Outsourcing Payroll Can Make Sense

By Natalie Winterfield

One of the most basic functions of any company, large or small, is payroll. Whether it is salaried management or hourly workers, the demands for accuracy and timeliness are great.

With all of the various needs companies have relating to payroll, how can your company keep up with constantly changing regulations? The best way is to work with outside experts who are familiar with your industry's special requirements. Outsourcing your payroll functions, no matter the size or activity of your company, will save you significant time and money so you can concentrate on your key functions.

Outlined below are some important payroll issues unique to construction companies:

* Paychecks. Construction companies, like other companies, are responsible for correctly processing many items on paychecks. The most familiar are deductions for federal and state income taxes, FICA Medicare and state unemployment deductions. Other additions to pay and deductions may include vacation pay, union dues, 401K plans, health insurance and garnishments.

Some deductions, such as FICA, state unemployment and 401K deductions have yearly maximums. These maximums, along with federal and state income tax tables, usually change every year, with some even changing mid-year. Additional pay items such as commissions, expense reimbursements and automobile allowances also need to be tracked and taxed, when appropriate.

* Unions. Most construction companies work with the various trade unions, whether they are electricians, insulators, carpenters, laborers, iron or sheet metal workers, painters or operating engineers. All unions require reports and/or payments of union deductions and fringe benefits on a weekly or monthly basis. Penalties and/or work stoppages can be imposed for late payments.

Complications of reporting include the various types of calculations for union deductions and benefits, which can be a percentage of gross, a percentage of gross plus taxable benefit, a flat rate per hour, a rate per hour paid, or a flat rate per hour with all overtime hours paid at time-and-a-half.

Union contracts usually call for changed rates every year on an anniversary date, with some having semi-annual rate changes. On the reports, unions usually need to know the different members who have worked, by name and social security number, along with their hours worked and paid. A summary of monies due the union is also required. Standardized reports that are acceptable to all unions are therefore a great time-saver to companies and should be utilized.

Employers also need to know their total costs on a job, and may have a large number of jobs open at any given time. Payroll data, including employer taxes and union benefits, are one key component of the total cost. For a business to remain competitive, it must be able to break the cost of a job down into various sub-categories, to compare them with other jobs and industry averages. A system that automatically uses existing payroll data in job costing reports is very important as it leads to greater efficiencies and values.

* Standard Reports. Other standard reports for payroll include the payroll register, which shows all the details concerning employees paid per pay period and the payroll status report, which shows such information as employee name, address, social security number, exemptions and year-to-date data. Special reports for deductions and saving plans, worker compensation insurance base wages and check reconciliations make it easier for businesses to handle information requests from insurance companies, state agencies, unions and banks. In addition, certified payroll reports are required on many jobs with government agencies and contain employee demographic information such as race, sex, marital status, classification in union and various check stub data. Automatically producing these reports will save companies time and money, so that they can continue to focus on their core areas of expertise.

* Tax Filing and Reporting. Federal, state, city and other local taxes are due at various times of the year. State unemployment and FUTA taxes are due quarterly. Other tax due dates depend on the history of the tax liability amounts for that jurisdiction and on the jurisdiction's policies. Some states, such as New York and New Jersey, require combined reporting of unemployment wages on the same form. If your business expands to more states, registrations and tax filing is required.

Natalie Winterfield is a marketing and sales executive with the Payroll Group in Fairfield, N.J.