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Construction Companies: State Payroll Compliance Issues (2026)
State payroll compliance for construction companies layers each state's wage floor, overtime rule, pay frequency law, new hire deadline and final pay rule on the federal rules cited on this page, and construction companies carry industry-specific state duties on top. BEG runs construction company payroll for $45 per employee per month inside the payroll software you already use, all-inclusive, live in 3 to 5 business days.
Where state law touches construction companies specifically
A construction business with two or more employees and $500,000 or more in annual gross sales is covered by the FLSA, and individual employees whose work involves interstate commerce are covered regardless of the employer's sales. Overtime is owed after 40 hours in each workweek; paying overtime only after 80 hours in a biweekly period is illegal because each workweek stands alone.
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.
The IRS Construction Industry Audit Technique Guide states that the use of subcontractors is common in construction and that many taxpayers treat employees as subcontractors to avoid paying employment taxes; examiners are told to consult an employment tax specialist on these issues, and backup withholding can apply to subcontractors.
The state layer every employer carries
Each state where an employee of a construction company works can set its own minimum wage, its own overtime trigger, a pay-frequency law, a new hire reporting deadline shorter than the federal 20 days, a final paycheck deadline, and a continuation coverage rule below the federal COBRA threshold. The state pages on this site carry those facts state by state from one data file, so the numbers here and on the multi-state checker never disagree.
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.
- A construction business with two or more employees and $500,000 or more in annual gross sales is covered by the FLSA, and individual employees whose work involves interstate commerce are covered regardless of the employer's sales. Overtime is owed after 40 hours in each workweek; paying overtime only after 80 hours in a biweekly period is illegal because each workweek stands alone. [DOL Fact Sheet #1]
- 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]
- The IRS Construction Industry Audit Technique Guide states that the use of subcontractors is common in construction and that many taxpayers treat employees as subcontractors to avoid paying employment taxes; examiners are told to consult an employment tax specialist on these issues, and backup withholding can apply to subcontractors. [IRS Publication 5522]
Read the full guide to payroll rules by state, and the rest of the construction company payroll library.
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Frequently Asked Questions
Which state rules hit construction companies hardest?
A construction business with two or more employees and $500,000 or more in annual gross sales is covered by the FLSA, and individual employees whose work involves interstate commerce are covered regardless of the employer's sales. Overtime is owed after 40 hours in each workweek; paying overtime only after 80 hours in a biweekly period is illegal because each workweek stands alone.
Does a construction company need a separate state account for every state with an employee?
Yes, in most cases two: a withholding account, unless the state has no wage tax, and an unemployment insurance account. Under the localization of work rules, unemployment tax for a remote employee goes to the state where the work is performed.
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: U.S. Department of Labor: Wage and Hour Division
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