Tag Archives: Construction Employment

Mixed Signals in Recent Economic Indicators Causing More Anxiety for the Construction Industry

Have you had a chance to read any economic news lately, and how it may impact your Construction Company?  Chances are there may be a feeling of increased anxiety and uncertainty.  (Hasn’t this been the generally feeling for the past 3 years anyway though?)  Here is a brief summary of what is causing this renewed feeling of anxiety:

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Is the economy getting better or are workers leaving the industry?

As the US continues to pull out of the economic slump, positive year-over-year job growth was confirmed in the Construction industry.  Citybiz list released an article earlier in the month that confirmed the Construction unemployment rate has fallen to a four-year low. However, the past few months have seen continued job loss in the sector. In another publication last week, a less than positive article regarding job growth in the Construction industry was also released claiming that the year-over-year growth in the sector is due to workers leaving the industry on a whole. Regardless of which scenario may be closer to reality, both publications agree that with a lack of long-term federal highway and funding the situation has less room to correct itself.

Construction Spending Unexpectedly Increases In August

The roller coaster ride of 2011 continues for the construction industry.  Following a 1.1% decrease in July, construction spending saw an unexpected increase in the month of August for nonresidential construction spending of 1.6% compared to the previous month.  This is based on the U.S. Census Bureau’s press release.  McGraw Hill Construction also reported an 8% increase in construction spending starts versus a 10% decline in July in their most recent report.

The good news was also seen in the employment spectrum according to The Associated General Contractors of America (AGC).   AGC stated in their press release that construction employers added 26,000 jobs during the months of August and September.  This increase brought the current unemployment level for the industry to 13.3% but AGC cautioned that some of the recent declines in the unemployment rate were a result of construction workers leaving the industry all together.

Based on the statistics that have been released over the past 3 months it is hard to gauge whether the industry has begun to stabilize or not.  These mixed economic signals may be frustrating for contractors attempting to prepare budgets or who are considering hiring additional employees for the future.

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Worker Classification: The New ‘Get Out of Audit Jail Free’ Card!

In recent years, the battle over how workers are classified has heated up.  Federal and state government agencies have been going after businesses that intentionally or unintentionally classify their workers inaccurately as independent contractors when they should have been classified as employees.  The resulting audits have proven to be very costly for companies that aren’t in compliance.  Unfortunately this is something that has occurred frequently in the construction industry.

In a surprising move, the IRS recently announced the Voluntary Classification Settlement Program (VCSP), which will enable employers to address their worker classification noncompliance issues and resolve them with certainty at a relatively low tax cost.  The VCSP does not add any clarity to existing laws, but rather provides a mechanism for employers to reclassify its workers prospectively without incurring substantial costs and without being subject to an audit.

To be eligible, an employer must meet these three criteria:

  1. The employer has treated all workers consistently – the individual has never been classified as an employee, and workers who hold a substantially similar position have also never been classified employees.
  2. The employer has filed a form 1099 for each misclassified worker for each of the past three years.
  3. The employer cannot be presently under examination by the IRS for any reason, and is not presently under examination by the Department of Labor or any state government agency with respect to the worker classification issue.

To be part of the VCSP, the employer must fill out form 8952 (Application for Voluntary Classification Settlement Program) at least 60 days prior to the date the employer wants to begin to reclassify the workers as employees.  The IRS will then review the employer’s eligibility, and contact the employer to complete the process and enter into a closing agreement.

If accepted into the VCSP, the employer will then:

  • prospectively treat the subject workers as employees;
  • pay 10% of the employment tax liability that would have been due for the previous year as computed under Code Section 3509;
  • not be liable for interest or penalties;
  • not be subject to a federal employment tax audit for prior years on the classification of these workers; and
  • agree to extend the employment tax statute of limitations from 3 years to 6 years for each of the first three calendar years beginning after the VCSP closing agreement.

Further information can be found on the IRS’ FAQ page, and we strongly advise you to contact your Aronson tax advisor at 301.231.6200 to help avoid the potentially costly consequences of trying to handle this matter on your own

Will the American Jobs Act Create Jobs For the Construction Industry?

There is an awful lot going on within the construction industry these days on all fronts, but the one glaring issue facing the industry is the heightened unemployment levels as a result of the  prolonged construction recession.  The current unemployment level for the construction industry as of August 2011 is 13.5% which is almost 5% higher than the national average covering all sectors.

With the health of the U.S. Economy on the verge of a recessionary relapse the President delivered to the country a speech on September 8, 2011 in which he proposed the “American Jobs Act”.  The Act includes the following which will directly impact the construction industry:

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