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The Many Stings Of A Sub-Optimal Payroll Solution

It is quite common for employers to wax eloquent about perks, benefits, and facilities that are on offer for their employees. While respecting these privileges, the core element that makes employees loyal to any business is their salary. That’s an essential truth. What really encourages loyalty from employees is how well employers are able to honor their payment commitments. A key element of the employee experience is the ability of the employer to create less friction and hurdles in the wage calculation and effort-wage translation processing.

While this might seem to be evident enough for employers, the reality is often different, especially in sectors like construction.

Payroll management in labor-intensive sectors like construction must navigate several hurdles before ensuring that employees are paid on time and work progress is not affected due to wage conflicts. Over the years, some finance and HR teams at construction companies have resorted to leveraging point software solutions to help manage their payroll better. But due to the poor understanding of digital technology in the sector, many construction companies end up investing in sub-optimal payroll solutions.

This is a critical challenge with the potential to create widespread damage and disruption of work.

Let us explore the top 3 hazards of having a sub-optimal payroll solution within a construction firm and the damages it can create:

Manual data entry

Legacy and outdated payroll software often work similarly to a basic spreadsheet program like Microsoft Excel. This results in site managers, payroll administrators, HR, and other stakeholders having to painstakingly invest in manual data entry work for much of their time. This results in two major problems.

The first is the widespread delay that is created in several dependent processes. For example, a supervisor who oversees 20 or more workers in his or her shift may need extra time to enter the work hours and schedule information in a sub-optimal software manually. This delay will affect payroll processing by the payroll or finance team as well as verification and validation of leaves and benefits by the HR team. Only when the other stakeholders get access to data entered by the supervisor, can they initiate their own processing and workflows.

The second danger is the error potential hidden in the data entry. Manual entry of data, especially for a larger work pool, may result in wrong information capture or entry into the system. The consequences of error-prone data will cascade once other departments work on top of the erroneous information.

Chances of fraud and effort forgery

It is estimated that in the US alone, timecard frauds and forged effort logging costs companies nearly USD 400 billion annually. With so many employees in different roles to manage daily, the construction sector is likely to be a big contributor to fraudulent practices in this regard. Workers could collude with supervisors to make wrong timesheet entries or employees could resort to tactics like Buddy Punching, longer breaks, unsupervised extra time, and much more.

While individually, these activities may not look like a big problem, the effect cascades when aggregated across larger groups or at the organization level. Inaccurate data about work effort can create chaos for the payroll team as they also need approvals from the finance team for billable hours. The finance team in turn requires customer approval for the billing, which can prove to be a challenge if an audit discovers mismatched or wrongful effort entries. Such gaps are also major stumbling blocks when it comes to financial reporting or closing project financials.

Compliance hurdles

Government entities and trade unions necessarily keep a close eye on a construction company’s wage processes and practices to ensure that all workers are fairly treated. In the case of projects that draw an element of government funding, either Federal or State, onerous compliance requirements must be met. Implementing multiple tax codes, wage structures, regulatory records, etc. is a Herculean task if it must be done manually or in fragmented “general purpose” payroll solutions.

Sub-optimal payroll solutions do not have the ability to automatically maintain wage templates and handle flexible tax conditions corresponding to geographic or job-role-specific payment or tax terms. They don’t allow for easy implementation of Union Payroll or Certified Payroll complexities. A failure to comply with regulatory and union policies can be extremely stressful for construction organizations. They may face legal action as well as huge penalties. This is in addition to possible worker action and non-compliance to work schedules owing to inefficient payroll.

The construction sector needs to change its outlook toward the adoption of digital tools. We could even make the case that keeping modern digital solutions out of the scope for payroll, HR, and administration could prove hazardous as volumes grow.

Sub-optimal payroll solutions will drastically reduce operational efficiency and create more problems than they solve. The need of the hour is a highly integrated construction project management solution that can seamlessly connect multiple departments and facilitate smooth information exchange. This will ultimately help in delivering a streamlined payroll management experience resulting in a significant reduction of manual work, elimination of fraud, and achieving multi-level compliance for tax and work policies. Get in touch with us and book a demo today to explore why CEM’s payroll and HR software can be a lifesaver for construction companies and help them solve the challenges of today.