Payroll complexity in oil, gas, and energy operations often stems from the structure of the work itself.

Overtime and long-shift calculations
A frequent error in oil, gas, and energy industries is day rate misclassification. This payroll compliance concern became even more pronounced in 2023 when The Supreme Court ruled that day rate workers are entitled to overtime and are not considered exempt, especially if their actual job duties (not job title) fall into non-exempt labor boundaries (e.g. equipment operation, manual labor, etc.). Unpaid work time is another major issue among workers who must travel across different job sites or complete work before or after established hours; in both cases, this is considered compensable time that an employer must pay.

Per diem, hazard pay, and supplemental earnings
Pay and overtime calculations are also complicated by the use of per diems, supplemental pay (bonuses, training compensation, etc.), and hazard pay. Whether it’s failing to calculate a taxable (vs. tax-free) per diem, or inaccurately adding supplemental earnings or hazard pay to an employee’s regular rate of pay, these issues could lead to FLSA violations, penalties, and steep compensatory back-pay obligations to impacted employees.

Project-based job costing
In industries where projects unfold in a range of locations and job sites (often across municipalities and state lines), it’s imperative to have a proven system for mobile time tracking, calculating variable tax & pay rates, and gauging profitability on a project-by-project basis. The right payroll and HR tools also allow your business to stay ahead of any local compliance requirements, union terms, or prevailing wage rates specific to the area where work is unfolding.

Multi-state payroll taxation
In most cases, income tax must be withheld in the state where work is performed. This presents complex challenges for payroll calculations among traveling oil, gas, & energy crews who operate in different locations and whose employers then have tax and compliance obligations in multiple jurisdictions. Determining withholding timelines, time tracking procedures, taxable per diems, and the case-by-case validity of state reciprocal agreements based on location is critical to avoid underpayment or overpayment and noncompliance.

Consistent payroll despite fluctuating schedules
In the oil, gas, and energy industries, unconventional scheduling is the standard, which requires a payroll and HR system that can seamlessly integrate payroll and mobile time tracking, whether it’s to accommodate rotational shifts, cross-jurisdictional projects, or avoid issues like time theft, miscalculations resulting from manual errors, or late pay for your workers.

Misclassification of workers as independent contractors occurs frequently in the oil, gas, and energy sectors, and sometimes extends to misclassifying non-exempt workers as exempt. Employers often base an exempt status designation on an employee’s job title or a high day rate pay that seems to exclude them from non-exempt status. 

In addition to sizable back pay obligations, a wide range of penalties and reputational damage could result from mishandling this aspect of HR and payroll. It’s also crucial to remember that some states have more stringent worker classification rules that apply in one jurisdiction but not in another.

Full compliance with OSHA standards for safety and health not only protects your workforce, but serves as an operational safeguard – preventing delays, major budgetary adjustments, and legal conflicts that could stall your company’s growth or damage its reputation.

Specific OSHA regulations apply to oil, gas, and energy companies, where posting requirements, hazard reduction techniques, extraction-related safety measures, and health education are paramount. OSHA offers a combination of mandates and recommendations regarding safety and health, engineering controls, administrative controls, the use of protective personal equipment, and other safe work practices. These requirements and recommendations should be met or exceeded, alongside local or state regulations. Compliance can dramatically improve with the use of a digital payroll & HR platform that facilitates efficient onboarding, training, access to HR & OSHA-required resources, and much more.

As oil, gas, and energy companies expand their workforce and scale of operations, relying on a basic payroll system presents a number of potential issues. 

Payroll-only solutions create data silos.

When payroll processes (and data) aren’t closely synched with timekeeping, benefits administration, and HR-related recordkeeping, employee data and tax accuracy suffers, creating a potential cascade of noncompliance, budgetary, and employee retention issues. 

The potential for manual payroll and HR errors grows as employee headcount grows.

With a basic payroll system that struggles to keep up with increasingly dynamic calculations and compliance considerations, HR challenges tend to surface after payroll issues emerge. Conducting internal audits, flagging obvious data-related errors, or furnishing accurate records becomes even more difficult without a consolidated platform.

Integrated payroll systems offer a single platform linking payroll to timekeeping, scheduling, benefits administration, onboarding, and more.

Unlike a basic payroll system, they can meet the needs of your business as operations mature and become more complex. For increased visibility and control, an integrated payroll system aligns with related HR processes and data to ensure accuracy, timely processing & pay, and specialized adaptation to energy sector needs (OSHA compliance, cross-jurisdictional taxes, compliance, and more). 

Why Texas-Based Energy Employers Choose Affiliated HR & Payroll

As a Houston-based payroll and HR provider, we have extensive experience supporting oil, gas, and energy companies, including Texas-based companies with multi-state crews and complex workforce management responsibilities.

Our personalized service adapts to the needs of your business, whether you’d like to leverage real-time compliance monitoring to stay on pace with multi-jurisdictional operations, implement biometric mobile time tracking, or improve recruiting and employee retention to address turnover concerns.

Our technology-enabled, human-supported solutions pair the benefits of automated Texas payroll services with invested HR support from experts with years of experience in the energy sector, empowering your business to seamlessly manage a diverse workforce while enjoying payroll peace of mind.