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January 22, 2019

4 Details Contractors Can't Afford to Forget When Outsourcing Payroll

4 Details Contractors Can't Afford to Forget When Outsourcing Payroll

By Kit Dickinson on January 22, 2019

contractors outsourcing payroll

December is the time of year when a lot of construction companies are doing their audits, meeting with accountants and seeing what systems are out there. They've completed most of their projects and now they're looking at what they want to do in the next year. If you're looking to outsource your payroll in 2019, here are some things you'll want to look at.

When purchasing a payroll system, you need to make sure the basics are covered—correct pay stubs, tax compliance, deductions, reporting, etc. But several details can easily get overlooked during the early stages of the purchasing process. If you forget to consider them while selecting a new Human Capital Management (HCM) system, you could end up regretting the solution you opt for.

Here are some of the most commonly overlooked items in a payroll system.

Automating Company Pay Policies

Many construction companies have job rates, union pay rules, prevailing wage calculations or other business rules that are unique to their company. In the past, payroll systems were limited to basic rules for calculating different pay or wage rates. That meant creating clunky workarounds, which usually involved manual data entry and flipping between software applications.

Today, many HCM companies are more sophisticated, and they can handle more complex calculations that contractors rely on. However, before you purchase a new system, share your methods for these pay policies with your HCM rep. Confirm that the vendor can accommodate them, or find out how close they can get or have partners that can complement their solution.

See how we help construction companies get more from their HCM systems – download the Time Bank Overview.

Integration with Other Systems

Make sure your employee-related systems can talk with a payroll system. Take inventory of your different existing systems that share data with payroll to make sure the vendor can pick up the load. For example:

  • Exporting payroll data to your ERP for Job Costing from your ERP and General Ledger
  • Importing financial data (loans, deferrals, stock options) from your 401(k) system
  • Exporting employee new hire and Masterfile changes to other systems

Nitty-Gritty FLSA Rules

The Fair Labor Standards Act (FLSA) can be confusing for companies in any industry. For contractors, it's especially complicated. Not only does it govern your hourly employees, it impacts fringe benefits, prevailing wages, union regulations and various job rates.

Be sure the HCM rep understands all of your different employee types (hourly, salary non-exempt, etc.), pay rules and pay frequencies (weekly, biweekly). This will ensure that your new payroll system keeps you in compliance with the ever-changing FLSA regulations.

Managing Payroll Reports

If you work government projects, you need to submit certified payroll reports each pay period. These reports prove that you paid out the right rates for the work each employee performed. Certified payroll reporting usually means printing a confusing report template directly from the Department of Labor website and manually filling it out. It’s time consuming, ripe for error, and difficult to justify if you’re audited.

Ask your HCM sales rep if they can help generate reports for your Job/Phase, Prevailing Wage, and other company-specific reporting needs.

Talk with your HCM rep about each of these items, and you'll get a better payroll system that fits your needs as a construction company. If your vendor has difficulty meeting any of these needs, ask them to talk with IDI—we integrate with HCM systems to provide the functionality that they can't do on their own.

Check out this video to find out more about how Contractor Central helps you solve payroll problems for your construction customers.