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Construction Companies: Payroll Tax Guide (2026)
Payroll tax for a construction company is the federal stack every employer runs, withholding, 7.65 percent employer FICA, FUTA, deposits and Form 941, plus the construction company items this page cites: IRS Notice 2025-54, DOL Fact Sheet #66 and 29 CFR 5.5(a)(1). BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Tax rules specific to construction companies
For per diem allowances paid for travel away from home on or after October 1, 2025, the IRS high-low substantiation rates are $319 per day for high-cost localities and $225 for all other localities in the continental United States, of which $86 and $74 are treated as paid for meals. The incidental-expenses-only rate is $5 per day.
On Davis-Bacon covered work the prevailing wage is the basic hourly rate plus the fringe benefit amount listed in the wage determination. The contractor may satisfy it by paying the whole amount as cash wages or by a combination of cash wages and bona fide fringe benefits, and it must be paid for all hours worked on the site of the work.
Contributions made or costs reasonably anticipated for bona fide fringe benefits on behalf of laborers or mechanics count as wages paid under the Davis-Bacon Act, and regular contributions made for a period longer than a week but at least quarterly are treated as made during the weekly periods they cover.
The stack every construction company runs
On one of the construction laborers at the May 2025 national median of $47,120, the employer share of Social Security and Medicare is $3,605 a year, FUTA is $42 after the 5.4 percent state credit on the first $7,000, and income tax withholding follows the employee's W-4. Deposits are monthly or semiweekly depending on the prior lookback period, with a next-business-day deposit whenever $100,000 accumulates. Form 941 is due the last day of the month after each quarter; W-2s and any 1099-NEC at the $2,000 threshold are due January 31.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- For per diem allowances paid for travel away from home on or after October 1, 2025, the IRS high-low substantiation rates are $319 per day for high-cost localities and $225 for all other localities in the continental United States, of which $86 and $74 are treated as paid for meals. The incidental-expenses-only rate is $5 per day. [IRS Notice 2025-54]
- On Davis-Bacon covered work the prevailing wage is the basic hourly rate plus the fringe benefit amount listed in the wage determination. The contractor may satisfy it by paying the whole amount as cash wages or by a combination of cash wages and bona fide fringe benefits, and it must be paid for all hours worked on the site of the work. [DOL Fact Sheet #66]
- Contributions made or costs reasonably anticipated for bona fide fringe benefits on behalf of laborers or mechanics count as wages paid under the Davis-Bacon Act, and regular contributions made for a period longer than a week but at least quarterly are treated as made during the weekly periods they cover. [29 CFR 5.5(a)(1)]
Read the full guide to how to calculate payroll taxes, and the rest of the construction company payroll library.
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Frequently Asked Questions
Construction company payroll tax: IRS Notice 2025-54
For per diem allowances paid for travel away from home on or after October 1, 2025, the IRS high-low substantiation rates are $319 per day for high-cost localities and $225 for all other localities in the continental United States, of which $86 and $74 are treated as paid for meals. The incidental-expenses-only rate is $5 per day.
Construction company payroll tax: DOL Fact Sheet #66
On Davis-Bacon covered work the prevailing wage is the basic hourly rate plus the fringe benefit amount listed in the wage determination. The contractor may satisfy it by paying the whole amount as cash wages or by a combination of cash wages and bona fide fringe benefits, and it must be paid for all hours worked on the site of the work.
What is the employer tax cost on one of the construction laborers?
At the $47,120 national median (BLS OEWS, May 2025): $3,605 in employer Social Security and Medicare, $42 in FUTA after the state credit, plus state unemployment at the employer's assigned rate.
What does managed payroll cost for a construction company?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Prevailing wage compliance, certified payroll and union vs non-union are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Construction Companies. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: IRS: Understanding Employment Taxes
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