An Iowa construction firm owner recently pleaded guilty to a payroll-linked legal challenge. Reports claim that the owner withheld over $1 million in payroll taxes. Unfortunately, there’s nothing unusual about reports like these in the construction industry. The question is, why?
The administrative challenges of managing multiple construction trade unions and contractors for construction projects can get quite overwhelming when done manually or in a piecemeal manner. Calculating and processing multi-tiered pay rates is tedious and time-consuming while also being extremely complex and confusing. Any wrong calculations can lead to several repercussions, including inaccurate or delayed payments, poor morale, and hefty penalties.
The Downsides of Poor Union Payroll Practices
Ask any financial leader of a construction company, and you’ll hear about a litany of challenges they face in the Union Payroll process. With the industry dealing with multiple job sites and a complex mix of roles and rates, processing payroll for construction in a union environment is a herculean task. There are many reasons for this: from contractors working on different jobs on different payrolls, to the unique tax rate, fringes, and compliance requirements of each state — juggling multiple pre-requisites and conditions can impact the accuracy and timeliness of Union Payroll in many ways.
Add to it the complexity involved with different pay periods, rate changes, pay rates, payroll deductions, regulatory compliance, and reporting – Union Payroll processing is a backbreaking exercise and can be extremely demoralizing for managers and contractors alike. Especially when it goes wrong (as it often does).
But it’s not just late or wrongly calculated payments that are a consequence. There are several downsides of poor Union Payroll practices. Let’s look at some of them in detail:
- High attrition: Wrong payrolls due to human error, or incorrect processing can have a profound impact on the overall well-being, morale, and productivity of the Union. When not addressed, over time, this can lead to high attrition rates. And with the construction industry struggling with a widening skills gap, finding (and retaining) skilled union workers can be a never-ending task.
- Poor reputation: Getting paid incorrectly can be extremely frustrating for workers and can result in damaged relationships between construction companies and the various Unions. Companies that are unable to overcome the challenges of poor payroll processes stand the risk of losing respect which can eventually lead to a poor reputation in the market.
- Hefty violations: Did you know? Payroll violations caused due to incomplete or erroneous data and miscalculations can lead to hefty finesand legal action. According to data gathered by the Fair Labor Standards Act on wages, hours, and other employment conditions, Union Payroll violations may be criminally prosecuted, with fines being as high as $10,000 – with subsequent violations even resulting in imprisonment.
- Debarment or termination: Construction companies that become habitual to wrong payroll processing also stand the risk of being debarred from receiving future contracts. While penalties can last for multiple years, they are also extremely vulnerable to downed shutters, with the government terminating their contracts.
How a Modern Solution Can Help Overcome Challenges
Accurately processing Union Payroll requires you to first be well aware of the prevailing rules and requirements. From pay periods to rate changes, deductions to compliance requirements – since any error in payroll processing can lead to high attrition, poor reputation, and the risk of hefty fines, you need to move away from traditional, paper-based processes and bring much-needed automation and flexibility into your payroll ecosystem.
Investing in construction payroll software is a great way to incorporate all of your Union’s requirements. A cloud-enabled platform that is built exclusively for the construction industry can:
- Eliminate manual processing of payroll and bring much-needed accuracy, efficiency, and speed into the realm of Union payroll
- Utilize automatic calculations to account for all of the moving parts, including fringe benefits, mass earnings, compensation, overtime wages, and more
- Offer anytime, anywhere access to real-time data, so you can make the right payroll decisions on the go
- Enable flexibility via custom setups to accommodate different pay rates, deductions, tax codes, payroll types, and other features you may require
- Seamlessly integrate payroll data into different solutions and projects and ensure real-time labor union data is always at your fingertips
- Make the most of built-in compliance controls to enable stress-free, secure, and compliant union payroll processing
- Ensure high levels of payroll data safety and prevent hackers and unauthorized users from reviewing or changing union payroll information
- Generate quick and accurate compliance reports, tax filings, and ACA reports and ensure a robust audit trail
Here’s another story to end on. A federal investigation carried out by the US Department of Labor led to the recovery of $229K in missed payroll and overtime wages for 809 misclassified construction workers in New Orleans. “What began as an investigation of the errant payroll practices of one company led us to recover thousands of dollars across three entities,” said Wage and Hour District Director Troy Mouton in New Orleans.
Violations like these are recurring in the construction and payroll industry, but there’s a lot you can do to ensure you aren’t misclassifying your workers, reporting inaccurate hourly pay rates, or failing to pay Union workers in a timely manner.
You can, for instance, outsource Union Payroll or invest in a robust and intelligent construction payroll platform to avoid the far-reaching consequences of wrong Union payroll processing. Learn more.