Cost management is an essential discipline that both construction companies and contractors need to master in order to reach maximum profitability.

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Managing the various expenses associated with a project, including labor, materials, supplies, and equipment, is no easy task. Without the proper system and processes in place, construction companies will have a difficult time projecting and achieving per-project profitability. An area where costs can vary widely is in labor, and it’s important to understand the true cost, which often includes insurance expenses, employee classification, and tax liabilities in multiple jurisdictions, among other things. To help manage these challenges, many companies elect to outsource their payroll to achieve better labor cost projections and more concise reporting. To help clients, prospects, and others, Hanson & Co. has provided a summary of the key benefits of payroll outsourcing below.

Benefits of Outsourcing

Beyond the traditional reasons to outsource, there are many benefits to outsourcing to a company with construction industry experience, including:

  • Job Costing – Traditional payroll services do not offer the ability to report payroll costs by job. The more general level of reporting is inadequate to help management track costs and identify potential overruns. An industry experienced provider should be able to track labor hours, dollars and related expenses (such as workmen’s comp insurance, FUTA and SUTA) by job. It’s important to partner with a provider that can offer more detailed reports that enable job cost tracking, estimates versus actual costs and projected costs until completion, to name a few. The key is that an experienced provider should be able to offer a comprehensive level of reporting needed to manage labor costs during all phases of a project.

  • Employment Reporting – Most construction companies rely on a diverse labor force to complete projects. There is often a need for labor with a variety of skill sets that can take the project from initial ground breaking to opening day. The challenge for most companies is that it’s difficult to keep track of the various employees and ensure compliance with labor laws. Issues such as new hire reporting and worker compensation classification can be a constant challenge. An experienced outsourced provider can help manage these issues and ensure the company is in compliance with various federal and state laws.

  • Multiple Jurisdiction Tax Reporting – Unlike most companies, construction industry companies often have payroll and other tax liabilities in a number of jurisdictions. When projects are in different cities or states, there are variations to the amount and type of payroll taxes that need to be paid. Unfortunately, it is not a one-size-fits-all proposition. It’s common for employee tax withholding to change in a single pay period as contractors and employees move from project to project. Such complexities require an experienced provider who can proactively manage these variations and ensure proper compliance.

  • Certified Payroll Reports – From time to time, construction companies work on projects that have special payroll reporting requirements. Generally speaking, these are federal- and state-funded projects that have detailed specification (e.g., Davis-Bacon Act) for how information is to be reported. An outsourced provider with construction industry experience can quickly prepare these reports for project compliance.

Contact Us

Payroll management for construction companies is not an easy task. While there are general benefits to payroll outsourcing, companies will receive significantly more value from working with an experienced construction industry provider. If you have questions about outsourcing your payroll or other construction accounting issues, Hanson & Co. can help. For additional information, call us at (303) 388-1010, or click here to contact us. We look forward to speaking with you soon.