Throughout most of the nation, upscale remodelers are struggling with the ever-thinning pool of skilled labor. With fewer quality hands around, it's an employee's market.

To help retain and motivate staff, Bill Picardi of Picardi Construction in Southborough, Mass., offers performance-based wage increases and year-end bonuses that can equal as much as 12% of a worker's yearly wage. He also tries to keep employees happy with periodic contributions such as new tools, money toward a truck repair, or gas reimbursements.

“It's always a struggle,” says Jeffrey Talmadge, owner of Talmadge Construction in Santa Cruz, Calif. “We're one of the more expensive remodeling firms in our area, and every client we work for expects high-quality workmanship and five-star service, so it's hard work to keep down the cost of labor.”

Talmadge also offers regular opportunities for performance-based pay hikes. “We do two annual performance reviews, one in the spring and one in the fall. In the spring we talk about money,” Talmadge says. “As their skills increase and their experience increases, they can look forward to a yearly raise.” For employees who don't progress, Talmadge provides a cost-of-living raise determined by the local consumer index, usually in the vicinity of 3%.

A new profit-sharing plan helps to stimulate improved performance, offering employees a small percentage of the net profit if the year's revenue and profit goals are met. “If everybody can keep a little piece of the pie,” Talmadge says, “that helps motivate them. It helps people keep an eye on the bottom line, too.”

Ultimately, many upscale remodelers find that the only way to keep labor from cutting too deeply into profits is to establish a wage ceiling. Picardi says he chats up other local remodelers to establish the going labor rate.

Across-the-board increases, he says, are strictly market-driven. “It's something you do when you have a gun to your head,” Picardi says. “You just pay them what you have to to make them stay.”

David Zuckerman is a freelance writer based in New York.