Managing the Complexities of Labor Rate Rules

Simplifying Rates Management


What happens when a Journeyman works a 16-hour shift? Well, first, he goes home tired and hungry and very keen on a cold beverage or two. But on top of that, he’s also got a smile in the back of his mind about the overtime and double-overtime he just earned. So, how much overtime was that exactly? Calculating how much of that 16 hours was regular, OT and Double-OT, can depend on a number of legal and contractual factors.

construction labourers

The challenge many organizations face is: who is responsible for knowing the rules of how to allocate their hours to the correct buckets? It’s often the case that that allocation is done by the site foreman right at the jobsite when he’s recording his crew’s hours at the end of the day. But why not just let payroll or AP figure that out? Waiting for payroll or accounts payable to figure it out later is typically not an option since the Site Foreman needs to get their daily LEM sheet signed by the client on that day.

Composite Rates Management


This leads me to the discussion around what we call “Composite Rates”. In 4castplus, the Composite Rate Type feature enables administrators to preconfigure the quantity split for how labor timesheet entries should be allocated according to company and labor standards.  By pre-configuring these rules, the site personnel that are recording hours are alleviated from having to look-up or just know these rules for each member of the crew. All the site foreman has to enter is the total quantity of hours, and the system auto-distributes that time into the appropriate rate categories – such as Hourly, Overtime and Double-Overtime, etc. All of the heavy lifting on how total daily time is costed and charged out is handled through pre-configuration of the Composite Rate.

Cost versus Billable Rules


In many projects, the amount of time that you are obligated to pay your staff (according to labor standards) can be different than what your customer contract allows you to bill them. For example, by law you may have to pay your staff overtime for any time exceeding 8-hours; but your contractual agreement with your client may stipulate that they will not agree to being billed for overtime at all. Or, maybe you can only bill them to a maximum of 2-hours overtime, but by law, you have to pay 4-hours of overtime. The Composite Rate manager allows you to configure rates that are intelligent enough to understand the difference between the hours-allocation for cost (i.e. payroll or accounts payable) versus billable (i.e. accounts receivable). Administrators can structure composite rates that have a separate configuration for the amount of hours that can be billed to customers. To achieve even more flexibility for the many variables that can occur at the jobsite. There is an additional feature to this that enables administrators to allow for an optional bypass of the composite rules so that they can let the field personnel enter the quantity split manually.

Why is this necessary?  Situations can occur at the jobsite that are beyond the control of the office personnel and the construction managers, site supervisors & other field personnel need to be given the options and flexibility to react. Sometimes this means agreeing to a one-off override of how many hours actually get billed to the client. Mistakes happen – and so even if your crew worked a full shift, billing the client for the full shift can, in certain cases, be inappropriate. They may need to override the default rules.  Again, this is an optional setting.

Adjustments, Project Costs and Approvals


Once the site foreman enters and saves the LEM information for the day, the project is immediately updated with all the cost & billable information on the correct cost codes on the project’s work breakdown structure. This is a key part of having the field tightly connected with the office. Project management and project controls have immediate visibility into the costs, activities and any unbilled revenue that is now appearing on the project. Having the confidence that these values – transactions – are accurate because of the preconfigured composite rates, creates greater trust in the data and reporting.

As soon as the site foreman is ready to finalize everything, he can submit that day’s entries for approval. Multi-level approvals can be configured to be routed to the appropriate staff members responsible for ensuring the entries are correct.

Even though the field personnel have done their best to enter the daily LEM for their project, there may be a need to make adjustments later. 4castplus provides an Adjustment feature the enables finance personnel to reverse a transaction and enter an adjustment as needed.

Billing – Accounts Receivable


All the entries from the field (and from any other ‘timesheet’) are immediately available to the invoicing module for client billing. A few conditions can be placed on that. One condition, for example, can be that only approved billable transactions will be available for invoicing.  Submitted invoices in 4castplus can also be routed through an approvals workflow.

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