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Project-Coded Payroll for Architecture Firms: How to Align Labor Costs with AIA Billing
Architecture firms bill for professional services, and the accuracy of those bills depends on the accuracy of labor cost tracking. When payroll does not connect to project records, someone on the operations team reconstructs labor costs manually - pulling timesheets, matching hours to projects, and entering numbers into a spreadsheet or project management system. It is slow, error-prone, and duplicates work that a properly configured payroll system should do automatically. Project-coded payroll eliminates the gap between what your employees are paid and what your projects are charged.
The Gap Between Payroll and Project Billing
Most architecture firms track time in one system and run payroll in another. The time tracking system knows which projects hours were worked on. The payroll system knows what employees were paid. But the two systems rarely talk to each other automatically - which means the labor cost that should flow into project financial reporting has to be manually transferred.
This gap creates real problems: project managers see outdated labor cost data, billing staff work from incomplete records, and finance teams spend hours reconciling numbers that should reconcile automatically. Firms that grow past 10 to 15 staff typically feel this pain acutely because the manual reconciliation burden grows faster than headcount.
Project-coded payroll closes the gap by making the payroll run itself the source of project labor cost data.
How Project-Coded Payroll Works
At the start of each pay period, employees submit hours coded to active project numbers. A project manager working on three active projects might submit 20 hours to Project A, 12 hours to Project B, and 8 hours to an overhead code for firm administration.
Payroll processes the total hours (40) and calculates the employee's gross wages, taxes, and deductions normally. Simultaneously, it distributes the labor cost proportionally across the three codes. The accounting system receives a journal entry that credits Project A with 50% of the labor cost, Project B with 30%, and overhead with 20%.
Project managers pulling financial reports see updated labor costs immediately after payroll processes, without waiting for a manual reconciliation step.
Mapping Labor Costs to AIA Billing Phases
AIA standard agreements organize fees by project phase. Each phase has a contracted fee, and the firm bills against that fee as work in the phase is completed. To know whether a phase is over or under budget on labor, you need labor cost data organized by phase, not just by project.
Project-coded payroll can extend to phase-level coding. Instead of coding hours to Project A, employees code hours to Project A - Construction Documents or Project A - Construction Administration. The payroll distribution then flows to phase-level cost centers in the accounting system, and project managers can see labor burn by phase compared to contracted phase fees.
Firms that implement phase-level labor tracking consistently report better control over project profitability because they can identify an overrunning phase while there is still time to adjust scope or staffing, rather than discovering the overrun at project close.
Setting Up Project Codes Without Creating Maintenance Burden
Architecture firms typically have a rolling portfolio of active projects, with new projects starting and completed projects archiving throughout the year. A project code system that requires a support ticket every time a new project is added creates friction that discourages accurate coding.
BEG configures project code management so your team can add, modify, and archive project codes directly in the time tracking interface. When a new commission is landed, the project manager creates the code. When a project closes, they archive it. The payroll system picks up the current active code list automatically each pay period.
What BEG Provides for Architecture Firms
- Project-coded payroll setup with project and phase-level cost allocation
- Accounting system integration (QuickBooks, Sage, Deltek, or others)
- Overhead and non-billable code configuration
- Self-service project code management for your team
- Full payroll processing including taxes, filings, and W-2s
- Multi-state compliance for project-site states
- BEG Managed Payroll - fully managed at $25-$45 PEPM, all 50 states
Stop Reconstructing Labor Costs by Hand
BEG sets up project-coded payroll for architecture firms in 3 to 5 business days. $25 to $45 per employee per month.
Frequently Asked Questions
What does project-coded payroll mean for an architecture firm?
Project-coded payroll means that when employees submit their hours for a pay period, those hours are tagged with the project number or code they worked on, not just the total hours worked. The payroll system processes those coded hours and distributes the labor cost to each project in your accounting system. This eliminates the gap between your time-tracking records and your payroll records, and gives project managers real labor cost data by project rather than estimates reconstructed after the fact.
How does project-coded payroll connect to AIA billing?
AIA billing documents - particularly the B101 and G702/703 series - typically include line items for architectural services that correspond to project phases: schematic design, design development, construction documents, bidding, and construction administration. When your payroll system codes labor by project and phase, those costs map directly to the relevant AIA billing line items. You can see exactly how much labor has been expended in each phase, compare it to the contracted fee for that phase, and adjust your billing accordingly without doing a separate cost reconstruction exercise.
What happens when an employee works on multiple projects in the same week?
Most architecture firm employees split their time across multiple active projects in any given week. Project-coded payroll handles this by allowing employees to submit hours against multiple project codes in a single pay period. The payroll system splits the labor cost proportionally across each project based on the hours submitted. The employee receives one paycheck for their total hours, and the accounting system receives a split labor journal entry that credits each project with its corresponding portion of the labor cost.
Our project managers currently reconstruct labor costs from timesheets after the fact. Is that a problem?
Yes, for several reasons. First, manual reconstruction introduces error - especially when timesheets are submitted late, incomplete, or at a different frequency than payroll. Second, it creates a lag between when labor costs are incurred and when they appear in project reports, which can cause project managers to over-commit resources before they see the true cost picture. Third, it duplicates effort: someone is doing work that a properly configured payroll system should do automatically. Project-coded payroll eliminates the reconstruction step entirely.
Can we track overhead and non-billable time the same way?
Yes. Project-coded payroll can include codes for non-project activities: business development, firm administration, professional development, and general overhead. Employees code all of their hours, including non-billable time, to the appropriate project or overhead code. This gives you a complete picture of how labor is allocated across the firm, not just how it breaks down across active projects. Firms that track overhead labor costs consistently are better positioned to set accurate billing rates and identify where administrative burden is highest.
How long does it take to set up project-coded payroll with BEG?
BEG sets up new clients in 3 to 5 business days from contract signing to first live payroll run. For architecture firms that need project-coded allocation, setup includes configuring your project code list, mapping those codes to your accounting chart of accounts, and connecting the payroll output to your accounting system. If your project list changes frequently, we configure it so you can add and archive project codes without waiting for a support ticket. The goal is a system that your firm can maintain day-to-day without relying on us for every project update.
Also relevant: Managed Payroll for Architecture Firms and Architecture Firm Payroll Guide 2026.
Authoritative source: U.S. Department of Labor: Wage and Hour Division
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