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💵 Construction Payroll Guide

Commercial construction payroll is fundamentally different from standard payroll. In a typical office company, everyone gets a salary or an hourly rate and overtime kicks in after 40 hours. Construction is different because:

  1. Workers are often union members with negotiated rates that vary by craft and jurisdiction
  2. The day matters, not just the week — California's 8/12 rule means daily hours trigger OT before weekly caps are even hit
  3. Multiple employers share the same job site, each with different compliance obligations
  4. Every state has its own rules — and you may have projects in several simultaneously

The GC sits at the top of the contract hierarchy and typically has the most compliance exposure, while subs operate under their own payrolls but must still meet project-level obligations.

The payroll hierarchy​

Who pays whom, and who carries the compliance risk.

On prevailing wage or public works projects, both the GC and all subs must pay the mandated wage rates and file certified payroll reports. The GC is responsible for collecting and reviewing sub CPRs before submitting them to the contracting agency.

Compliance layer — applies to all contractors on covered projects
Prevailing WageDavis-Bacon, state laws
Certified PayrollWH-347, weekly filing
Fringe BenefitsHealth, pension, training

What this section covers​

Overtime & time calculation​

How hours convert to pay — the core of construction payroll.

  • Federal Overtime (FLSA) — The baseline: weekly OT after 40 hours, workweek definition, exempt vs non-exempt, weighted average for multi-rate weeks
  • California Overtime — Daily OT (8/12 rule), 7th consecutive day, alternative workweek schedules, anti-pyramiding, meal and rest breaks
  • State Overtime Map — All 50 states compared: daily OT states, FLSA-only states, prevailing wage states, multi-state project setup

Rates & wages​

The anatomy of construction pay rates and how to manage them.

  • Union Locals & Wage Rates — Base wage + fringe breakdown, classifications (Journeyman, Foreman, Apprentice), geographic scope, apprentice-to-journeyman ratios, CBA fringe OT
  • Prevailing Wage Rate Management — Rate lookups, project types, CBA vs PW priority, fringe OT rules, rate effective dates, multi-state rate management

Compliance & reporting​

Certified payroll filing — federal and state requirements.

Putting it all together​

Real-world payroll math and end-to-end setup.

  • Worked Examples — Seven dollar-amount scenarios: the three compliance outputs, shift differentials, California daily OT, 7th day, AWS, prevailing wage OT, CBA vs Davis-Bacon, fringe credit offsets
  • End-to-End Payroll Setup — Full configuration walkthrough: dependency chain, time calculation mode decision tree, payroll run lifecycle, and verification checklist

The GC vs sub distinction​

A general contractor holds the prime contract with the owner and takes on the compliance liability for the whole project. Subcontractors sign trade-specific agreements with the GC. On prevailing wage or public works projects, both the GC and all subs must pay the mandated wage rates and file certified payroll reports. A company using payroll software might be the GC, a sub, or both on different projects at the same time.

Why fringe benefits are line items, not one number​

Fringe benefits in a union CBA are always separate contribution amounts: health and welfare (typically $8–$18/hr), pension ($6–$15/hr), vacation/holiday fund ($2–$6/hr), and apprenticeship/training ($0.50–$2/hr). These are paid per hour worked to the benefit funds administered by the union trust, not to the worker directly. Your wage rate entry needs to capture each of these separately because:

  • Some are subject to OT premiums and some aren't (varies by CBA)
  • Certified payroll reports require them itemized
  • Fringe rates sometimes update on a different schedule than base wages
Key Principle

When rules conflict, follow the one most favorable to the worker. Federal, state, and contract/CBA rules can all apply simultaneously. Build your payroll process to handle the most restrictive rules for each project.

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