For Accurate Payroll Start with Accurate Timekeeping
The article emphasizes the critical importance of accurate timekeeping and employee classification in payroll management, highlighting how errors or intentional misclassification—such as treating employees as independent contractors—can lead to unpaid wages, legal penalties, and significant financial losses, as exemplified by the Michigan Regional Council of Carpenters and Millwrights' exposure of $1 billion in unpaid wages due to payroll fraud, and recommends using payroll syncing solutions to maintain compliance and protect companies from fines and lawsuits.
Payroll is an essential part of HR; your employees work for you because they want to get paid. But payroll is also an area where mistakes can cause more than employee frustration—they can result in penalties and lawsuits.
Recently, construction workers aligned with the Michigan Regional Council of Carpenters and Millwrights (MRCC) brought attention to payroll fraud. The MRCC cited illegal practices such as misclassifying workers, paying less than legally required minimum wages, or failing to pay for all hours worked, contributing to $1 billion a year in unpaid wages.
While some of these practices are due to intentional wrongdoing, others may simply result from poor recordkeeping.
Maintaining accurate employee records not only keeps you compliant but also helps protect your company from potential fines and lawsuits resulting from misclassifying workers, paying less than minimum wage, and failing to pay for all hours worked.
Misclassifying Workers
Construction companies often rely on independent or 1099 contractors to complete projects. Because these workers aren’t employees, there is no need to pay social security, Medicare, unemployment, workers’ compensation, or health benefits. The ease and cost-efficiency of hiring a contractor is why misclassification is such a big issue. Some companies misclassify workers intentionally to save on paperwork, taxes, and overtime, but others do so by mistake.
The main deciding factor between employees and contractors, according to the IRS, is the amount of control the worker has. An independent contractor has complete control over how and when the work gets done and typically negotiates work before it begins, specifying when and where it will be completed.
Payroll syncing solutions can help ensure that once you accurately classify an employee, the classification remains consistent between your workforce management system and your payroll package.
Paying Less than Minimum Wage
Federal minimum wage provisions are contained in the Fair Labor Standards Act (FLSA). The federal minimum wage is $7.25 per hour effective July 24, 2009. Many states also have minimum wage laws. Deductions from wages for items such as cash or merchandise shortages, employer-required uniforms, and tools of the trade are not legal if they reduce wages below the minimum rate required by the FLSA or reduce overtime pay due under the FLSA.
Some minimum wage violations stem from misclassifying employees, making them exempt from minimum wage laws. For example, independent contractors aren’t entitled to the same FLSA protections as regular, full-time employees. Employers may also manipulate timesheets to underreport hours.
Digital time tracking software protects both workers and employers. Time tracking apps accurately log every hour, and workers can sign off on their timesheets, ensuring both employee and company approval of the time worked.
Failing to Pay for All Hours Worked
The Fair Labor Standards Act (FLSA) protects US workers by ensuring they are paid for all hours worked, including overtime. Complying with the FLSA is a significant part of construction payroll. Failure to comply can result in severe consequences, including fines and even criminal prosecution. According to the Department of Labor, employers who willfully or repeatedly violate minimum wage or overtime pay requirements are subject to a civil money penalty of up to $1,000 for each violation. Willful violations may result in criminal prosecution and fines up to $10,000. A second conviction may result in imprisonment.
Digital time tracking provides security when it comes to paying employees for all hours worked. Using a digital time tracking system eliminates mistakes that can occur with paper timesheets, such as misremembered times, indecipherable handwriting, and altered numbers. It also gives managers insight into hours logged per site and per worker, so they’re not surprised if overtime is required. Additionally, a digital record is more secure than paper time cards, with data always available should a discrepancy arise.
Tracking all hours worked for properly classified employees via digital time tracking not only makes your payroll process more accurate but also more efficient. Companies that have switched to digital time tracking have reportedly saved hours on payroll tasks. Using a company with robust integrations streamlines the entire process, giving HR teams valuable time back in their day and confidence that everything is done correctly.
See a demo of how HR technology can help your construction business.
Related
What Does Paid in Arrears Mean?
Paid in arrears refers to the practice of making payments after services or work have been completed, commonly used in construction and payroll to manage cash flow by delaying payment until after the work period or project completion, thereby allowing businesses to maintain operational liquidity.
What is Workforce Data Analytics?
Workforce data analytics in construction involves collecting, organizing, and analyzing employee-related data—such as performance, time usage, and turnover—using tools like ExakTime to enable informed decisions on resource allocation, productivity, cost management, and workforce optimization for improved business outcomes.
Preventing Time Tracking Errors: What They Are & How to Avoid Them
The article emphasizes the critical importance of accurate employee time tracking for businesses, highlighting how manual methods like paper timesheets and spreadsheets lead to costly errors such as inflated hours, buddy punching, and duplicate entries, and advocates for advanced digital solutions like ExakTime® that use features like geofencing and photo ID verification to prevent discrepancies, reduce payroll fraud, and optimize labor costs.
How to Keep Track of Work Hours Effectively in the Construction Industry
The article emphasizes the critical importance of accurately tracking work hours in the construction industry to ensure precise payroll processing, proper allocation of labor costs to specific projects, compliance with labor laws including overtime regulations, and improved project management through detailed reporting and resource planning, recommending advanced time tracking solutions like ExakTime to optimize these processes.
Tracking Overtime Accurately Increases Benefits and Performance
Accurately tracking employee overtime hours is essential for businesses to ensure compliance with labor laws, prevent financial losses from errors, improve project cost estimates, foster employee trust and satisfaction, and ultimately enhance overall productivity and operational success.
Homebase Review vs ExakTime: A Comparison of Employee Time Tracking
The review compares Homebase and ExakTime as specialized time-tracking solutions tailored for construction and field service industries, highlighting their features such as mobile apps with GPS tracking, compliance tools, payroll integration, and job costing analytics to address unique challenges like prevailing wage management and certified payroll, ultimately helping businesses improve labor cost management, project profitability, and regulatory compliance.