Streamlining the Management of Prevailing Wages and Burden Rates on Construction Projects

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When you run construction projects for public sector clients, you need to factor prevailing wages into your bids, forecasts, project management, and financials. You may also need to consider labor burden rates. Software and services from Sikich can take the busywork and the risk of errors and penalties out of these tasks and give you more control of the business.

Ensuring fairness and equitability

The idea behind prevailing wage standards is that the government wants to make sure that workers on public sector construction projects receive fair, equitable payment that is commensurate with their skills and qualifications. Therefore, when your construction business gets involved in projects for government entities, you usually need to demonstrate that you pay your employees the appropriate prevailing wage. If people working on any of your commercial projects are union members, union policies will often also demand that they are paid according to prevailing wage standards.

In the US states that apply prevailing wage, an authority like a department of labor and industry publishes the rates for a comprehensive range of construction trades, along with policies and advisory guidance. Under prevailing wage conditions, you typically need to provide certified payroll reports that show your employees’ base pay, bonuses, and benefits. Somebody reviewing the report needs to be able to verify that the compensation and benefits package you offer is equitable for the workers, given their roles. You might face a variety of consequences if you fall short of prevailing wage regulation. For instance, you might not be able to compete for further government contracts, your client might cancel the contract for your current engagement, or payments might be withheld until you make a correction.

Maintaining consistency in managing prevailing wages and burden rates

Of course, prevailing wages need to factor into your proposals and forecasts. If you don’t consider prevailing wage compensation accurately, running profitable projects in compliance with regulation may be challenging. As part of prevailing wage practices in a given state, you may need to offer employees a certain level of benefits, which incur a certain cost. Mandatory insurance, management and administrative salaries, and other items usually considered overhead also come with costs. You have to know exactly what those various costs are in order to establish their percentage in relation to construction labor wages: that’s what’s known as the burden rate. And, when your clients’ needs and schedules change, you may have to bring different people and a different blend of skills to a project, and all these financials will have to change accordingly.

For the managers in many construction companies, managing burden rates and prevailing wages while maintaining solid business health requires a great effort in documenting and tracking project and people data. At the end of every pay period, they need to provide accurate information to the company’s payroll processors, who often work for an external services provider. When project status and client needs drive staffing changes, they need to make updates promptly. If they don’t, reporting and financials could soon be out of sync with the people and skills actually contributing to construction projects. That, in turn, might result in inaccurate invoicing, thinning margins, or a decline in profitability.

From simple, standalone to connected, comprehensive construction software

You can use software apps to record and communicate prevailing wages, burden rates, and other workforce data on your company’s projects. However, if you use spreadsheets and other standalone tools, keeping them all current and consistent may become a source of headaches and errors.

Instead, you could take advantage of a connected software environment, where one system becomes the company’s consolidated source of data and also provides the workforce management, project management, financials, and other capabilities you need. Once you decide that this is a good way to go, you need to identify a product and provider that fit your business and make your life easier.

Sikich has a wealth of expertise in supporting construction companies, and we also deliver a comprehensive industry solution, HEADSTART for Construction. It provides a strong business management foundation in Microsoft Dynamics 365 Business Central, in which it combines with ProjectPro, a well known construction software. ProjectPro gives you key construction business functionality, including job quoting, project accounting and management, subcontractor management, and more. HEADSTART for Construction lives in the cloud, so team leaders at project sites, journeymen entering their time, and business managers working at company or home offices can access it with equal ease.

Cloud construction software simplifies business management

Once you deploy HEADSTART for Construction and enter correct prevailing wage and burden labor rates, you can have greater confidence that your billing and financials will be accurate and complete. You don’t need to question your assumptions, manually reconcile spreadsheets and other documents, or do research every time you want to know how well the business is doing. You can base estimates, quotes, change orders, and forecasts on reliable, complete information. With the solution’s reporting tools, you can quickly determine what your project completion percentages and real-time financials are and how they compare to contracts and projections. It’s not a major effort to run these numbers, and you don’t need to wait for updates at the end of certain reporting periods or project milestones. Instead, you can get a real-time view of the business whenever you wish.

HEADSTART is designed to be easy to use for busy construction professionals. It’s intuitive, so you don’t need to set time aside for learning how to navigate it. Once you are comfortable with the most important functions of construction project, resource, and finance management, you can do more. By using the solution, you can gain a nuanced view of the cost structure and performance of your jobs, model and forecast changes, and put them into practice. In working with clients and subcontractors, you can draw on current data to have productive conversations and respond to changing needs without asking people to wait while you do research.

Short onramp to getting more from technology, with less effort

HEADSTART for Construction can integrate with most leading payroll services, saving you the labor-intensive step of producing and forwarding reports to their specifications at the end of every pay period. The Sikich portfolio includes a payroll software we can deploy together with HEADSTART.

Starting from our initial fact-finding with you, on to software deployment and support, we can deliver our engagement completely and efficiently in the cloud. You don’t need to wait for the pandemic to subside before you modernize your construction management technology. And, if you want more assistance regarding payroll and accounting, we can connect you with the Sikich division that will help.

To explore what you could accomplish with Sikich and HEADSTART for Construction:

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

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