Choosing the Right Payroll Company for Contractors

If you're a contractor shopping for a payroll company, you've probably noticed that most providers make the same promises: accurate checks, on-time deposits, tax filings handled. And while those basics matter, here's the uncomfortable truth—most payroll companies aren't built for construction.

Generic payroll works fine when every employee shows up to the same location, works the same hours, and gets paid the same way. But that's not your world. Your crews bounce between job sites. Your labor costs need to hit the right project. You've got a mix of W-2 employees and 1099 subs. And if you're doing any government work, you're swimming in certified payroll reporting requirements that would make a typical payroll processor's head spin.

Choosing the right payroll company for contractors means finding a partner who actually understands these realities—not one who treats construction like every other industry.

The Job Costing Problem Most Payroll Companies Ignore

Here's where most construction payroll services fall short: they can't connect labor costs to specific jobs.

For a contractor, payroll isn't just an HR function—it's the backbone of your job costing system. When your concrete crew works Monday on the hospital project, Tuesday and Wednesday on the school renovation, and Thursday and Friday on a private residence, you need those labor dollars allocated correctly. Otherwise, your job cost reports are fiction, your WIP schedules are wrong, and you're flying blind on profitability.

The problem is that most payroll platforms were designed for businesses where job costing doesn't exist. Employees clock in, work their shift, and go home. Simple. But in construction, an electrician might work on three different jobs in a single day, each requiring separate cost tracking—and potentially different prevailing wage rates.

A true payroll company for construction builds job costing into the DNA of their platform. Time tracking should capture not just hours worked, but which project, which cost code, and which phase. That data should flow seamlessly into your accounting system so your project managers can see real labor costs against budget—not a month-old estimate.

If your current payroll provider treats job allocation as an afterthought or requires clunky manual workarounds, you're creating more problems than you're solving.

Certified Payroll: Where Generic Providers Really Struggle

Government work can be incredibly profitable for contractors, but it comes with compliance requirements that scare off plenty of competition. Chief among them: certified payroll reporting.

When you're working on federally funded or state-funded projects, you're typically subject to Davis-Bacon or state prevailing wage laws. That means you need to pay workers specific wage rates based on their trade classification, track those hours meticulously, and submit certified payroll reports proving compliance. Get it wrong, and you're looking at penalties, project delays, or being barred from future government contracts.

Most generic payroll software has no idea how to handle this. They might be able to run payroll at different pay rates, but generating compliant WH-347 forms? Tracking fringe benefit allocations? Handling the apprentice ratios and classifications? That's specialized territory.

The right construction payroll software handles certified payroll as a core feature, not a bolt-on. It should automatically calculate prevailing wages based on project and classification, generate the required reports in the correct format, and maintain the documentation you'll need if you're ever audited. If your payroll provider makes you export data to spreadsheets and manually build certified payroll reports, you're wasting hours every week and introducing unnecessary compliance risk.

The 1099 Reality in Construction

Unlike most industries, construction relies heavily on subcontractors and independent contractors. You might have a core crew of W-2 employees, but you're also cutting checks to specialty subs, owner-operators, and independent tradespeople regularly.

A good 1099 payroll service integrated into your construction payroll system helps you manage both sides cleanly. That means tracking payments to subs throughout the year, generating accurate 1099s at year-end, and maintaining the documentation to support proper worker classification. The last thing you need is an IRS audit questioning whether your "independent contractors" should have been employees—and the right payroll partner helps you stay on solid ground.

What to Look for in Construction Payroll Services

When you're evaluating a payroll company for contractors, the conversation needs to go deeper than "can you process our checks?" Here's what actually matters:

Ask how their system handles job costing. Can employees allocate time across multiple jobs and cost codes? Does that data integrate with your accounting or project management software, or does it live in a silo?

Ask about certified payroll. If you do government work now—or might in the future—you need a platform built for it. Request a demo of their certified payroll reporting, and ask how they handle prevailing wage calculations, fringe benefits, and WH-347 generation.

Ask about their experience in construction. How many contractors do they serve? Do they understand union payroll, multi-state taxation for traveling crews, or the complexities of paying workers across different jurisdictions?

And ask about integration. Your construction payroll system shouldn't exist in isolation. It should feed data into your job costing, your general ledger, and your project management workflows. If you're manually re-keying payroll data into your accounting system, you're burning time and introducing errors.

The Bottom Line

Payroll in construction isn't just about getting checks out on Friday. It's about capturing labor costs accurately so you know which jobs are making money. It's about staying compliant on government projects through proper certified payroll reporting. It's about managing a mixed workforce of employees and subs without creating a classification nightmare.

Generic payroll companies can handle the basics, but they weren't built for your industry. The right construction payroll services partner understands the unique demands of contracting and provides a platform designed around how you actually operate.

Before you sign with the next payroll provider who promises to "handle everything," make sure they can handle your everything. Because in construction, payroll is about a lot more than just payroll.

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