Contractor Payroll Prep: 5 Things You Should Do To Streamline Your Process
Payroll is an essential part of effectively running a business, no matter what business you’re in. But payroll for the trades is a little different and requires special considerations to process correctly.
For many shops, payroll is a real headache. It’s time-consuming, tedious, and prone to errors. These errors can cost you in a number of ways—time, money, and employee confidence. Or worse, you could find yourself on the receiving end of a wage-related lawsuit.
Before you send payroll to your processor, you need to calculate gross pay, which is the total wage an employee earns before taxes and other withholdings are taken out. Gross pay forms the basis for other payroll calculations such as overtime and withholdings, which is why it’s so important to make sure you get it right.
While it may be tough to make payroll fun, there are things you can do to make payroll prep easier. Let’s dive into a few!
1. Track office employee and technician time in one single location.
How does your shop manage employee time tracking? Do your technicians track their time differently than your office staff? Do they use an automated system or rely on manual timecards or timesheets?
Accurate timekeeping is crucial to your payroll prep process. One way to simplify and improve accuracy is by giving both office staff and technicians one central location to track and view their time.
Centralizing employee timesheets lets you pull up real-time employee job records quickly, giving you more timely and accurate data to help with job costing. In addition, it simplifies your employees’ workflows, encouraging better timekeeping compliance.
2. Build trust by allowing employees to sign off on payroll.
It goes without saying your payroll should reflect the correct hours your staff works and proper performance pay credit. Payroll accuracy is key to preventing errors, building employee trust, and most importantly for the trades, retaining your team.
To that end, be sure to address discrepancies before you send payroll off for processing. Let your staff help you catch potential errors by giving them the opportunity to easily view and sign off on payroll at the end of each pay period.
Payroll sign-off adds transparency your employees will appreciate, and enabling technicians to digitally sign off on hourly and performance pay saves them a drive back to the office. For you, it saves the headache of going back to make corrections after payroll is processed.
Pro Tip: Make sure employee information such as name, address, or social security number is correct, too. You’re furnishing this information to the IRS, so minimize your liability by keeping it accurate.
3. Ensure correct pay rates for non-job time and performance pay.
Your payment structure should effectively account for pay employees earn that falls outside standard base pay. A few examples include drive time, meal breaks, meetings, and paid or unpaid leave.
You should also have a system in place to correctly track incentives and performance pay such as:
- Bonuses
- Commissions
- Spiffs
Pro Tip: You may need to calculate overtime when a technician is on a job longer than expected. Make sure your overtime pay rates are correct and comply with local regulations. Your regional labor board can help answer questions about this, so keep their contact information handy just in case!
4. Align earnings codes with your payroll processor.
Earning Codes help you organize employee earnings by how they are taxed. For example, bonuses and commissions are taxed at a different rate than regular hourly pay.
If your shop’s earnings codes don’t align with those of your payroll processor, it causes a bottleneck, because you’ll have to export your payroll, then reformat and manipulate it, so the processor recognizes the data.
Your payroll prep process should include mapping your earnings codes to your payroll processor. It saves you time transferring information from one place to another and minimizes the opportunity for errors, which can result in tax over/underpayments or employees questioning their pay breakdowns.
5. Keep payroll reports up to date for continual improvement.
Job costing is an essential part of running a profitable shop. And having up-to-date payroll reporting and analytics tied to each job can help you get a better picture of overhead and average hourly employee cost, which you’ll need for accurate job costing.
Get in the habit of regularly running payroll reports if you’re not already doing so. Doing this has two major benefits for your shop:
- It allows you to fine-tune average billable service rates.
- It lets you see where to make improvements to profitability.
Having centralized employee timekeeping and performance pay tracking can be a game-changer for your shop. It keeps your reporting current and empowers you to make decisions that increase profitability.
Make payroll prep pain a thing of the past.
Timesheets and Performance Pay in ServiceTitan arm you with in-app tools that help you customize, capture and calculate gross pay all in one place. You’ll be able to view and edit timesheets in real-time, make payroll adjustments, track non-job events, and accurately pull wage data for payroll processing.
Best of all, Timesheets and Performance Pay are built with the trades in mind, creating efficiencies that:
- Save you time in back-office prep and employee sign-off
- Offer flexibility in performance pay structures
- Improve transparency in pay calculations
- Contribute to job costing accuracy
Get started with Timesheets and Performance Pay, and let ServiceTitan help make payroll easier!
Original blogpost can be found here.
