Industry News Payroll and Compliance

The Growing Compliance Challenge in Construction Site Payroll

Construction Payroll software

For construction companies, payroll and time tracking is becoming increasingly complicated, especially regarding union and government compliance. Complying with standards being laid out by the Fair Labor Standards Act (FLSA) or the Davis-Bacon act is not easy, especially with many companies still struggling to calculate the right wages and overtime rates for workers.

Read on as we  review the growing compliance challenges in construction site payroll and how advanced construction payroll software can help.

Taking a Look at the Top Compliance Challenges

Infrastructure spending is reaching an all-time high, allowing a multitude of big construction projects to be carried out worldwide. But these large-scale projects are making it difficult for companies to find, recruit, and retain competent people for successful business operations.

At the same time, with payroll-related compliance requirements getting extremely stringent, it is leading to the violation of workers’ rights to be paid their full wages and benefits. Therefore, if construction and EPC companies want to keep their projects running, they must review their pay practices or risk losing the workers they  depend on.

As the Department of Labor extends the scope and relevance of the Davis Bacon Act, construction and EPC firms need to improve the efficiency with which they record and report wages. The growing challenges of managing hundreds of trade unions efficiently and administering prevailing wages for thousands of workers are only causing payroll complexities to worsen within the construction industry.

To that end, let’s look at the top compliance-related challenges in construction site payroll:

1. Incorrect Rates for Union Labor

Construction companies and associated contractors and subcontractors are legally obligated to accurately identify their electricians, plumbers, carpenters, operating engineers, and teamsters and pay them as per local prevailing wages and fringe benefits.

Yet, the problem of incorrect rates is rampant in the construction and EPC industry. The US Department of Labor recently investigated and recovered over $799k in back wages from a contractor that paid its workforce incorrect wages and fringe benefits.

2. Complying with FLSA Standards

The FLSA constantly establishes the list of compliances that construction and EPC companies have to adhere to: from minimum wage to the maximum number of hours, overtime pay, child labor standards, and record keeping.

But keeping up with these updates isn’t easy for construction and EPC companies, especially in the absence of automated time-tracking. This leads to improper wages paid – along with high non-compliance charges.

Recently, a landscaping company violated the FLSA act and failed to record working hours, denying 57 workers $88k in overtime wages.

3. Calculating Shift Differential Pay

As construction companies work beyond the traditional  single-shift model, workers need to be paid based on the shift they worked on. However, most companies pay all their workers’ standard pay, with little or no information on how the pay rate changes based on the shift they worked on and has to be reported.

Although FLSA doesn’t mandate shift differential pay, it can certainly help companies retain their workers and ensure they are compensated for their efforts working in an otherwise less desirable shift.

4. Compliance Specific to the Davis-Bacon Act

For construction and EPC companies, complying with standards laid out by the Davis-Bacon Act is critical – especially for contractors and subcontractors performing on federally funded or assisted construction contracts over $2k.

But many organizations fail to pay workers according to locally prevailing wages because they are unable to determine these rates. In the absence of a centralized platform, companies also find it challenging to update wage information, monitor contracts, report violations, and avoid contracts from being awarded to ineligible contractors.

5. The WH-347 Report

Many construction contractors must submit certified weekly payrolls for contracts subject to the Davis-Bacon and related Acts. But this process can be cumbersome, especially if done manually.

Manually entering work details of each worker, including their pay rate, dates and hours worked, and the appropriate taxes that should be deducted is not only time-consuming but also highly prone to error. This further impacts the accuracy of the wage rate calculation.

6. Timecards, Payroll, and Billing Woes

As construction companies grow and become more complex, the need for better and optimal solutions becomes apparent. But the over-reliance on paper timecards greatly add to payroll and billing woes. Not only do they fail to scale with the enterprise, but they also limit growth.

And because such timecards do not integrate seamlessly with payroll and billing solutions, they impact the efficiency with which companies can send invoices, track payments, fulfill contractual obligations, and accurately maintain books and records.

How an Advanced Construction Payroll Software Helps

Denying workers their full wages is not only unethical, but also causes construction and EPC companies to violate federal labor laws while gaining an unfair competitive advantage over those who abide by the law.

With many companies now struggling to fill critical construction positions and seamlessly operate their businesses, paying the exact salary to workers based on the number of hours worked, including differential pay and overtime charges, is critical.  

Furthermore, with new mandates and standards constantly being launched by acts like FLSA and Davis-Bacon, construction companies need to move away from manual and paper-based processes and embrace a modern and flexible construction site payroll solution that paves the way for easy payroll management.

An advanced construction payroll software can simplify union payroll and certified payroll reporting for construction and EPC companies, modernizing timecard reporting for the onsite and remote crew.

By eliminating paper and spreadsheet-based reporting, modern software helps streamline timecard management while also managing prevailing wage and Davis Bacon data with automatic calculations.

Using advanced construction payroll software, construction companies can

  • Capture timecards and timesheets in an automated manner and enable real-time data to flow automatically between payroll and billing systems
  • Leverage an automated and easy-to-use digital payroll solution and bid adieu to complex construction payroll processing
  • Unify data across workers and sites and enhance productivity and efficiency with smart data insights
  • Cut time-consuming, repetitive, and tedious manual work while ensuring business compliance via powerful calculation engines.
  • Altogether take the pain out of payroll processing.

The Bottom Line

At CEM, we understand how complex payroll processing is for construction companies. Our fully-integrated advanced payroll software is an automated and easy-to-use digital payroll solution that helps streamline payroll processing and cut time-consuming, repetitive, and tedious manual work.

Contact us today and allow us to enhance your construction site payroll processing game, so you can provide fair wages to your employees while ensuring compliance with all the latest compliance requirements.