Engineering & Professional Services Firms: Payroll Mistakes to Avoid (2026)

Mistake 1: classification

Under Davis-Bacon regulations, the term laborer or mechanic covers workers whose duties are manual or physical; workers whose duties are primarily administrative, executive or clerical, and persons employed in a bona fide executive, administrative or professional capacity under 29 CFR part 541, are not laborers or mechanics. Forepersons who spend more than 20 percent of a workweek on laborer or mechanic duties are covered for that time.

Mistake 2: hours and the regular rate

Engineering is listed as a field of science or learning for the learned professional exemption, so engineers whose primary duty requires advanced knowledge acquired through prolonged specialized instruction and who are paid on a salary or fee basis at the standard salary level are exempt from overtime. Job titles alone do not determine exemption status.

The standard salary level for the executive, administrative and professional exemptions is $684 per week, equivalent to $35,568 per year; the highly compensated employee threshold is $107,432 per year including at least $684 per week paid on a salary or fee basis.

Mistake 3: the engineering firm tax item

Employers use Form 8974 to determine the qualified small business payroll tax credit for increasing research activities that can be claimed on the employment tax return; related forms listed by the IRS include Forms 941, 943, 944 and 6765.

What catches them

A pay code review at setup, an exemption file per employee, a regular-rate flag on every pay component, and a deposit calendar that does not depend on one person remembering. Failure-to-deposit penalties run 2 to 15 percent; back overtime runs at time and one half plus an equal amount in liquidated damages.