How Construction Contractors Can Navigate an Evolving Workforce
Even before the pandemic arrived, general trends in the U.S. workforce have been affecting the construction industry – contractors. The industry is generally staffed by white male workers, a demographic that will continue to shrink as a percentage of the overall population in coming years.
Now, as the industry emerges from the pandemic, many workers have grown accustomed to working from home and are not enthusiastic about returning to an office environment.
Help Wanted in Construction Firms
You can’t walk far in most U.S. cities without seeing “Help wanted” signs on the doors and windows of retail businesses. Many construction and contracting firms are also facing significant hiring challenges.
During the short time that the construction industry was shut down in 2020 due to the pandemic, the sector lost more than one million workers. As of June 2021, the industry had recouped nearly 80 percent of its workforce but was still down almost 240,000 employees from pre-pandemic levels.
According to data from Associated Builders and Contractors, construction firms will need to hire nearly half-a-million new workers in 2021 and another one million workers over the next two years to keep up with anticipated demand.
The labor shortage is even worse in some trade specialties. For example, nearly nine out of 10 contractors are currently having difficulty hiring craft workers, according to a workforce survey recently conducted by the Associated General Contractors of America. A year ago, just 52 percent of contractors reported having this difficulty.
Ramping Up Technology
Some construction firms are trying to overcome worker shortages by ramping up technology to boost efficiency. For example, more than half (57 percent) of contractors in the Associated General Contractors of America survey said they increased their rate of technology adoption over the past year. A similar percentage said they expect their rate of technology adoption to further increase over the next year.
Examples of this technology adoption include project management and estimating software, document management systems, drones and robotics, and additive manufacturing.
Making matters worse, all of this is occurring during a time when the construction industry is booming, especially the residential sector. New home construction, along with home renovations and improvements, are surging due to the red-hot housing market and a severe lack of housing inventory.
At the same time, the ongoing pandemic continues to pose unique hiring challenges to construction and contracting firms. On-campus recruiting and job fairs are still limited, for example, and some individuals remain hesitant to return to a face-to-face work environment, whether in the office or on the job site.
Meeting the Challenges
What are some things your firm can do to meet these staffing challenges? Here are five ideas to consider:
1. Make sure your compensation is competitive. In most regions of the country, employees are in the driver’s seat when it comes to negotiating salaries and benefits. This means that your compensation needs to be competitive if not better than other contractors in your area.
Conduct a compensation survey to find out what your competitors are offering in the way of salary or hourly wage, fringe benefits, and sign-on bonuses. Then set your compensation a little bit higher than the average so your firm stands out from others. Make sure potential new hires (and existing employees, for that matter) understand the value of the total compensation package beyond just the salary or hourly wage.
2. Allow remote work flexibility for some employees. As noted previously, some employees who have gotten a taste of remote work don’t want to go back to the old model of commuting and working in a traditional office. If you don’t adapt your policies to allow office and administrative employees to work remotely at least a couple of days a week, they will find a company that will.
3. Get creative with benefits. Many younger employees place a high value on non-financial benefits, especially generous paid time off (PTO) policies. In response, some firms are offering PTO-free Fridays in which employees can take select Fridays off without it counting against their PTO.
Other firms are taking this a step further by offering unlimited PTO to salaried office staff. Essentially, these employees are allowed to take time off whenever they want (within reason) without having to keep track of it. This might not work for every business, but it’s something to consider depending on the makeup of your workforce and the severity of your hiring challenges.
4. Offer opportunities for career advancement. One of the best ways to retain top employees is to offer plenty of opportunities for them to advance their careers in your organization. Whenever possible, promote employees from within your company to management and leadership positions instead of hiring managers from outside.
Also, be willing to invest in the training required to prepare employees for advancement opportunities. This shows employees that you’re committed to their success and want them to remain with you for the long term. New technology tools like those listed previously present a great opportunity for employees to learn new skills and possibly advance their careers with your firm.
5. Diversify your workforce. With the decline in white male workers, firms should prioritize outreach initiatives to women and minorities and identify the perks of their workplace that appeal to them.
Start Planning Now
Be proactive and ask around. Consult with your managers to see what ideas they have for overcoming workforce challenges. Whatever approach you take will require buy-in across your organization, so it’s important to seek input and convey the importance of trying new approaches.
Labor issues are just one of many factors making for a turbulent time in the construction industry. Dembo Jones’ team has extensive experience in industry benchmarking, cashflow analysis, and proper tax planning that will help your business weather the upheaval and emerge on solid financial footing. Contact us today.