an email as authorization to make a change. To help combat ransomware, it’s important to have a backup plan, check the frequency of your backups and verify their location, making sure these backups are happening off-site in multiple locations to increase the security of your data.
2. Multi-city and Multi-state Payroll
   If you work on jobs in multiple states, you must understand and comply with state, and local where applicable, income tax rules. If you do not stay compliant there are sizeable penalties for not properly withholding or not filing your W-2s incorrectly. To overcome any difficulties with this situation and avoid losing profitability on a job, be proactive and have constant communication with your payroll and bidding teams to be aware of these requirements.
3. Child Support Withholdings
   Child support withholdings are a huge issue in general for construction payroll since many clients have withholding requirements. However accurate withholding can become tricky, especially with hourly employees. Pay attention to Income Withholding for Support forms (IWOs) and state requirements and ensure you’re using accounting software that allows for the use of formulas, if needed, to properly withhold.
4. Evolving Legislation
   Tax and payroll legislation is constantly being updated on both state, local and federal levels. Identifying future impacts to your business can prevent a reactive approach to paying taxes. Surround yourself with experts in their domains, such as CPAs who specialize in construction, and engage them often.
   
   Try to remain flexible and understand things can change quickly. Focus on what can be done, but don’t get lost in what can’t. While it’s critical to stay up-to-date and proactive in keeping your business current on legislation, there are resources available to you to help you get back on your feet if you fall behind.
5. Prevailing Wage
   Prevailing wage laws require employers to ensure that their employees are paid no less than the prevailing wage rate—the hourly rate paid to similarly employed workers in a certain location. The issue for construction companies is that the prevailing wage for each job and employee is unlikely to be uniform across the board because each job could have its own set of unique rules and there are many workers from different localities working on each job.
   
   To overcome these issues, employers must match employees to the proper job codes and wage rates to create an accurate, certified payroll. Failure to do this could result in incorrect wages being paid and the wrong information being submitted to the government.
6. Union Payroll
   Union payroll varies between different unions and their localities and comes with different pay rates, fringes, and compliance requirements. To overcome union payroll complexities, you will need flexible construction-specific software that can easily set up multiple user-defined deductions and fringes to take all of the different variables into account. This will save you from the stress of calculating payments for multiple unions and locals.

Overcoming Construction Payroll and Compliance Challenges

Whether construction payroll is done in-house, outsourced to an external payroll service, or through a professional employment organization (PEO), the best way to help overcome payroll and compliance challenges is to use software designed for construction, like Deltek ComputerEase. Construction software will take away the burden of double-entry data and tracking tax filing deadlines while automating manual processes and managing your cash flow.