how to save thousands on construction payroll

If you are a contractor, you have to deal with construction payroll. But you also have a zillion other things to worry about. If you don’t keep all the balls in the air—you won’t be profitable.

If you are processing payroll for construction manually, you are losing money. If you are like most firms, your profit margins usually end up smaller than projected. There are numerous expenses you have no control over. That is one of the reasons construction companies have a higher-than-average failure rate.

Save on Construction Payroll

You can’t control interest rates on construction financing. Or the price of materials. Or the weather. If any of these variables don’t break your way, it can have a devastating financial impact. More efficient construction payroll is an area in which you can mitigate these costs. By getting rid of paper timesheets, you can lower the cost to run payroll. How much can you save with automated time card processing?

Let’s break it down.

Time Rounding

Say your crew is scheduled to work 8-5. When do your employees really show up? Some probably get on the job site at eight. But it is unlikely that all of them do. It’s realistic to assume that 10% are late on any given day. Do you think these tardy workers record 8:07 or 8:15 as their shift start time? Probably not. Especially if they fill out their time cards at the end of the pay period. If their scheduled start time is 8:00, that’s what they will write on their time card. They also have more pressing things on their minds than arrival times.

Suppose you have 50 full-time 15/hr employees. If ten percent are seven minutes late every day, that’s 35 minutes of labor you are paying for but not receiving. Based on 260 yearly workdays, that’s $1400.

Time Theft

Time theft also increases payroll for construction. This is probably costing you more than time rounding. Employee time theft occurs in every industry. It’s not difficult for offsite construction workers to steal time. Employees commit time fraud with early punch ins and late punch outs. Extended breaks and meals also cost you. Buddy clocking is especially costly.

According to the American Payroll Association, 43% of hourly employees commit wage theft. If 40% of your employees steal 10 minutes a day (a conservative estimate), that means you are losing roughly $50 a day for intentional wage theft.

That adds up to $13,000 per year! Add that to the $1400 for unintentional time card rounding and we are at $14,400.

Adding Hours on Paper Timesheets

Let’s talk about the person that processes your construction payroll. After your employees fill out their time cards, someone has to add up the hours. Let’s say that takes 8 minutes per time card. If you pay your employees twice a month, that’s about 13 hours and 20 minutes just to add up hours.

If you pay your payroll manager $20, it costs you $266 every month to get those timesheets added up. That’s $3192 annually. Our running total is $17,592. Are you beginning to see how manual employee timekeeping inflates your labor expenses?

The Cost of Human Error

Your payroll manager is probably a whiz with a calculator. But everyone makes mistakes. (I had to correct some initial errors with the calculations in this article.) When time card hours aren’t added correctly, it results in an incorrect paycheck. When the errors are discovered, they need to be fixed so you can issue a corrected paycheck.

Let’s say there are 4 incorrect paychecks a month and they each take 15 minutes to correct. That’s another hour of administrative costs each month. It adds $240 a year for your payroll manager’s time. This does not account for the time the employee spends working it out with their manager. The total savings is now $17,832. Remember, that’s for a firm with 50 hourly employees who earn an average of $15 per hour.

Automated Timekeeping for Construction Payroll

How does automated construction payroll work? Your employees clock in with a physical time clock or online portal. The system records the punches and creates a digital time card. Time is recorded to the minute. Systems with schedule enforcement eliminate early punch ins and late punch outs. (Unless approved by a manager.)

Biometric time clocks eliminate time theft. There are clocks designed specifically for construction job sites. Some construction firms allow employees to clock in with their cell phones. Built-in GPS verifies their location. Your managers can’t be everywhere at once. Mobile timekeeping apps keep track of employees. Managers can check employee time and attendance from their mobile device throughout the day.

Integrate time and attendance with project management software. You can improve efficiency even more. Increased efficiency also extends your labor budget.

Employee Schedule Optimization

Construction scheduling software integrates with time and attendance for even more construction payroll savings. Multi-crew and multi-site scheduling is too complicated for spreadsheets. Spreadsheets are almost as limited as pen and paper.

WFM systems with construction templates let you schedule by site, project, or team. You can view multiple schedules at once. Copy schedules forward and updates them as the project advances. This only takes a couple minutes because you have the template saved.

Job roles in the construction industry are highly specialized. WFM software has tools to help you manage the skills and licenses involved. They help you ensure that you have the necessary trade skills for each shift or project. You can even set alerts for license expirations. Schedule both hourly employees and subcontractors. Scheduling systems help you cut overstaffing and unplanned overtime. They also save a lot of time and hassle for your scheduling managers.

The savings provided by scheduling are harder to quantify than automated timekeeping savings. For that reason, I didn’t add them to the original $17,832.

SwipeClock helps contractors save big on construction payroll. Our affordable construction timekeeping systems integrate with our industry-leading time clocks. Visit SwipeClock for Construction for more information on how you can reduce your construction payroll expenses.

By Liz Strikwerda

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