Construction Companies and Payroll Services

Construction Companies and Payroll Services

One in five of all insolvent firms in the UK is from the construction sector, making the construction industry a significant contributor to UK’s insolvency figures. The rising cases of insolvency in the sector are mainly due to soaring inflation and the long lead time leading to a potential domino effect for supply chains. As the trend persists, it severely impacts the supply chain due to the debt owed. The industry is also suffering from labour and material shortages across the country. Research by recruitment specialists revealed that 83% of construction companies feel the strain from the lack of skilled workers. With the increased demand and short supply, wages for skilled construction workers are on the rise.

To survive the same fate, construction firms must improve their risk management functions to avoid lower capacity and compromised supply chains. For instance, companies can redefine their procurement procedures to improve cost efficiencies, protect profits and deliver projects on time. It is also crucial to future-proof construction through digital transformation. While the construction industry has slowly adopted technology, digitisation can speed up processes and improve project quality. The adoption of construction software simplifies financial reporting and gives an overview of the company’s cash position. For instance, if you adopt ERP software, you can:

• Locate the right resources for a construction project using procurement tools
• Control budgets for construction projects
• Mitigate risks in construction
• Improve data management

Managed Payroll for the Construction Industry

Aside from managing your expenses in construction, it is important to keep your workers happy. With the procurement complexities and other challenges facing the construction industry, the last thing you need is to worry about payroll. Construction deals with multiple complexities in payroll that other industries don’t have to worry about, including prevailing wages and compliance with the Construction Industry Scheme (CIS). Ensuring the payroll details are accurate requires considerable time and resources. Fortunately, you can use managed payroll service providers to streamline payroll responsibilities and free your time to handle business-critical tasks.

The Challenges in Managing Construction Payroll

Some of the difficulties you encounter when handling payroll for construction companies include:

• Construction Industry Scheme requirements: If you have a construction business, you are familiar with the Construction Industry Scheme (CIS) introduced in 1972 to ensure workers are paying the correct level of tax. Managing CIS compliance can be tedious since you need to check that sub-contractors are genuine, CIS-registered and not de facto employees. Under CIS, the tax is deducted at the source from payments made to sub-contractors. Hence, you must calculate tax and NI deductions to remit to HMRC. You also have to pay sub-contractors on time and file monthly returns.

• Different pay scales: If you run a design and build company, you have a range of employed staff with diverse pay scales. For instance, the architects, electricians and carpenters earn different salaries. The nature of work also means you employ more people on a short-term basis. That means additional work and time to process the different salaries for every skilled worker.

• Varied work hours: Each worker in construction has unique working hours depending on the duties. The varied work hours add an extra level of complexity to your payroll. It is also crucial to process the CIS-specific tax rates based on earnings.

Construction Payroll Services

Payroll for construction can be a real nightmare if you don’t have the expertise to juggle the tasks. If handling payroll for your construction business makes you scratch your head because you don’t understand the terms, use managed payroll solutions. A construction payroll service can streamline your payroll by managing the following tasks:

• Tracking employee time and pay rates
• Cutting paychecks and making direct deposits
• Calculating payroll taxes from each pay cheque and filling returns
• Assisting with CIS compliance requirements

Due to the complexity of the construction payroll, it is important to pay close attention to avoid problems. Unlike other businesses, where you only keep track of a worker’s hours and write the paycheck, in construction, you ensure the payroll procedure meets all the requirements. For instance, you need to ensure that each professional receives the right wages for the duration of their contract and skills.

Benefits of Outsourced Payroll Services

Whether you need help meeting the CIS requirements or managing varied pay scales, managed payroll services offer numerous benefits. These include:

Expert assistance in managing payroll

Construction companies involve various activities, from procurement to recruitment and managing cashflows. Tracking cash flow in and out of the business is challenging without adding payroll management to the mix. While you can keep payroll management in-house, it becomes one of the many duties you are expected to complete. Besides, construction payroll is complex due to CIS requirements and requires expert knowledge to avoid mistakes. When you outsource, you get dedicated help from experts in the field who will get it right the first time, and you can focus on critical business functions.

When you rely on managed payroll services to handle your employee payments and tax compliance, you are assured of error-free payroll calculations. You lock in legal compliance and don’t have to deal with any surprises arising from non-compliance. Payroll services can spot and fix errors in compliance. Tax deductions on payrolls also have deadlines for filing returns and remitting to the HMRC. When you are busy, you may forget to keep track of some of the deadlines. Outsourced payroll focuses on your payroll and ensures returns are filed on time and you never miss a deadline.

No limit to sub-contractors

Handing the payroll for contractors is a nightmare for most construction businesses. For sub-contractors, tax is deducted from the payments, which means you must ascertain that they are not de facto employees and are registered with CIS. Aside from checking if they fulfil the requirements, you also have to calculate the tax and NI deductions for subcontractors registered with CIS and those not registered. Subcontractors registered with CIS are deducted 20%, while non-registered pay a higher rate of 30%. You also have to pay the subcontractors on time and keep accurate records. The work involved in hiring and managing subcontractors discourages most construction businesses from hiring them. However, if you have managed payroll services, they can handle the details.

Staying on top of CIS legislation

CIS legislation has changed over the years, and it is important to stay updated on any future changes. Your payroll provider is always on top of the CIS legislation, and you don’t have to worry about missing anything. When the regulation changes, your payroll service provider will ensure you maintain compliance.

Time tracking

If your company still uses timecards and individual timesheets, there is room for error in calculating work hours. Besides, with the busy and fast-paced construction sites, the time sheets will likely get lost. With an outsourced payroll management provider, you can keep track of the work hours of construction workers and maintain accurate payments.

Saves time

If you find payroll to be time-consuming and stressful, the best solution is to hire managed payroll services. They will handle all the payroll functions and streamline processes. You don’t have to spend time vetting subcontractors and managing the payments to employees and contracts. You can focus on other critical construction business functions instead of staying compliant with tax regulations. Aside from saving time, you also save money spent on hiring a dedicated accounting team to handle payroll.


Managing payroll in the construction sector is complex. Yet, it is crucial to ensure accurate payroll that meets the Construction Industry Scheme requirements. Managing the payroll functions alongside running a construction company effectively to avoid insolvency is time-consuming. However, a managed payroll service that handles your payroll needs frees up your time to deal with other issues like procurement and project management. Snow Technology provides dedicated payroll solutions to help your business grow.

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