COVID-19’s impact on the economy has many manufacturers looking for payroll solutions that can improve efficiencies and cut costs. But manufacturing is an industry with unique payroll challenges, and it’s important to find a third-party vendor that can solve your biggest payroll problems.
Find a trusted advisor who understands the manufacturing industry’s specific challenges, trends, and terminology. Payroll sales reps who take the time to do this can provide solutions that manufacturers need most. Let’s take a look at the top payroll issues your HCM provider should be able to solve for you.
Calculating Union Rates
If you have union workers, you have complex union rules to deal with every payday. For most manufacturers, that introduces a tangle of calculations that make timekeeping and payroll particularly challenging to manage. And that complexity increases exponentially when you’re dealing with multiple unions.
Many unionized companies have resigned themselves to laborious manual timekeeping and payroll processes, or using spreadsheets for determining union specific pay rates. But more and more companies are looking for ways to automate their pay policies and business rules to save time and avoid labor disputes.
Your payroll system should be able to handle union pay accurately, easily and reliably. Ask your HCM consultant about how their system addresses these challenges:
- Union pay rates. This is critical, because the rate is determined by several factors, including the union, the employee's seniority level in the union and their role. You may also have premiums to pay on top of the hourly union rate if union members work with hazardous material, perform evening or weekend work, or meet other requirements.
- Union benefits. Will the HCM handle mandated benefits defined in the collective bargaining agreement?
- Union deductions. How does the payroll system calculate the union dues that you pay?
Handling Multiple Job Rates
Unlike many industries that pay employees a defined rate of pay, manufacturing companies have several factors that determine the correct pay rate. Many employers pay different rates based on multiple variables, including:
- The type of work performed
- Where the work is performed (division, department, location/plant)
- When the work is performed
- How the time is classified (straight time, overtime, training, administrative, PTO)
It’s only becoming more challenging to manage variable job rates, all while staying in compliance with Fair Labor Standards Act (FLSA), and it’s critical that your HCM system accommodates different labor rates based on your rules.
Ask your payroll representative if their system can take the labor grading, and the varying rates associated with each, and calculate it automatically.
Calculating Incentive Pay
You want to hire and keep workers who do more than produce quality and quantity. Teamwork, planning, decision making, and problem solving are valuable skills in your employees, and incentives can help retain your best workers.
Manufacturing companies use several types of incentives:
- Team or experience-based incentives
- Wage progression, or step pay
- Production pay
- Shift differential
For companies that have one or more of these pay policies, accurately calculating the proper overtime earnings that factor in time worked, incentives, production pay and/or union wages becomes even more complex to be compliant with FLSA guidelines.
Most time-and-attendance systems aren’t designed for these complexities, so it’s important to ask your payroll provider if they can automate your organization’s incentive pay.
Integrating with Your ERP
You probably use an enterprise resource planning system (ERP) or shop floor control system for accurate production planning and reporting. These systems usually offer communication between Sales, Production, Warehouse, Procurement, Administration and Finance, including integration with online accounting systems.
Most ERP systems don't include a robust time-and-attendance or payroll module to handle shift differentials, overtime, and state-specific rules. Therefore, many manufacturing companies choose to outsource their HCM needs.
These payroll systems typically are very good at supplying general ledger information, but not the full spectrum of data you need. Don't settle for anything less than a comprehensive and complete data flow back to your ERP system. That includes the general ledger and critical job cost information.
Make ERP integration a central part of your dialogue with vendors. While the complexities of ERP processes are beyond payroll systems, complementary solutions such as Contractor Central can help bridge the gap. Contractor Central is IDI's comprehensive web-based application for manufacturing companies that want to outsource payroll while keeping their best-of-breed ERP.
Related content: 6 Signs You Need to Automate Your Unique Payroll Policies
IDI Boosts Your Third-Party Payroll Solution
IDI can eliminate your time-consuming processes and synchronize your disparate systems. Our solution is designed for companies that need to integrate ERP systems with time and payroll, and handle complex calculations.
At one time, third-party payroll systems had no ability to manage all of the demanding calculations for a manufacturing company paycheck. But with IDI’s integration software, your payroll provider can give you an automated solution that takes seconds of your time — not hours. Best of all, results are guaranteed correct every payday.
Run payroll with the push of a button and get back wasted time every week. Talk to your HCM representative to learn more.