In construction, where hourly wages are higher and labor rate classes are more complex than in most other industries, payroll processing presents unique challenges.

By recording and reporting labor hours with comprehensive electronic field logs, construction companies can streamline a process fraught with inefficiency when it is managed with paper, spreadsheets or standalone time tracking applications. They can also eliminate payroll errors and violations that can be extremely costly.

“There are a number of tangible examples of how a system like this improves our operation and ensures that we are paying the men and women that work for us timely and correctly each week,” says Mark Galasso, president at Lancaster Development, a heavy highway contractor based in Richmondville, New York. “We were able to reduce our payroll staff by a little over half and went from having one, two or sometimes as many as three payroll errors per week to less than three per season now. We’ve made a radical improvement in our accuracy and timeliness.”

Three Options

The liabilities with paper timecards or spreadsheets for tracking hours are obvious. When contractors elect to upgrade to a more specialized system, they have three basic options.

The first is a dedicated application for time capture and reporting, which is relatively inexpensive and easy to deploy. These point solutions, however, have limitations. Contractors will need a separate system—or systems—to record non-labor performance data such as equipment hours, material utilization and daily productivity. They would then need to pull data together from these various systems to get a complete picture of job performance versus plan at any given point in time.

“I subscribe to the general philosophy that the fewer software systems or applications you have to maintain, the better,” says Herb Brownett, a former heavy construction CFO and CFMA chairman who now serves as an industry consultant.

Relying on time-capture functionality within an accounting or ERP system is a second option. Drawbacks with this approach include time-capture and reporting interfaces that may not be user friendly for field teams, and delays in getting information back to the field in the form of monthly accounting reports as opposed to daily field tracking reports.

The third option is a dedicated performance tracking and analysis solution to capture employee hours along with production quantities, as well as material and equipment utilization within a comprehensive electronic daily field log. These field tracking applications can transfer data seamlessly to accounting or ERP systems for payroll processing, in addition to other accounting requirements. Importantly, they can also generate their own field-focused reporting on the labor and productivity data.

These reports are produced daily to help leaders track progress versus plan and make appropriate operational adjustments while there is still time to protect profitability.

Coding Correctly to Avoid Penalties

Recording how many hours employees work is only part one of the payroll challenge. Contractors must classify those hours correctly, according to the type of work being performed in order to comply with prevailing wage requirements for public projects. They must also account for overtime, benefits and other variables. Not doing so results in significant, labor-related fines and penalties for contractors across the country. 

As the size of the company, the complexity of the work and the diversity of the work increase, so do the opportunities for errors and the value of a specialized software system for avoiding them.

Capturing and coding hours immediately in the field is step one in ensuring payroll accuracy, and this is where electronic field logs excel. Mobile devices and laptops make it easy for foremen to record hours daily. Contractors can also link only the labor rate classes relevant to a particular job with the field logs for that job. 

Limiting the options in this way helps foremen to avoid coding mistakes and removes the potential for those errors to be missed by the accounting system when payroll is certified. Instead of searching through a long list of potential rate classes for each employee, they can pick from the limited options that appear in a drop-down menu on the electronic log.

Specialized software offers other advantages. Built-in error checking—such as spell checking a document—can catch common mistakes, such as when the total hours for a crew are not in sync with the individual hours for that crew’s members or when the same hours for one employee are duplicated on two different logs. GPS, time stamps and e-signatures add further accountability.

Electronic Data Transfer

Even if hours can be recorded correctly, moving that information from the field to the accounting system with a paper- or spreadsheet-based process presents more chances for errors and inefficiency. With multiple points of data entry, everything from illegible handwriting to assigning the wrong cost codes can threaten accuracy and timeliness.

A manual handoff also tends to require a lot of back-and-forth conversation between the field and the office. Phone calls, emails and text messages to clarify information can be chaotic and introduce opportunities for miscommunication.

With electronic field logs, data (including employee hours with correct codes) can be transferred directly to accounting systems. This eliminates the effort and opportunities for errors that go along with redundant manual data entry.

Some contractors lump processing labor hours in with the dreaded “paperwork” that pulls people away from hands-on aspects of managing projects that they see as more critical to profitability. The ones that use electronic field logs and a seamless transfer to accounting, however, can impact the bottom line by driving efficiencies and avoiding costly errors.