Calculating payrolls is crucial for several reasons. First, it shows you how much money you’re spending to maintain the workforce. The process is essential for learning more about benefits spending, due taxes, and compliance.
Unlike some other industries, calculating payrolls in construction is much harder. This is because a large part of the workforce receives hourly wages, and it’s hard to monitor their presence on the site. As if that wasn’t enough, we also need to assess their performance, especially if we’re giving out bonuses.
We’ve dedicated a whole article to explaining the topic so you have a better understanding of how to calculate payrolls and bonuses. Hopefully, this will help you in analyzing your expenses and optimizing them over time.
Construction Payroll Basics
In construction, we calculate workforce payroll by summing the total number of employees and multiplying that figure by the average salary. Unfortunately, in practice, the process is much more complex as most workers have different contracts and hourly wages, which you calculate based on the total hours worked.
What makes the calculation even harder is the large number of associated payments. For example, you’re not only spending money on wages; you also need to calculate bonuses for each person, overtime, PTO, and a few other factors. On top of that, once you sum up these figures, you need to deduce them by benefits, taxes, and social security expenses.
When you’re finished with all the calculations, you’ll get net wages. This term is otherwise referred to as “take-home pay” or the amount a person will get when everything’s said and done. Of course, if you wish to grow as a company, you want to minimize all these added payments (such as taxes) to ensure your workforce gets as much money as possible.
Challenges of Determining Construction Payrolls
The construction business is very complex on several levels. Among other things, many companies struggle to calculate their payrolls, as they need to consider common time-tracking challenges, monitor several locations, and take into account unions.
Location Challenges
Most companies run several concurrent projects. In other words, they have to monitor several locations at the same time, including each worker at the site. To make matters worse, these projects might vary in terms of employee contacts, conditions, and daily activities.
The problem is multiplied if some of the employees are hoping to go from one site to another and receive different paychecks for each project. You also need to calculate how much time they spend traveling, as some companies don’t consider these billable hours.
If the person travels between states or counties, this means you’ll also have to consider different laws, tax requirements, and the filling process.
Union Requirements
Union requirements are another factor that adds to the complexity of payroll calculations. For example, many unions prescribe the minimum amount of money their members should take on benefits, annuity funds, pensions, and other perks.
According to the applicable laws, the employer needs to adhere to these prerequisites as long as a person is backed by a collective-bargaining agreement. The only saving grace is that these contracts might vary in terms of stipulations, so construction companies have some wiggle room when signing them.
Time Tracking Issues
Most employees get wages based on their participation in the field. Unfortunately, many of them take advantage of this rule through the “buddy-buddy system.” In other words, they use various tactics to misrepresent their effective work time, getting more money than they deserve.
To put a stop to this practice, modern construction businesses have introduced time tracking for construction. With advanced devices, companies can now monitor employees’ presence on the field, ensuring that they’re not overpaid.
Certified Payrolls
In well-regulated countries such as the US, employers can’t mess around with payrolls. Each week, a company is required to submit a report to a specific public agency showing that it has paid its staff the right amount of money. With this law, the government ensures there isn’t any manipulation in the hands of construction businesses.
When handing over a report, a company needs to include basic employee data, fringe benefits, wages for each individual, taxes, deductions, work performed, and hours worked. It’s worth noting that each state has its unique forms, which further complicates things for businesses that have projects in different areas.
Calculating Construction Payrolls
There are numerous things construction managers have to consider when calculating payroll:
- The most important thing is finding a way to track effective time in the field. Staying away from traditional paper tracking is usually the best course of action.
- You have to take into account collective-bargaining agreements and the minimal benefits you have to provide to your staff.
- The use of accounting and HR software is also great, as it streamlines your calculations and allows you to save data on the cloud.
- Businesses have to take into account payday requirements, which depend on whether you’re paying your staff on a weekly, monthly, or semi-monthly basis.
- Consider the form of payment you’re using.
- Lastly, you need to take into account all the forms and administrative processes that come into play.
The Importance of Digital Tracking
As mentioned, digital time tracking is vital for modern businesses. Not only does it allow you to monitor your staff in the field, but it also shows you how much time they’ve invested in the project. With digital time tracking, you avoid common tricks employees use while also ensuring that the staff is as effective as possible.
Even if your staff isn’t trying to trick the system, you still need to use wearable technology. Sometimes, people make inadvertent mistakes or simply forget when they started working. The entire process relies on GPS technology, which makes clocking in and clocking out a breeze.
Last Thoughts
The topic of payroll calculations in construction is a complex one. When we take into account all the laws, individual contracts, hourly wages, and taxes, we’re left with an unmitigated mess that only software can correct. Luckily, we have just the right programs that will allow us to simplify the process.
