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Why Payroll Management Is So Complex In Construction And EPC Projects?

Construction is one of the most important job creators in nearly every country. As the size of the project grows, so do the associated requirements and complexities. In every function, more needs to be done. Ultimately, this means hiring a large number of people with a wide range of skills and experience.

While the complexities of large projects present challenges for decision-makers and managers on one hand, another area that becomes a sore point, particularly in large projects, is payroll management.

Payroll is one of the most important, but underappreciated, aspects of any industry because it deals with processes and policies for the most important asset for employee satisfaction- their salaries or wages.

Employees are not interested in learning about internal processes, reports, or approvals. They anticipate being paid on agreed-upon schedules, which could be daily, weekly, biweekly or monthly. However, for employers, payroll is a time-consuming process that necessitates information from stakeholders across departments, such as attendance and daily logs from project teams, leave details from HR, work performance reports from managers, KPI achievement and target reports from Sales, budgetary approvals from Finance, and much more.

Payroll management is a Herculean task for any industry.  As a result, when it comes to construction and EPC projects, the complexities simply ascend to a new level. Let us take a gander at the additional industry-specific challenges to payroll management for those who are unaware of them.

Manual data management

Payroll in the construction industry has become increasingly complex due to a lack of adoption of technology for project management. Data pertaining to each project, employee schedules, work progress, and so on are quite often manually documented in pen and paper.. Such manual data management processes affect the agility of the payroll team. They would have to further engage in data entry work and consume a good amount of productive time in dealing with low-value data acquisition and filtering jobs.

Location diversity

Construction projects are often spread across locations. A construction business may operate in multiple states or federal jurisdictions. Each state would have its own mandatory wage structures as well as prevailing wage rates for employees in different trades and job roles.  Furthermore, when projects are spread across multiple states, payment periods and working hour calculations may have internal variations. While centralizing payroll management, the geographical diversity of projects frequently creates challenges. Manually maintaining payroll processes will result in additional overhead, and therefore a high risk of errors and delays.

Contract Labor

The construction and EPC sectors frequently have a high proportion of contract, seasonal or temporary employees who are not on a fixed payroll. The location diversity of projects we mentioned earlier also makes it necessary to maintain a large contractual workforce. Project teams typically source labor from local vendors and must hire a diverse range of  workers with varying pay grades and wage codes. Some may have to be paid directly while others may have to be paid through the vendor who supplies the laborers. Besides, there will be variations in payment contracts. Some laborers may have to be paid per hour while some may have to be paid per day of work and each of these models will have direct and vendor payment categories. To summarize, the high level of contractual labor prevalent in the construction sector presents a significant challenge for payroll management.

Reporting, Compliance, and Insights

We have already seen the diversity in location and type of labor. Each of those challenges creates further roadblocks for payroll when it comes to arriving at payroll calculations and compliance. Reports from different departments or projects must come to the payroll team to start their calculations. There is a need to maintain standard payroll compliance reports which government regulators audit periodically to ensure that fair pay grades are maintained. Similarly, different rules may apply to union members, needing a particular union payroll format. In projects that receive government aid or funding, the payroll may need to be presented in a very specific form to meet certified payroll requirements. Besides, there would be specific requirements on splitting paychecks into direct cash components as well as other mandatory benefits like insurance premiums, welfare funds, etc. A construction business having projects executed in multiple states and countries will see these reporting challenges scale astronomically.

From the challenges we have covered, it’s clear that complexity abides in payroll. But complexity shouldn’t be a roadblock. The underlying factor behind all challenges is the load of manual work!

The construction sector badly needs automation and digital construction project management solutions that drive efficiency and assure compliance. Such solutions will aid streamline all facets of operations, especially payroll management. By implementing a digitized project management solution, various departments will be able to automatically collect time and all the needed data from their employees . The data would be centrally accessible to the payroll team who can then leverage the payroll management capabilities of digital construction management software to help eliminate any complexities.

Bringing construction and EPC projects under the scrutiny of modern digital management tools is critical for transforming payroll into a more modern and employee-friendly experience. This is where our suite of construction-specific digital solutions can help. Talk to us to book a demo and experience the true power of automated construction project management and payroll administration.