Navigating payroll efficiency, technology, and compliance in construction firms
The construction industry is no stranger to complexity, with ongoing regulatory changes, labour shortages, and rising costs shaping its landscape. Payroll, once a routine administrative task, has evolved into a strategic function essential for efficiency, compliance, and financial stability.
A recent survey by Intuit QuickBooks found that financial management is a widespread challenge, with 36 percent of small firms in architecture, engineering, and construction struggling with long-term financial planning. Additionally, 32 percent face difficulties tracking cash flow, while 36 percent grapple with expense management – challenges that can hinder growth and profitability.
To overcome these obstacles, construction businesses must prioritise financial management by leveraging accounting services for project planning, tax compliance, and budgeting. Effective cash flow management and cost control enable firms to reinvest in growth and long-term success. However, many still rely on outdated payroll methods, leading to errors, inefficiencies, and compliance risks – particularly given fluctuating workforce structures due to seasonal demand, subcontracting, and shifting project scopes.
As payroll demands evolve, so must the solutions. To stay ahead, construction businesses need a more streamlined approach – one that ensures timely and accurate management while minimising the administrative burden.
The payroll challenges in construction
Payroll in construction is uniquely complex compared to other industries. Unlike fixed office environments, construction companies manage a dynamic workforce
spread across multiple job sites, with varying wage rates, overtime considerations, and compliance with region-specific tax laws and union agreements.
One pressing concern is the upcoming National Insurance (NI) increase set to take effect in April, which will drive up employer contributions and overall payroll expenses. This, coupled with the rising national minimum wage, adds pressure on margins, particularly for small and mid-sized contractors. Businesses that rely on younger workers and apprentices will feel the greatest impact, with some facing wage increases of 18 percent.
Additionally, payroll errors can be costly. Late or incorrect wage payments hurt employee morale and expose companies to legal repercussions. According to the 2024 Intuit QuickBooks Accountant Technology Survey, nearly 88.3 percent of small business owners worry about making payroll mistakes. In construction, where cash flow management is already a challenge, inaccuracies can lead to delays in project execution and financial instability.
The push for more efficient payroll solutions
Given these challenges, construction firms are increasingly seeking ways to optimise payroll management. A key trend is the growing shift towards outsourcing. Research shows that 41 percent of accounting professionals have outsourced payroll processing in the past year, primarily to gain compliance expertise, improve accuracy, and enhance security.
However, there is a growing recognition that outsourcing is not a one-size-fits-all solution. Many firms are now exploring hybrid models, such as payroll co-sourcing, which allows them to outsource certain functions while retaining control over critical aspects. This approach balances efficiency with compliance, ensuring that companies remain in control of sensitive payroll data while leveraging external expertise for administrative tasks.
Technology as a game-changer in payroll
The most significant transformation in payroll is being driven by advancements in technology. Cloud-based payroll solutions are reshaping the way construction firms manage their workforce, providing real-time access to payroll data, automating tax compliance and integrating seamlessly with accounting software.
Automated pay runs significantly reduce manual processing and the risk of errors. By streamlining payroll through automation, construction firms can ensure that payments are made on time and with precision, reducing administrative overhead. Seamless integration between payroll systems and accounting software enhances financial reporting accuracy and provides real-time financial insights. This connectivity allows businesses to maintain clear financial oversight while reducing the need for manual effort to align payroll data with accounting records.
Multi-user access is another game-changing feature, enabling HR, finance, and project managers to collaborate in real time efficiently on payroll tasks. With defined user permissions, different teams can access the payroll information they need without compromising data security. Compliance updates are also automatically integrated into cloud-based payroll systems, ensuring alignment with government regulations and minimising the risk of compliance breaches.
A major advantage of cloud-based payroll systems is their ability to provide valuable payroll insights that support strategic decision-making. Instead of viewing payroll as a routine administrative task, construction firms can leverage payroll data to track labour costs, predict future workforce needs, and enhance financial forecasting.
Looking ahead: payroll as a strategic asset
For construction firms, payroll is no longer just a function of paying employees – it’s a critical component of financial health and business strategy. The key to success lies in embracing technology, streamlining processes, and staying ahead of regulatory changes.
A well-designed payroll system should empower businesses, not burden them. By leveraging automation, integrating intelligent insights, and ensuring compliance, construction firms can transform payroll from a cost centre into a competitive advantage.
As the industry continues to evolve, construction leaders must ask themselves: Is my payroll system keeping up? If not, now is the time to modernise, streamline, and future-proof payroll operations.
By Pauline Green
Pauline Green is Head of Product Compliance & Programs at Intuit QuickBooks UK. Intuit is a global financial technology platform that powers prosperity for the people and communities it serves. With approximately 100 million customers worldwide using products such as TurboTax, Credit Karma, QuickBooks and Mailchimp, it believes that everyone should have the opportunity to prosper.