Managing payroll in a construction organization demands meticulous record-keeping, unquestionable accuracy, and speed. This labor-intensive industry is known for good work by good hands. However, pen-and-paper payroll management can lead to inaccuracies and errors that hurt profits, complicate filing taxes, and create inefficiencies throughout the organization.  

According to a study by Ernst & Young, each manually entered HR task (like payroll entry) costs US businesses an average of almost $5. 

However, empowering your organization with the right tools, and a wealth of knowledge, can drastically improve and optimize every step of the payroll process.  

With the height of technology at your fingertips and a skilled workforce ready to prove themselves, there’s no better time to develop a payroll management system that improves efficiency, productivity, and profit.  

The Hidden Cost of Disorganized Payroll Management 

While there are countless things that leaders in a construction company must manage, optimizing payroll needs to be high on the list. Many small businesses still handle their finances manually with pen and paper, but there are ways to improve productivity and profitability.  

1 - Better systems save money. 

One of the biggest problems with inefficient payroll is the cost. Manual payroll management is time-consuming and meticulous—each hour a payroll specialist spends entering payroll with outdated processes is money that could be better invested elsewhere. For example, companies who use software like hh2 have saved close to 70% more time because the need to collect, code, and chase down paper time sheets is eliminated thanks to automation.  

Additionally, some research conducted by hh2 used an ROI calculator. The results showed that just one admin reviewing time sheets for 25 employees spent an average of 4 hours per week entering time sheets manually– and an additional 4 hours per week correcting payroll errors.  

Here’s the hard math: The average payroll admin makes about $25 an hour.  When you multiply 8 hours of this manual data entry by the 52 weeks in a year… manual payroll entry ends up costing a staggering $10,400 annually for a team of only 25 employees. Imagine how much higher that dollar sign climbs as a construction company expands. 

2 - Automation improves record accuracy. 

The adage: “If it ain’t broke, don’t fix it” is usually right. However, payroll impacts every person (at every level) in a construction company, and it’s one of the first places where mistakes can happen that cause a ripple effect of issues.  

According to a GNSA report, manual payroll entry accounts for 35% of payroll errors. Construction payroll software can eliminate payroll errors by automating every step of the payroll process, from recording punch clock entries to issuing paychecks and helping monitor and deter “buddy punching” (when employees clock in and out for absent employees) and time tracking fraud. 

On an annual basis, “buddy punching” costs US businesses hundreds of millions of dollars in payroll expenses. Investing in reliable accounting systems can help construction businesses encourage employee compliance. 

3 - It can lower payroll collection time by up to 70%. 

The right construction payroll management software makes payroll collection and execution much faster because it automatically collects employee time, makes tracking more accurate, and simplifies payroll approval. 

This short video talks more about how construction-specific payroll software speeds up the process.  

Watch: Process Payroll More Efficiently and More Effectively with hh2 Remote Payroll 

4 - It ensures stronger compliance. 

Compliance and the construction industry go far beyond employee safety and property protection. Prioritizing professional training and investing in payroll management software is the best way to help ensure compliance, accuracy, and the most efficient process from time-tracking to payday.  

5 - Less time spent doing payroll. 

Automating payroll management saves money in many ways, and that includes labor. When companies eliminate manual payroll processes, it dramatically increases the time HR and Payroll departments have to accomplish other high-priority tasks. 

5 Ways To Improve Payroll Management 

Developing the most effective and efficient payroll management system encompasses many moving parts unique to the construction industry. The following outlines the most important priorities to consider when dealing with payroll. 

Make sure to stay up-to-date on payroll regulations. 

Compliance is a top priority for all construction companies. Payroll specialists and company leaders need excellent, ongoing training to manage the many legal regulations and compliance guidelines around payroll. 

Use tech that integrates with Enterprise Resource Planning (ERP). 

Construction involves hands-on, demanding work. Staff at all levels are often in the field, grappling with the elements, and technology can be limited to cell phones, tablets, and power tools. However, the back-end operations have significantly improved with recent advancements in industry technology, offering the convenience of integrating with long-standing ERPs. 

Audit processes frequently. 

Even after integrating payroll management software, organizations should regularly assess processes throughout the year. Workflows, technology, and staffing needs change as businesses grow. Regularly auditing payroll can improve current systems and ensure records and processes are up-to-date and compliant.  

Here’s an article by TechnogyAdvice.com that offers a helpful checklist of what to look into during a payroll audit. 

Provide training and professional development.  

There are many nuances to payroll in the construction industry, and specialized training and annual skill-building help employees stay ahead of software updates that impact their workflows and compliance and regulation changes.  

Eliminate Human Error 

The modern workforce often wears multiple hats and multi-tasks, contributing to high stress and human error. Streamlining the payroll process by integrating powerful software automates tedious manual data entry and can reduce payroll errors by 75%, according to a report by The Hackett Group. 

5 Things You Should Never Do With Payroll  

There are a few pitfalls that construction companies (and businesses as a whole) should avoid when it comes to payroll. From mindset shifts to cybersecurity, here are 5 things to avoid for successful payroll management 

1 - Paying late. 

Good business relies on trust, inside and outside of an organization. Paying your employees late builds resentment and impacts morale. Ensuring payroll is always on time must be non-negotiable.  

2 - Leaving time tracking to old-fashioned time cards. 

Ensuring accurate records and payments is crucial to a smooth payroll process, and manually entering time cards consumes countless hours of the payroll department’s time, leading to unnecessary errors that frustrate employees and the organization as a whole. 

3 - Forgetting to report all forms of taxable employee compensation. 

Construction companies can have trouble at tax time if they’ve misclassified employees because required forms are missing or incorrect. Beyond hourly and overtime rates, an accurate payroll management system helps keep track of taxable compensation forms so filing taxes doesn’t incur unnecessary penalties. 

4 - Slacking on security protocols. 

There are few things more personal and sensitive than payroll information. According to Cybersecurity statistics, a cyber attack happens every 39 seconds on average. Predicted to cost $8 trillion by 2023, cybercrime data breaches cost US businesses an average of $9.44M.  

These startling statistics show why prioritizing cyber security is a must in the modern world. Construction businesses don’t need to be scared–just prepared. When choosing a payroll management system, look into its security features and work with a specialist to maximize security and achieve peace of mind. 

5 - Having an “if it ain’t broke, don’t fix it” mentality. 

While simple is always better, construction companies must be adaptive as the industry evolves. A shocking report by Clutch revealed that 25% of small businesses still use old-fashioned pen and paper to track finances. As described above, manual data entry greatly strains the workforce and leads to many errors. Evolving with the times and using technology to your advantage is essential to lasting success. Even if the initial investment costs seem steep, the amount of time and money saved will be an invaluable ROI.  

Choosing the Right Payroll Management Software 

Now that the value of payroll management software is clear, it’s important to know that not all systems are created equal. While many exist, companies should choose one explicitly designed for the construction industry. Some companies may also need to navigate payroll for self-performing GCs (General Contractors), which requires a unique tool that adapts to these nuances accordingly.  

Software should also integrate fluidly with any preexisting Enterprise Resourcing Software (like Sage), so information doesn’t have to exist in silos–which leads to more workflow issues that impact every level of business.  

If you’re interested in an intuitive way to help your construction business run more smoothly…