Step 1: Hiring & Employee Classification
Why It Matters
Hiring skilled workers is hard enough—doing it in a way that keeps your company legally protected is even harder. In construction, misclassifying employees as independent contractors is a widespread issue that can lead to back wages, unpaid taxes, lost benefits claims, and DOL audits.
Incorrect classification may seem like a shortcut, especially for short-term projects or subcontractor partnerships. However, federal and state labor laws use strict criteria to determine whether a worker is legally an employee, and construction firms that get it wrong risk six-figure penalties.
Another problem is improper onboarding. Many construction firms onboard crew members informally or verbally, skipping documentation like I-9 forms, policy acknowledgments, or safety training logs.
What to Audit
✔ Are all workers classified properly as employees or independent contractors based on IRS and DOL standards?
✔ Do all job descriptions clearly define wage classification (exempt/non-exempt), scope of work, and skill requirements?
✔ Are I-9 forms collected within three business days of hire and stored separately from personnel files?
✔ Does every new hire complete an onboarding checklist that includes safety procedures, a handbook receipt, and information about benefits eligibility?
✔ For union or prevailing wage jobs, are labor classifications and certified payroll documentation properly maintained?
Step 2: Wage Compliance & Payroll Management
Why It Matters
Wage compliance is one of the most frequent sources of lawsuits and audits in the construction sector. Whether you’re operating as a GC, specialty contractor, or sub, you likely manage a mix of hourly employees, apprentices, and field supervisors, with varied shifts, job site locations, and overtime eligibility.
If you’re not correctly tracking hours, breaks, travel time, and job costing, it’s easy to make wage mistakes, especially for non-exempt employees covered under the Fair Labor Standards Act (FLSA). This includes paying overtime for more than 40 hours per week and calculating fringe benefits or hazard pay for public contracts.
Many construction firms still rely on handwritten timecards or verbal approvals, which increases the risk of payroll errors or disputes.
What to Audit
✔ Are all non-exempt employees receiving 1.5x pay for overtime hours, per FLSA rules?
✔ Are timecards submitted daily or weekly and signed off by supervisors?
✔ Are you accurately tracking travel between jobsites and compensating for time spent gearing up or attending mandatory pre-shift meetings?
✔ Is your payroll software configured to handle prevailing wages, fringe benefits, and union contributions when required?
✔ Do you audit payroll quarterly to catch misclassifications or underpayments before they escalate?
✔ Are payroll taxes filed on time, and wage statements issued with proper documentation?
Step 3: Workplace Policies & Jobsite Safety
Why It Matters
Construction is among the most dangerous industries in the U.S. Each year, OSHA ranks fall protection, scaffolding, and trenching among the top violations, many of which result in serious injuries or fatalities. A written safety plan is no longer optional—it’s a baseline expectation for public and private project bids.
But job site safety is just one piece of your workplace policy puzzle. Clear conduct policies, anti-harassment training, and consistent disciplinary procedures all help reduce legal risk and create a more stable, respectful work environment, especially when managing crews from diverse backgrounds.
What to Audit
✔ Do you have a construction-specific employee handbook outlining your code of conduct, PPE requirements, and disciplinary protocols?
✔ Are site safety plans developed and distributed for each active project?
✔ Are toolbox talks, tailgate safety briefings, and job hazard analyses (JHAs) documented weekly or as required?
✔ Do you conduct annual employee safety training, including new OSHA topics and equipment-specific refreshers?
✔ Are substance use policies enforced and documented across your crews?
✔ Is there a clear procedure for employees to report safety issues, harassment, or misconduct anonymously?
Step 4: Employee Benefits & Workforce Retention
Why It Matters
The construction industry faces a major labor shortage, with skilled tradespeople retiring faster than new workers enter the field. Retaining reliable crew members—especially forepersons, operators, or specialty trades—requires more than competitive pay. Employees today expect access to benefits, career growth, and recognition for their work.
From a compliance standpoint, employers must also navigate benefits regulations like the Family and Medical Leave Act (FMLA), state-paid leave laws, and workers’ compensation insurance, regardless of whether they offer health insurance.
What to Audit
✔ Are your health benefits, PTO, and leave policies compliant with federal and state regulations?
✔ Are you providing workers’ comp coverage that matches job classification codes and payroll levels?
✔ Do you offer skill-building, equipment certification, or leadership training for experienced crew members?
✔ Are safety bonuses, retention incentives, or project milestone rewards used to boost morale?
✔ Do you conduct regular performance reviews and provide upward mobility opportunities for field staff?
✔ Are exit interviews documented and used to inform future retention strategy?
Step 5: HR Record-Keeping & Documentation
Why It Matters
Construction companies face complex documentation demands—often across multiple worksites, states, and subcontractor relationships. From I-9 compliance and OSHA 300 logs to safety citations, timecard approvals, and subcontractor insurance certificates, poor recordkeeping can put your company at risk during audits or legal disputes.
A centralized, cloud-based HR system can reduce paperwork, improve organization, and ensure consistency, especially if you operate across state lines or bid on government projects.
What to Audit
✔ Are each employee’s I-9 forms, W-4s, and wage statements securely stored?
✔ Are OSHA 300, 300A, and 301 logs updated, posted, and retained per regulation?
✔ Do you maintain subcontractor agreements, certificates of insurance, and safety attestations?
✔ Are employee evaluations, corrective action forms, and incident reports logged by project or department?
✔ Is your HR data backed up and access-controlled to ensure confidentiality?
✔ Do you conduct an annual HR compliance review to identify gaps and implement improvements?
Conclusion
Construction companies that proactively audit their HR practices are more likely to stay compliant, retain top talent, and win more competitive bids. Whether scaling your workforce, bidding on public contracts, or simply trying to reduce risk, aligning your HR practices with this five-step framework can set your business apart.
📌 Need help building an HR infrastructure that scales with your construction business? Contact Targeted-HR for customized workforce solutions designed for the trades.