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Payroll Challenges

Construction Payroll Software Faces Challenges

The first major challenge for Construction Payroll Software is to have a mechanism that ensures that projects are being charged a fully loaded rate for the people working on it.

When payroll solutions fail to provide a mechanism, then management is left to attempt calculations on a spreadsheet. However standalone spreadsheets cannot take into account the nuances involved in a construction payroll.

The forensic accounting that Muli performs when implementing the payroll procedures for a new client, invariably reveals, that the series of hourly rates in a spreadsheet, that their management has used to to charge projects for services provided, are unrealistic.

Consider the following scenario. A construction company with two projects, one in the city – the other at a suburban location. Employees at the major city project working long hours are being compared with the suburban project, working normal hours. The cost per hour for the city project can be almost double the suburban project. However, the difference is not obvious unless you do the analysis.

Real Cost Per Hour

Muli’s approach is to ensure every individual is being charged at a real cost per hour including on-cost provisions. We believe that this method produces the most accurate results for costing a project.

We all know of experienced Project Managers who gather the “best” labour force the company has to work on their projects. These “old soldiers” tend to cost more due to time served plus the additional benefits provided. So overall they cost more than the new starters and the the real cost is usually not applied to the actual jobs. The Muli approach ensures this is not the case.

Muli also provides a mechanism to ensure projects that consume all the company’s labour do not distort the overall average cost per hour for other projects. For example, if all the company’s labour resources were used over the weekend on a single project, then Muli provides a loading factor in the timesheet entry to grossly load up the cost per hour for that particular weekend project, rather than allow it to be applied as an average increase in cost over all the work that that individual is doing.

How’re Your Provisions?

The second major challenge concerns making the correct provisions for the cost of labour, so that the company’s accounts don’t suffer a run on cash. Consider a project in a remote location that went for a year and then finished. If all the employees then take their holidays, and if your construction payroll software hasn’t been suggesting the correct provisioning for the cost of that labour’s annual leave, termination payments etc, then there will be a major drain on cash – particularly if the cash has previously been distributed as profit!

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