April 19, 2016

Legal Risks Government Construction Contractors Take with Payroll

Legal Risks Government Construction Contractors Take with Payroll

By Kit Dickinson on April 19, 2016

How to Solve the Payroll Risks of Government Construction Contractors

Messer Construction is a regional general contractor and commercial construction manager that provides leadership for complex building projects in Ohio, Indiana, Tennessee and Kentucky. Messer’s staff includes a wide range of labor types, such as foreman, laborer, paver and others.

As a government construction contractor, Messer was constantly tied to three requirements that dragged down its productivity and put the business in legal and financial risk.

3 Risky Payroll Problems of Government Construction Contracts

Prevailing Wages / Fringe Rates

The Davis-Bacon Act states that for government contracts, trade workers must be paid the prevailing wage in the geographic area where they’re working. For example, an electrician on a project in Cincinnati makes a different rate than an electrician on the same type of project in Cleveland. Often a government contract will also mandate an hourly fringe benefits rate for the job. It’s a frustrating challenge for construction companies with projects in multiple states and with multiple labor types.

Messer operates in several states, so to stay in compliance they painstakingly managed multiple pay rates by manual and spreadsheet methods. It would often take several days just to complete one batch of payroll. Manually determining pay rates is onerous and ripe for error—possibly exposing yourself to wage and hour violations, and heavy government fines.

Accurate Time Collection

It can be difficult for construction companies to track time in the field at a job site. Time is often written on paper, and job rates and other rules have to be entered manually. It’s a labor-intensive process, especially when you’re calculating prevailing wages and fringe rates. Many construction companies still rely on spreadsheets or manual time cards, which are unreliable, onerous and time-consuming.

Government Reporting (Certified Payroll Reports)

After completing payroll on government jobs, construction companies have to submit certified payroll reports to the government to show that they paid their employees properly.

Many construction companies print the report templates directly from the Department of Labor website and complete them manually—which is time consuming, error prone, and difficult to justify if you’re audited.

Meeting Construction Payroll Requirements without the Risk

IDI and our payroll partner consulted with Messer to see how we could eliminate these risks and frustrations. We installed our Time Bank solution to integrate Messer’s Viewpoint ERP application with the time-and-attendance and payroll systems. Time Bank automates their complex pay policies while eliminating manual calculations.

Here’s how Messer’s Time Bank installation eliminated their payroll problems:

Automatic Prevailing Wage Calculations

Time Bank associates employee hours by job and location to the correct prevailing wage rate and contract-mandated fringe benefits. The application compares the prevailing wage rate against each employee’s base rate and pays the higher of the two. It also provides a user-maintainable table for Messer administrative users to update when new projects are added or government rates change.

Easy Tax and Deduction Logic

With projects across different states and jurisdictions, Time Bank applies the appropriate tax codes and client-specific deductions based on where an employee worked and which jobs were performed.

Salaried Employee Calculations

Since Messer had a population of salaried employees that charge time to projects, Time Bank allocates exempt employee earnings to different projects, based on the percentage of time worked on each project. The system also calculates a vehicle allowance for salaried employees.

Automatic Custom Reports

We customized the solution to generate client-required reports for their Job/Phase, Prevailing Wage, Certified Payroll and other Messer-specific reporting needs.

“Our Time Bank solution reliably calculates prevailing wages,” said Valerie Siebel, Messer’s Corporate Systems Manager. “This solution literally saves days of manual reconciliation calculations and data entry during payroll processing, enabling Messer to focus on strategic business tasks.”

With Time Bank, our partner helped transform Messer’s payroll from a frustrating exercise that constantly risked an audit to an easy, robust system they could count on.

Next Steps

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