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Contractor Considers Sending Payroll Packing

A general contractor who specializes in multifamily housing units noticed he was spending a large amount of time on one thing: payroll. Although he had office staff to help him out, the contractor still found it to be time-consuming, complicated and tedious work.

During a recent industry event, a fellow construction company owner mentioned that she’d solved her payroll problems by outsourcing this function to a third-party payroll service. This sounded appealing to the contractor, so he contacted his financial advisor to discuss the idea further.

QUITE A CHALLENGE

The financial advisor agreed that payroll for his or most any other construction company is challenging. Contractors often deal with multistate and local taxes, more-prevalent workers’ compensation claims, work crews that vary in size and shifting pay rates.

In addition, some workers don’t receive a paycheck every two weeks because of project scarcity and down times. The uncertain economy has exacerbated this challenge in recent years for many construction businesses.

KEY QUESTIONS

The advisor stressed that any payroll service the contractor seriously considers must understand these nuances and, preferably, have experience working with contractors. A few key questions include:

  • Is the service able to prepare certified payroll reports instantly?
  • Is it familiar with the reporting differences between union and nonunion workers?
  • Does it know the applicable payroll laws and regulations in any state where the contractor might have jobs?
  • Can it compile job cost reporting? (Lack of ability to do so is often a deal-breaker.)

If the answer to any of these questions is “no,” the contractor should probably move on. After all, the payroll service will assume the responsibility (though not the legal liability) for completing virtually all payroll-related paperwork and ensuring taxes are paid on time.

A good one will, therefore, help his construction company avoid tax and regulatory pitfalls and, in turn, the negative financial consequences that come with these threats. Finding a savvy, trustworthy partner with the latest technology is of the utmost importance.

Last but not least, the contractor needs to compare the costs (including conditional fees) of several prospective services. He needs to further compare the cost of each to what he’s currently paying his staff to handle payroll matters.

TOUGH CALL

After speaking with his financial advisor, the contractor admitted outsourcing his payroll was a tougher call than he’d anticipated. Ultimately, however, he decided to go for it. After a relatively lengthy bidding process and some minor implementation bumps, he’s now enjoying some noticeable relief from the burdens of construction payroll.

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