Job costing payroll: from time card to job cost

Time is recorded by worker, job, cost code and classification. Payroll turns the hours into gross pay, taxes and deductions. Job cost needs each hour's wages plus burden posted to the job and cost code the time was charged to, so the project manager sees true cost against the estimate.

Employer Social Security (6.2 percent up to the wage base) and Medicare (1.45 percent), federal unemployment tax on the first $7,000 of each worker's wages, state unemployment tax up to the state's wage base, workers' comp by class code, health and retirement contributions, union fringe and paid time off. A journeyman paid $40.00 an hour with burden at 38 percent of wages costs $55.20 an hour on the job.

Unemployment taxes stop at their wage bases, so actual burden is heavier early in the year and lighter later. Posting actual burden is precise but swings; a loaded rate by trade smooths it and needs a true-up against actual cost, quarterly or at year end.

Fringe paid in cash is wages and carries employer taxes; plan contributions generally do not. The classification on each hour feeds both certified payroll and job cost, so a wrong classification is wrong twice.

Allocating a salaried superintendent's or project manager's time to jobs moves cost between jobs; it does not change their pay or whether they are exempt from overtime. Leaving them out understates every job's labor cost.

The usual causes when job cost and payroll disagree:

Labor and burden posted to all jobs should tie to gross pay and employer costs in the payroll register, with the difference explained as overhead and uncoded time. A standing reconciliation each period catches most errors before the month closes.