By the time Robert Criner realized his mistake, it was too late. One of Criner’s best workers told him that he was leaving to work for a competing remodeling company. The reason? The company was willing to pay $1 more per hour. Criner thought that he was paying fairly. But after doing some research, he discovered that he was paying a full dollar less an hour than his competition. “I gave everyone a $1 an hour raise on the spot,” says Criner, president of Criner Remodeling, in Newport News, Va. “But I still lost a good man.”
Today, with a shrunken labor pool and growing recovery-fueled demand, experts say that avoiding Criner’s mistake is more important than ever. Criner says that he now makes it a point to stay on top of what the competition is paying and to match it.
We combed through private and government data to show what remodeling company owners must pay to find—and keep—good workers. And because pay is only part of the equation, we also looked at what benefits are necessary for your business to stay competitive.
The Labor Shortage
Studies from the National Association of Home Builders (NAHB) and The Farnsworth Group show that it’s harder than ever to find qualified workers. In fact, 49% of remodelers rated no higher than six on a 10-point scale when asked to rate their confidence in finding workers, according to a 2014 Farnsworth Group/Hanley Wood Contractor Confidence Index survey. (Hanley Wood is the company that publishes Remodeling.) Meanwhile, the share of builders reporting serious labor shortages shot up between 2012 and 2014 to 15% from 5% for framing crews and to 12% from 4% for finish carpenters, according to the NAHB.
“It’s really difficult to find good people,” confirms Andy Hannan, production manager with Mark IV Builders, in Cabin John, Md. “People don’t really want to get into this business anymore. So you’ve got to find them.”
But finding those good workers is no easy task. As the recession dragged on, many remodelers sought work elsewhere and left the industry altogether, says Robert Dietz, an NAHB economist. Now, as the recession lifts and the cost of building materials rises, he says that remodeling company owners find themselves stuck in a supply/demand bind: With few qualified workers left, wages have risen so quickly that some owners are forced to pass up projects or pay more for workers, some of whom aren’t even qualified for the job. At the same time, companies must compete for workers against more than just other remodelers, especially in the higher-paying high-tech and energy sectors, Dietz says.
And while benefits remain an important part of an overall employment package, as the recession lifts, workers are demanding better pay. In fact, 60% of respondents to the 2014 Job Satisfaction and Engagement Survey from the Society for Human Resource Management (SHRM) named compensation/pay as the No. 1 contributor to overall job satisfaction. By comparison, benefits ranked fourth. Back in 2010, compensation ranked fifth. This is the first time since 2010 that it has ranked at the top, says Kate Kennedy, a spokesperson for the SHRM.
What Should You Pay?
SHRM’s findings are all the more reason why company owners need to stay current with the going rate in their region. That rate varies substantially, depending on where you live, according to data from the U.S. Bureau of Labor Statistics, one of the most comprehensive sources for wage and benefits data. However, combing through BLS data can be daunting. The BLS combines some job descriptions that don’t seem to belong together—extraction and building, for instance. So for the purposes of this article, we’ll be focusing on the BLS data for carpenters.
Overall, carpenter wages increased 4.6% in 2013 from 2012, according to Fitch Ratings. Wage inflation is expected to increase the rest of the year and into 2015. Dietz says that the law of supply and demand dictates that the lower the unemployment rate in an area, the more companies will have to pay for workers.
Nationally, the current median wage for a carpenter is $21.40 per hour or $44,510 annually. By state, Alabama has the lowest hourly pay at $15.51 or $32,270 per year. Hawaii and Alaska top the pay scale at $32.53 an hour or $67,650, and $30.65 an hour or $63,770, respectively. For the contiguous United States, New York state leads the pack at $27.70 per hour or $57,620 annually.
Metropolitan regions are just as diverse. The Hanford-Corcoran region of California is the place to be for carpenters, where that position’s hourly mean wage is $42.74 or $88,890. That anomaly aside, the major metro areas range all the way from $31.17 per hour for the New York metro area to a puzzling $14.55 for the Dallas-Fort Worth area.
Dietz suspects that both the high and the low anomalies reflect commercial construction influences. He was particularly surprised by the low number in the booming Dallas-Fort Worth area. But, he says, that number could be due to a data lag as well.
In general, the more skilled the worker, the harder he or she is to find, Dietz says. That’s partly due to workers shifting to other industries such as the booming energy sector. “Why frame walls when you can frack wells?” he says, quoting an article from John Burns Real Estate Consulting. Indeed, comparable energy sector work yields nearly $4.50 more per hour than residential remodeling, Dietz found from looking at BLS data. The Burns Consulting article noted that oil and gas pipeline construction workers could earn a whopping $8.15 more an hour than new-home framing contractors.
Still, company owners need more than just good pay to attract the best workers, says Tim Faller, owner of Field Training Services. Faller says that showing workers you value them by helping them solve problems—offering flextime for working parents who need to pick up kids, for instance—can be as enticing as high wages.
“Find out what the average pay is for the area and match it,” he advises. “And then create a working environment where people feel like they’re really appreciated.”
Costs & Benefits
A big part of that appreciation comes in the form of benefits. But what should you offer, and how much will it cost?
On average, 58% of all employers with one to 49 workers offer health care benefits, according to the BLS’s March 2014 National Compensation Survey. The survey shows that a much higher number of employers in the construction sector—70%—are offering health benefits. Thirty eight percent of those employers offer dental benefits, 24% offer vision care, and 68% offer outpatient prescription drug coverage. Construction employers bear 80% of the health care costs on average, the survey shows, and beyond health care, 44% of companies with one to 49 employees offer some kind of retirement benefit. Meanwhile, 50% of those companies offer paid sick leave and 66% offer paid vacations. When it comes to offering a combination of medical and other benefits, 53% of construction employers offer medical and retirement, while 44% offer medical and life insurance.
One of the biggest benefit costs for employers—and the benefit most sought after by employees—is health insurance. But the cost of offering that benefit is rising. Employer-sponsored health premiums rose 3% in 2014 to an average of $16,834 per year, according to the Kaiser Family Foundation, a nonprofit based in Menlo Park, Calif.
The average flat monthly employer premium cost for the construction sector is $423, according to the BLS National Compensation Survey. For employers with one to 49 workers, that number falls to $382, the survey shows. Add in family coverage, and those costs rise to $871 and $816, respectively.
With such a high cost for these types of benefits, employers say that it’s important for workers to understand that their pay isn’t just based on the hourly wage. “Today, with the benefit package they get, they don’t really see all the money they make,” Criner says. “Sometimes they need to be reminded of what’s in their package.”
For instance, a Criner employee who earns $23 per hour really gets $30 an hour when benefits are factored in, Criner says. Those benefits include retirement, health care, vehicle maintenance and insurance, eight paid holidays, worker’s compensation insurance, clothing, and a week of vacation during the first year followed by two weeks vacation after two years and three weeks after 10 years.
Hourly Wages vs. Salary
But when it comes to benefits, Andy Hannan believes that he offers the best one of all: Paying employees a set salary, rather than an hourly wage.
He says that paying on salary rather than “chasing hours” reduces bookkeeping and related costs. But more importantly, it creates more employee loyalty.
As a bonus, Hannan says that paying a salary allows him to hire employees for less than they’d otherwise work on an hourly wage. And since his company is in the Washington, D.C., tech corridor, it allows him to compete against other companies that pay on salary.
“To get good employees, you have to create these incentives,” Hannan says. “And salary is part of that.”
Although employees don’t fill out time sheets, they do fill out job sheets so that the company can do costing. And though remodeling is notorious for its downtimes, Hannan says that if he and his team are doing their job, employees work 40 hours a week—or more. “The Fridays you leave at 2 p.m. counterbalance with the days I ask you to stay longer,” he says. “I really haven’t had any problem with it.”
However company owners pay employees, Criner says that the ultimate question when setting rates is to ask what are your best workers worth? “Your company is only as good as its employees,” he says. “So never forget how valuable they are.”