What are the problems with managing wages for a construction site - and can a software system help?
Profitability and keeping to budgets are two sides of the same coin in construction.
When working for the UK's major house builders, ensuring your subcontractor tradespeople aren't double-booking a fix or that your company is applying for all the daywork and variation orders correctly can be the difference between profitability or cash flow issues.
One of the biggest challenges in managing wages for a construction site is ensuring that all workers are paid correctly and consistently for their contributions. This can be difficult due to the complex nature of many construction projects, which often entail multiple layers of subcontracting and various types of labour.
Operating and managing a business in the construction industry is not an easy ride. Working with various site stakeholders - such as working alongside other trades, can impact your schedule or cause your contractors or subcontractors issues when completing their work. This is even more noticeable when housebuilders suddenly want to increase their plot completion rate.
When this happens, it can be difficult for any business owner to track who has done what, whether it's tendered contracted works, VO's or daywork. Ensuring that budgets are kept and not overspent is a problem for construction trades of all sizes.
One common problem experienced in construction sites by contractors working for the UK's biggest housebuilders is the double booking of wages. This occurs when two or more subcontractors or PAYE claim the same fix during the same period, resulting in overpayment and causing the business a loss.
In some cases, subcontractors who know they're about to jump ship onto a better-paid site may even book work they did not complete, knowing that their contract manager won't even spot it for a month or so.
How do I find the right construction site wages software for my business?
This is a critical question, and there are a few key things that you need to think about when choosing the right software for your construction business.
Some of the most important things to consider include the cost of the software, how user-friendly it is, and what features it offers. Thankfully, in recent years, plenty of software solutions have been built specifically for the construction industry.
Unfortunately, so many of these solutions are geared toward 'large players' like Taylor Wimpey and Barratt Homes and may not necessarily fit smaller subcontracting firms. And these solutions certainly wouldn't be affordable.
However, there are software solutions available that have been tailored especially toward smaller firms.
Stephen Clark of construction wages software provider Site Manager Pro says, "Most construction firms have built themselves up from starting as specialist tradesmen with 2-3 people working for them, to upscaling to over 100+ subcontractors on site and all of the logistical issues that come with it.
"Paper timesheets are a thing of the past as they are difficult to keep track of and can cause damage to the budgets of the business. Overseeing variation orders can be almost impossible to keep track of at times, so it is now commonplace for construction businesses to implement management software to solve these problems."
Stephen continues, "My suggestion to any contractors searching for construction software to assist them with booking their wages and overall management of their business is to look for smaller apps and software solutions that your competitors are utilising. The issues you're having have already been solved; it's just that you're not aware of it!"
What problems can come with the double booking of wages on a construction site?
A few examples of problems that can occur include:
- Reduced profitability: Double booking wages mean a company's employees are paid for more than one fix simultaneously. This can reduce profitability for construction businesses because it reduces the total amount of money they have to invest back into their business, reduces efficiency on site and increases costs related to labour. There are several strategies that companies can use to avoid double-booking wages, including using advanced budgeting software that reduces the ability of tradespeople, be they subcontracted or PAYE, to double-book any given budget.
- Increased administrative burden: Reviewing who's done what and resolving issues with associated paperwork for double booking in of wages is time-consuming for businesses. This is especially true if the construction business relies on paperwork being supplied from site managers, through to the subcontractor, then up through the chain of command and, at some point hopefully, dropping into the in-tray of the office team whose job it is to apply for payment for every price of work completed. Fortunately, software programs and apps can automate this process - making it much easier for businesses to manage the whole process.
- Negative impact on site team morale: When your team members discover that another subcontractor or employee has falsely claimed for work they didn't complete, it can create tension on site, reducing their overall morale and motivation. Additionally, if the situation is not dealt with swiftly and rectified, it can lead to further issues such as decreased productivity or increased labour moving company.
These problems can cause serious issues when processing payroll for subcontractors and can be detrimental to the overall capabilities of the business in the short, medium and long term.
So, how do you solve the problem?
Ryan Jones, Operations Director from LJ Construction, explains, "For many years, we struggled with our payroll system for our subcontractors as there were always cases of double booking of wages. Times have changed from managing a handful of people to upscaling to a business with over 160 subcontractors across multiple sites."
Jones continues, "Using our original paper timesheet system brought lots of problems with them getting lost and unaccounted for. This had huge repercussions on our business. We had cases where we missed tens of thousands of pounds in unclaimed daywork and variation orders.
"As for contracted works, the work we did book in wasn't always the right work, so it didn't get paid. Trying to unpick this led us to over-staffing the admin team. To solve this headache in the company, we began to look for a wages software specifically designed for the construction industry. Back in 2006, it didn't exist, so we had to build one."
"Thankfully, we partnered with a software specialist who built us a custom solution that allowed subcontractors to book their wages via their mobile and prevent any double booking on any sites, keeping us within our set budgets. We could also control and oversee variation orders, and overall workforce management became simpler and far more efficient."
Following this guidance will assist you in locating the most efficient management software for your contractor company. You can simplify your business processes and alleviate your pain points by choosing the appropriate solution for your needs.