What Is Union Payroll and How Does It Work?

Union payroll is a specialized field of payroll management that aligns with collective bargaining agreements (CBAs) established between employers and labor unions. This area of payroll differs from standard payroll practices due to its unique regulatory framework and intricate requirements. Employers navigating union payroll must understand these complexities to ensure compliance and maintain sound labor relations.

Distinguishing Features of Union Payroll

The Collective Bargaining Agreement (CBA) is a legally binding contract negotiated between employers and labor unions. These agreements define employment terms, including wage rates, benefit structures, working conditions, and payroll procedures. Compliance with the CBA is important, as deviation can lead to disputes or legal action.

Union dues and fees are another distinguishing feature. Unions require members to pay regular dues, initiation fees, and assessments. Employers collect these amounts through payroll deductions, as specified within the CBA. The agreement outlines how much each employee owes and the frequency of these deductions, which can be a flat fee, a percentage of wages, or vary based on hours worked.

Employer contributions to multi-employer benefit funds are a component of union payroll, often separate from an employer’s standard benefits package. These contributions, mandated by CBAs, cover health and welfare, pension, annuity, and training funds. Contributions require calculation and remittance to adhere to agreed-upon terms.

Union payroll involves specialized reporting to unions and various benefit funds. This reporting ensures accountability regarding employee hours, wages, and benefit contributions. It requires precise record-keeping and adherence to reporting schedules.

Understanding Union Wage and Benefit Structures

Union wage structures are defined within Collective Bargaining Agreements, establishing pay rates based on job classifications, skill levels, and experience. These agreements outline rates for different tiers, such as journeyman and apprentice rates, and provisions for shift differentials and premium pay. For some projects, prevailing wage laws dictate minimum wage and benefit rates.

Overtime and holiday pay are subject to specific rules within union contracts that may differ from general labor laws. Union agreements may define overtime based on daily hours worked in addition to weekly thresholds, and can specify higher premium rates, such as double-time, for extended hours or weekend work. Holiday pay provisions can also include premium rates for work performed on holidays, or specify how paid time off for holidays is treated when calculating weekly hours for overtime purposes.

Union-sponsored benefit funds include health and welfare, pension, annuity, training, and vacation funds. Health and welfare funds provide medical, dental, and optical coverage, while pension funds, such as defined benefit or defined contribution plans, secure retirement income. Training funds support skill development and apprenticeship programs, and vacation funds provide savings for employee time off.

Employer contributions to these funds are calculated based on hours worked, a percentage of wages, or a fixed amount per employee. These contributions are paid to multi-employer trust funds, which are separate legal entities governed by their own agreements and boards of trustees. Trust fund agreements outline the terms for contributions.

Managing Union Dues and Contributions

Deducting union dues requires employee authorization before amounts can be withheld from paychecks. This authorization is provided through a signed document, such as a check-off authorization form, or electronic communication. The authorization specifies the amount of dues and confirms employee consent for deductions.

Once authorized, the payroll process involves calculating and deducting union dues and other fees from each employee’s gross wages. The Collective Bargaining Agreement (CBA) dictates the calculation method, which can involve a flat amount, a percentage of pay, or a variable rate based on hours. Payroll systems must be configured to apply these rules for each union member.

Remittance procedures for collected dues require employers to forward withheld amounts directly to the union within a specified timeframe. This involves submitting documentation, such as a deduction report, which lists employees from whom dues were deducted and the corresponding amounts. Timely remittance is a contractual obligation and important for compliance.

For union benefit contributions, employers must calculate amounts for each multi-employer fund based on CBA terms. This calculation relies on factors like employee hours worked, specific hourly rates, or percentages of wages. Employers complete remittance forms provided by the funds and adhere to payment deadlines to avoid penalties.

Record-keeping is important for all union-related deductions and contributions. Employers must maintain records of employee authorizations, deduction calculations, and remittance confirmations for both dues and benefit contributions. These records demonstrate compliance during audits and resolve discrepancies.

Union Payroll Reporting and Audits

Certified payroll is a specialized reporting requirement for contractors and subcontractors working on federally funded construction projects. This weekly report, submitted using U.S. Department of Labor Form WH-347, details wages paid to each worker, ensuring compliance with prevailing wage rates and fringe benefit requirements under the Davis-Bacon Act. The WH-347 form includes information on employee details, job classifications, hours worked, wage rates, and deductions.

Employers must regularly submit reports to union benefit funds, usually monthly. These union fund reports provide a breakdown of employee hours, gross wages, and employer contributions for health and welfare, pension, and other funds. Each union local or fund may have distinct reporting templates and submission schedules.

Unions and benefit funds conduct audits of employer payroll records to verify compliance with Collective Bargaining Agreements and contribution remittances. During an audit, employers can expect requests for documents, including payroll registers, timecards, general ledgers, and proof of benefit payments. Auditors review these records to ensure required contributions have been remitted according to CBA terms.

Failing to meet union reporting or contribution obligations can lead to consequences for employers. These include financial penalties, demands for back payments with interest, and legal action by the union or benefit fund. Non-compliance can also damage an employer’s reputation and lead to strained labor relations.