For heavy civil contractors managing crews, job sites, and multi‑state payroll
The middle of the year is an ideal time to step back and check the health of your payroll processes—before you head into year-end prep, W-2 deadlines, or potential IRS notices. For construction contractors managing complex labor structures, certified payroll, or Davis-Bacon compliance, even a small misstep can create issues.
Here are five common (and preventable) payroll errors we see construction firms make—and what to do about them before they cost you.
1. Social Security and Medicare Thresholds Are Out of Date
The 2025 Social Security wage base increased to $176,100. If your payroll system hasn’t been updated, you may be:
- Deducting too little or too much from employee pay
- Under-contributing your employer match
- Setting yourself up for reporting discrepancies on W-2s
2025 Quick Reference:
- Social Security: 6.2% each (employer and employee), up to $176,100
- Medicare: 1.45% each, no wage cap
- Additional Medicare: 0.9% employee-only for wages over $200,000
Source:
IRS – 2025 Publication 15 (Circular E)
2. Certified Payroll & Davis‑Bacon Compliance
If you're working on federally funded or Davis-Bacon-covered contracts, you must ensure:
- Wages meet prevailing wage requirements (base + fringe)
- Weekly submission of WH-347 certified payroll forms
- Job classifications and postings are accurate and up to date
More resources:
3. Overtime Miscalculations
Under the Fair Labor Standards Act (FLSA), overtime must be paid at 1.5× the regular rate for hours worked over 40 in a workweek.
Construction-specific mistakes:
- Forgetting to include nondiscretionary bonuses or shift premiums
- Paying straight time for overtime hours
- Misclassifying travel or standby time
To stay compliant, ensure your payroll system accounts for the correct regular rate components.
4. Multi‑State Payroll Withholding Errors
Do your crews live in one state and work in another? You may need to:
- Withhold income tax for the work state, not just the home state
- Register and pay State Unemployment Tax (SUTA) in the work state
- Apply reciprocity agreements where applicable
What to do:
Review where your workers are physically performing services, and check each state’s employer withholding rules.
Helpful resource:
APA – Multi-State Payroll Taxation Overview
Note:
Some jurisdictions require the assessment of local income taxes (county, city, or school district), which may be based on job location, employee residence, or both. Review your Earnings History and W2 inquiries to ensure the appropriate amounts are being deducted and remitted.
The Eclipse Onboarding team is available at any time to help with your payroll review, should you need our assistance.
5. Missing or Late Federal Tax Deposits
Late deposits can lead to:
- 2–15% penalties, depending on how late
- Accrued interest
- IRS audit flags
What to do:
- Confirm your deposit schedule in IRS Publication 15 (monthly or semiweekly)
- Ensure your payroll system uses scheduled deposits based on payday, not just pay period
- Automate reminders or approval workflows if needed
Bonus tip:
You can review the IRS penalty structure for late deposits here.
Need a Smarter Payroll System Built for Construction?
Heavy civil contractors face one of the most complex payroll environments in the U.S.—with multi-state rules, union labor, certified payroll, prevailing wage compliance, and tight remittance schedules.
Eclipse ERP is purpose-built for construction and helps contractors:
- Stay current with tax thresholds and wage bases automatically
- Handle Davis-Bacon compliance and certified payroll submissions
- Apply proper regular rate logic for overtime
- Manage multi-state and local payroll obligations
- Automate payroll tax deposits and reduce risk
Want to see Eclipse in action with your payroll setup?
Request a custom demo and let us show you how we reduce risk, and save time, for your team.
