April 26, 2016

Why Construction Contractors Are Fed Up with Payroll

Why Construction Contractors Are Fed Up with Payroll

By Kit Dickinson on April 26, 2016

Pencil and ruler in the planning, construction, technical drawing.

If you’re selling a payroll solution to government contract construction companies, you’ve got some frustrated clients—and one terrific opportunity.

Government construction contractors have a unique payroll problem that virtually no other industry has to deal with: prevailing wages. In essence, prevailing wage is a federal requirement for government contractors that’s designed to guarantee that construction workers receive the going rate and benefits for their job type within the geographical area they’re working in. In order to stay compliant and prove their compliance, payroll processes can be enormous tasks.

As a result, these construction companies have strong feelings about managing payroll that time-and-attendance companies need to understand.

Prevailing Wage Frustrations with Government Projects

Here’s what government construction contractors want you to know about their payroll processes.

It Takes a LOT of Time to Manage Payroll

The time required to manage all of the different combinations of projects, jobs, and rates can be enormous. If a company has multiple government contracts, each project has its own job and rate classifications. It can be incredibly time-consuming and error-prone to manage these projects manually. Also, many contracts have a defined Fringe Rate benefit that needs to be factored into the employee pay, which increases the time and effort.

The Department of Labor estimates that it should take less than an hour to compile information for eight employees on a single payroll report. But for contractors that have many more employees who work in several sites of varying wage rates, it’s not unusual to spend as many as 20 hours a week to complete the task.

Wage Decisions Are Complex and Convoluted

Employees are often entitled to the higher of their base rate versus the prevailing wage. This comes into play when a company needs a higher paid skilled laborer to fill in for a shift on a lower graded prevailing wage job.

Every time an employee shifts job roles, the rate of pay changes and the employer must recalculate the correct pay—often using painstaking manual calculation methods.

Payroll Reporting Is Confusing and Frustrating

Government construction contractors must fill out reports that prove their compliance with state and federal regulations. These reports are complicated and difficult to understand, and it’s very easy to fill them out incorrectly.

To make matters worse, every state has its own payroll reporting requirements, and none of them are simple. A contractor that operates in several states needs to be extremely careful to submit the right forms in the right way with full and correct information.

Reports can be rejected if they’re incomplete or provide inadequate information—requiring contractors to go back to square one and redo the report to make the necessary changes.

Every Paycheck Is a Time Bomb

Companies that use multiple software solutions for time-and-attendance and wage calculations could be manually entering the same information into as many as three different systems. The opportunity for human error is extremely high.

But not only is the risk of error high, the penalties for noncompliance are significant. Companies that make calculation or data entry errors can face employee litigation, hefty fines from the government, loss of future government projects, and even imprisonment. A simple fat-finger data entry mistake could put a company’s future on the line.

The Opportunity for Prevailing Wage Clients

Time-and-Attendance companies who understand the frustrations (and fears) of government construction contractors have a tremendous opportunity to win new clients. As you engage with your customers and prospects, be prepared to address this issue that’s unique to the government contractor industry. The company that can provide a robust and automated solution to simplify this enormous process will gain a tremendous advantage over the competition and help win the sale.

Next Steps

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