While announcing a slew of measures to improve the economic outlook of the country, President Biden announced in February of 2022 that all federal projects over $35 million in value need to follow Project Labor Agreements (PLA). But even before this announcement for federal projects, the construction industry witnessed a massive push by the administration to execute PLA in all major infrastructure projects across the country.
In all probability, PLA will become the standard norm for worker support in the construction sector. But what does that mean for contractors or construction companies? How does it impact payroll management in these businesses? What should construction companies do to ensure a disruption-free wage and benefits administration approach with strict adherence to PLA norms?
These are all questions that are increasingly being heard across the managerial boardrooms of almost every construction business. Before going into the details of its impact, it is essential to have a quick grasp of what PLA does in the construction sector.
What Is PLA?
In simple terms, PLA is a framework that governs and fixes wage structures, benefits, and other worker rights for all workers in a specific construction or alteration project. It often mandates that workers be a part of a union before the start of work, and the framework stands valid till the end of the project and is unique to each project. They can be used in both public and private projects even though the mandate is currently on public projects alone.
How Does PLA Impact Payroll Compliance?
Construction companies are known to be traditionally slow in adopting modern payroll solutions and very often rely on manual-intensive MS Excel or similar spreadsheet payroll management approaches. This is highly detrimental to the evolving needs of the industry. With PLA becoming a new norm, the complexity levels in payroll processing have become too extreme to be handled any longer by spreadsheets or basic payroll tools.
Let us explore how PLA adherence will impact payroll dynamics for modern construction businesses.
Inefficient Processing of Payroll
As the economy gets challenging, workers will really appreciate on-time payment settlements as per their contracts. Firm mandates like PLA will result in finance staff having to spend a considerable amount of extra effort to map wage structures to each employee. Moreover, the same project might employ different contractors for different categories of workers, each having a unique PLA. This would mean acquiring and compiling payroll data following different schemes.
Such a situation would necessitate other department heads to collaborate with the finance team in transferring data. A manual or outdated payroll system will result in inefficiencies crawling into every stage of this process and escalating as the number of personnel increases. The end result would be that workers may experience delayed payment settlement, resulting in dissent among them toward contractors.
Accommodating Existing Labor Provisions
PLA is just one among the several legal or work frameworks that are becoming a norm in the construction industry. Federal contractors, for example, must also ensure wage structures are in alignment with local labor laws, as mandated by the Davis Bacon Act. Every jurisdiction might have its own individual labor laws that must be enforced while determining and settling construction labor payments.
It is practically impossible for all stakeholders, from department heads to finance teams, to be aware of unique propositions like the Davis Bacon Act while handling data related to payroll processing. But, as a construction organization, the business must be able to accommodate all existing labor provisions in addition to newer mandates like PLA as applicable over time.
Compliance with labor laws is an additional layer of complexity above the previous point of accommodating relevant local and national labor provisions. Settling payments and administering benefits for workers belonging to different unions and guided by different PLA frameworks will require a high degree of compliance to be exercised by finance teams.
PLA frameworks are like a sovereign arrangement that is protected by law and hence subject to audits and regulatory oversight. Any failure to comply with norms and rules laid down for PLA will invite penalties and subsequent difficulties in the conduct of construction businesses by the contractor.
Therefore, payroll processing needs to be guided by an umbrella system that has all the right compliance checks in place and provides on-time reporting and archiving capabilities to ensure continued compliance.
So, What’s the Way Forward?
New labor mandates like PLA as well as the rising number of local, regional, or national pre-requisites on wage terms like the Davis Bacon Act or Union Wages, have all transpired into a really challenging and intense scenario for construction businesses in terms of payroll management. No longer can they afford to handle the diversity in payroll processes through outdated software or spreadsheet programs.
Today, construction companies need an efficient and scalable payroll system that is compliant with all major legal and regulatory provisions and can automate payroll processes seamlessly. This is exactly where CEM comes into the picture. Our SaaS-based payroll processing platform is trusted by some of the biggest names in the construction industry for managing their end-to-end payroll needs. Book a free demo to see how our payroll solution is the ideal choice for your needs.