Managing Payroll for Project-Based Companies

Payroll for professional services was much more uncomplicated and straightforward than what it’s today. Since the companies mainly consist of salaried employees, the process of managing payroll was on auto-pilot, that was, pay the employee the same salary for each pay period and then move on.

However, the role of the payroll department and human capital management has become much more complex now. With increased scrutiny from clients, the government, and employees, the payroll process should be precise. The project-based companies should correctly allocate the number of hours and earnings of the employees across different funds; projects, pay periods, and clients.

Allocating Employee Salaries

Salaried employees in a project-based environment work on inconsistent schedules, spanning numerous clients or jobs. Sometimes, a project may need 65 hours in a week while the other week may demand employee’s only 20 hours.

While the employee still gets the same salary, irrespective of the number of hours charged, the payroll system must be capable of providing correct billing, financial statements, and labor reporting. And all this means accurately breaking down the salary earnings and employee hours across the billable and non-billable time.

Bonuses & Other Non-Discretionary Payments

Many professional service companies take into consideration performance-based earnings as a part of their overall salaried employee compensation. Some examples are monthly commissions or annual bonuses to achieve sales goals.

These payments are often managed in a spreadsheet or a manual method since the companies can’t find vendors who automate the policies and well-integrate results with payroll, time, and other systems.

Know that paying commissions is much easier for a payroll system. First, ask the payroll provider if they can automate calculations behind the company’s sales draw policies. If not, you may also recommend a provider to offer assistance with automation. Doing so can save time, reducing the risk associated with manually managing complex pay policies.

FLSA Compliance for Salaried Non-Exempt Employees

Most salaried employees working in project-based companies are eligible for overtime. This practice is common in law firms, banking, engineering, and other industries. Most of the time, attendance systems identify when the employee becomes eligible for overtime and determine their correct pay during the current pay cycle. However, as per FLSA, these non-discretionary payments must be applied when earned. Also, ensure automation of the necessary overtime adjustments to avoid expensive audits.

The Conclusion

There’s been a change in managing payroll for project services companies. Instead of merely paying the same salary to everyone, companies must adopt a strategy for enhancing the overall business profitability while ensuring that the payroll platform you choose delivers a much-detailed project visibility offering robust processing.