Payroll systems for the Engineering, Construction and Operation (EC&O) industry pose a unique set of challenges.

The ability to handle union labors, regulatory government requirements, and project actual labor costs are essential. SAP payroll has strong processing capabilities and allows complex configurations to serve a vast variety of needs. Hence, many companies like American Airlines, Delta Air Lines, Microsoft, Burger King, Coca-Cola, United States Navy (just to name a few) use SAP as their payroll solution.

However, SAP payroll lacks the unique capabilities required by the EC&O industry, such as union payroll. By leveraging our deep business knowledge of the EC&O industry, as well as our strong technical know-how, ReachNett has developed a tool specifically to fill this gap and enhance the SAP payroll solution to deliver the functionalities needed by the EC&O industry. 

ReachNett’s EC&O Payroll allows companies to more effectively achieve two goals: 1) address government requirements, and 2) accurately predict actual labor costs.

Government Requirements

EC&O companies often bid for government projects, highways, bridges, and government buildings. Government entities— whether local, state, or federal— all have regulations in place to ensure that workers’ pay and benefits meet certain standards, as summarized below.

Davis Bacon Prevailing Wages 
According to the Davis Bacon Act, workers working on government projects must be paid no less in cash and benefits than a specified prevailing wage for the job classification. Due to the complexity of employer-provided benefits and the fact that employees can work multiple projects during a week, the standard configuration of SAP software cannot handle this requirement. ReachNett’s solution fills this gap.

Service Contract Act 
Similarly, according to the Service Contract Act, government project workers must be paid no less in cash and benefits than a specified prevailing wage for the job classification. ReachNett’s add-on accounts for the complexity of employer-provided benefits as well as employees who work multiple projects in a week. 

Sick Leave Accrual 
Recently, governments at different levels have issued stipulations on sick leave accrual for employees working in their jurisdiction. Due to the mobility of the employees working on different projects, an employee may cross multiple jurisdictions within a week, causing sick leave accrual to become very complicated. Standard SAP configurations cannot address this stipulation. ReachNett’s add-on solution handles this gap.

Certified Payroll Report 
Government projects will typically require companies to produce a certified payroll report detailing the employee’s day by day paycheck information, with gross-to-net totals. The standard SAP configuration does not address this requirement. ReachNett’s add-on solution will bridge this gap.

Actual Labor Costs

Labor costs typically account for a large percentage of the total cost of EC&O projects. For some service projects, labor can account for as much as 60% of the total cost. Accurately calculating the labor cost for projects— and in a timely manner— is key to the profitability and success of EC&O projects. 

Direct Labor Cost 
Direct labor cost is typically defined as the wages and premiums paid to the employee (e.g. straight time pay, overtime pay, safety bonus, per diem etc.). These payments will typically be assigned a cost element, like projects or service Order, so that the project can add up the direct labor cost that has been charged to it.

Indirect Labor Cost 
When employees get paid, employees pay taxes to various tax authorities. At the same time, the employer must pay taxes for certain tax types as well (e.g. Federal FICA tax, Federal FUTA tax, State unemployment tax (SUI)). These are costs to the employer because of the project. Because an employee may work multiple projects during the week, the employer-paid taxes need to be distributed among the projects. The employer’s contribution of employee benefits are another area of indirect labor cost to the projects. 

OCIP and Non-OCIP Worker’s Compensation and Liability Insurances 
The worker’s compensation and general liability is another area of indirect labor costs to projects. However, it is often the case in the EC&O industry that the project owner will cover or partially cover the insurance. This makes the calculation complicated, and the standard SAP solution cannot handle this degree of complexity. ReachNett’s add-on solution addresses this issue and provides the necessary set up tables as well as calculation enhancements.

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