Construction companies operate in one of the most complex and high-risk employment environments. Between workers’ compensation exposure, certified payroll requirements, union relationships, OSHA compliance, and project-based employment, construction HR is uniquely challenging.
Not all PEOs understand construction. Choosing a PEO without construction expertise can create serious problems. Here’s what construction companies need to know about PEO partnerships.
Why Construction Companies Need Specialized PEOs
Workers’ Compensation Costs: Construction has some of the highest workers’ comp rates of any industry. Roofers might pay $25-$40 per $100 of payroll. Concrete workers, framers, and other trades face similarly high rates. For many contractors, workers’ comp is their largest expense after direct labor costs.
OSHA Compliance: Construction sites are inherently dangerous. OSHA regulations are extensive, inspections are common, and violations carry steep penalties. General contractors face additional liability for subcontractor compliance.
Certified Payroll: Government projects (federal, state, and local) require certified payroll reports documenting compliance with prevailing wage laws. The documentation requirements are strict, and errors can result in project delays, penalties, or contract termination.
Project-Based Employment: Many construction workers move between projects, sometimes working for multiple contractors in a single year. This creates hiring, termination, and documentation challenges uncommon in other industries.
Union Relationships: Union contractors face complex requirements around union dues, fringe benefits, and collective bargaining agreement compliance.
Multi-State Operations: Contractors working across state lines face varying licensing, insurance, and employment law requirements in each state.
What Construction Companies Should Look For
Construction Industry Expertise: Choose PEOs with dedicated construction divisions and deep industry knowledge. They should understand:
- State-specific contractor licensing requirements
- Prevailing wage and certified payroll processes
- OSHA safety programs specific to construction trades
- Workers’ comp classification codes for various trades
- Bond and insurance requirements
- Union relationships and requirements
Workers’ Comp Specialization: Verify the PEO has experience managing high-risk construction classes. Ask about:
- Their experience modification rate (e-mod)
- Safety programs specific to construction
- Claims management approach for serious injuries
- Return-to-work programs
- OSHA 10/30 training availability
Certified Payroll Capabilities: If you work on prevailing wage projects, the PEO MUST have robust certified payroll systems and expertise. This isn’t optional—it’s essential for government contract compliance.
Safety Programs: Strong construction PEOs offer:
- Site-specific safety plans
- OSHA training and certification
- Toolbox talk materials
- Fall protection programs
- Equipment safety training
- Incident investigation support
Flexible Employment Models: Construction work is often seasonal or project-based. Your PEO should accommodate varying workforce sizes, seasonal layoffs, and rapid hiring without penalizing you for workforce fluctuations.
Best PEOs for Construction
TriNet: Offers a construction-specific vertical with tailored services, experienced account managers, and understanding of industry needs. Strong workers’ comp programs and safety resources.
ADP TotalSource: Massive scale provides excellent workers’ comp rates. Certified payroll capabilities and multi-state experience. Less personalized than smaller providers.
CoAdvantage: Specializes in construction and other high-risk industries. Strong focus on safety programs and workers’ comp cost reduction.
Employer Flexible: Construction-focused PEO with deep industry expertise, particularly in the southeastern United States.
Regional Construction PEOs: Many regions have PEOs specializing in local construction markets. These providers often have established relationships with local unions, insurance carriers, and project developers.
Workers’ Comp Savings in Construction
Construction workers’ comp savings through PEOs can be dramatic:
Example: 20-person framing crew
- Independent policy at $30 per $100: $300,000 annual premium on $1M payroll
- PEO master policy at $18 per $100: $180,000 annual premium
- Annual savings: $120,000
For many contractors, workers’ comp savings alone justify the entire PEO fee with money left over.
Certified Payroll Compliance
What It Involves:
- Tracking hours worked on each government project separately
- Documenting compliance with prevailing wage rates
- Calculating and reporting fringe benefits properly
- Submitting certified payroll reports weekly or bi-weekly
- Maintaining detailed records for audit purposes
- Responding to compliance inquiries from contracting agencies
How PEOs Help:
- Automated tracking systems
- Prevailing wage rate databases
- Compliant certified payroll report generation
- Audit support and documentation
- Training on requirements
If you bid on government projects, verify your PEO has strong certified payroll capabilities before signing.
OSHA and Safety Compliance
Key OSHA Requirements for Construction:
- Fall protection (leading cause of construction fatalities)
- Scaffolding and ladder safety
- Electrical safety
- Hazard communication
- Personal protective equipment
- Equipment operation safety
- Trenching and excavation safety
PEO Safety Support:
- Site safety inspections
- Customized safety programs
- OSHA 10 and OSHA 30 training
- Toolbox talk materials
- Safety committee guidance
- Incident investigation
- OSHA defense support
Union Contractor Considerations
If you work with unions, ensure your PEO can:
- Process union dues and fringe benefits correctly
- Handle multiple union agreements simultaneously
- Maintain separate records for union vs non-union workers
- Coordinate with union benefit funds
- Provide reports required by union agreements
Not all PEOs have strong union experience. If this applies to you, it’s a critical evaluation criterion.
Multi-State Construction Projects
Contractors working across state lines face:
- State-specific contractor licensing
- Varying workers’ comp requirements
- Different employment laws in each state
- State tax registration and filing obligations
- State-specific prevailing wage rates
PEOs with strong multi-state capabilities handle these complexities seamlessly, ensuring compliance across all project locations.
Common Construction PEO Challenges
Classification Accuracy: Proper workers’ comp classification is critical. A carpenter classified as a finish carpenter vs rough framing carpenter can have significantly different rates. Ensure your PEO understands construction classifications precisely.
Seasonal Fluctuations: Some PEOs penalize you for seasonal workforce changes. Find providers comfortable with construction’s variable nature.
Owner-Operator Issues: If you work with owner-operators or 1099 contractors, verify your PEO’s policies on these arrangements.
Equipment and Tools: Who provides tools affects worker classification and compliance. Discuss your specific situation with potential PEOs.
Cost Expectations
Typical construction PEO costs (including workers’ comp):
Small crew (5-10 workers): $200-$350 per employee per month
Mid-size company (25-50 workers): $175-$300 per employee per month
Larger contractor (50-100 workers): $150-$250 per employee per month
These ranges include PEO administrative fees, workers’ comp, payroll processing, benefits, and HR support. Actual costs depend heavily on your specific trades, safety history, and benefits selections.
ROI for Construction Companies
Typical Construction Company ROI:
Savings:
- Workers’ comp: 30-50% reduction
- Benefits costs: 20-35% reduction
- Eliminated HR staffing: $55,000-$70,000
- Reduced OSHA penalties: Variable but potentially significant
- Fewer workers’ comp claims: 15-25% improvement
Costs:
- PEO fees: $150-$300 per employee per month
Net Result: Most construction companies save 25-40% on total HR and benefits costs while dramatically improving compliance and safety.
Key Questions for Construction PEOs
- How many construction clients do you serve?
- What’s your experience with [specific trade]?
- Can you handle certified payroll for government projects?
- What’s your e-mod and workers’ comp rate for my classification?
- What safety programs do you offer construction clients?
- Do you handle union contractors?
- Can you support multi-state projects?
- How do you handle seasonal workforce fluctuations?
- What OSHA training resources do you provide?
- Can I speak with construction company references?
The Bottom Line for Construction Companies
Construction companies face unique HR challenges that generic PEOs can’t address effectively. You need providers with construction expertise, strong workers’ comp programs, certified payroll capabilities, and understanding of OSHA requirements.
The right PEO dramatically reduces workers’ comp costs, ensures compliance, and provides safety resources that protect both your workers and your business.
Operating a construction company and need specialized PEO support? Contact PEO Consulting Partners for a free consultation. We specialize in matching construction companies with PEOs that understand your industry and provide the workers’ comp savings, safety programs, and compliance support contractors need—at no cost to you.