Compensation Chronicles

While pay increased in response to the demand for people, the ongoing compensation story is based on how fast base pay changed and the effect on variable pay.

As the workforce outlook from 2021 to 2023 consistently reflects multiple open positions and high turnover, worker demand throughout construction remains intense. In fact, the U.S. Bureau of Labor Statistics (BLS) Job Openings and Labor Turnover Survey (JOLTS) indicated 301,000 construction openings in December 2021 and 359,000 in December 2022.1

To help construction financial professionals improve their workforce outlook and better understand compensation trends, this article highlights current workforce issues, how contractors have responded to workforce demand, and the overall effect on future pay increases. It also presents actual pay rates for several operational, estimating, and finance/accounting positions; reviews the Employment Cost Index (ECI) and its usefulness in pay tracking; and provides a forecast for 2023.

The Ongoing Story

The turnover rate between July 2021 and July 2022 for noncraft personnel was 17.7% (17.9% between July 2020 and July 2021). Demographic breakdowns indicated an 18% turnover rate for GCs and construction managers, with most construction sectors hovering around 17%.2

The highest turnover rates of more than 18% were reported in the Southeast, Gulf Coast, Rocky Mountain, West, and Pacific Northwest states where at least 60% of contractors experienced turnover in superintendents. In each of the 10 U.S. regions, 50% of survey participants indicated they experienced project manager turnover.3

In another recent industry survey, 93% of respondents had open positions for salaried employees with 91% of those companies stating they are having a hard time filling some or all positions.4 Similarly, 71% of respondents had open salaried craft positions with 89% of those indicating a hard time filling some or all positions.5 The 2021 edition of this survey was almost identical for the salaried position responses (90% having open positions and 89% having a hard time filling).6

In the 2023 Construction Hiring and Business Outlook Survey, 69% of contractors expected their headcount to increase in 2023 with 58% expecting it become harder or remain hard to hire.7 Further, “an overwhelming 80% report they are having a hard time filling some or all salaried or hourly craft positions.”8 The 2022 survey indicated a similar sentiment, with 83% having a hard time filling positions.9

The 2022 Saga

Regarding anticipated pay increases, the numbers reported are provided by survey participants. As the year progresses, we make updated predictions based on past practices and industry trends. Historically, we know that by year-end, contractor forecasts are usually lower by 0.3% to 0.5%. Wow, were we off.

The 2022 Merit Shop Wage and Benefit Survey reported data effective May 1, 2022 but also reflected the actual pay increases for 2021.10 In May 2021, open shop contractors were projecting a craft increase of 3.21%, so we initially expected the 2021 increase to be about 3.7%. However, the year-end actual increase was 4.65%, a whopping 1.44% higher than the 3.21% contractor projection.11

Once the actual 2021 craft data was known, we realized pay was changing quicker than anticipated. As 2022 evolved, pay projections went up 0.1% every few weeks. By September 2022, executives saw an average increase of 5.6% (originally expected to be 4.7%), 5.2% for professionals and middle managers (originally expected to be 4.5%), and 4.9% for open shop craft (originally expected to be 4.1%).

In December 2022, executive increases were at 5.5%. The most notable differences were among company revenue categories as shown.12 Municipal and building contractors reported a 5.6% increase followed by highway contractors at 5.5%. Most demo-graphic increases were similar, except for heavy contractors (4.9%) and Pacific Northwest contractors (6.1%).

Variable Pay Decline

With limited funds available for direct pay increases (base and variable), bonuses or incentives generally decrease to help maintain a competitive total direct pay package. Positions that are tied to project results tend to be more volatile than those tied to corporate results. However, current trends show almost all job families have experienced declines since 2018.

On the operations side, superintendent variable pay (expressed as percent of base pay) dropped from 12.9% in 2018 to 10.1% in 2022. The project superintendent variable moved from 16.6% to 14.9%, and the construction manager position dropped from 21.5% to 15.6%. Likewise, project manager variable pay fell from 16.7% to 12.9% and senior project managers plunged from 23.7% to 16%.13

The estimating job family saw declines from 2018 to 2022, as entry level estimator bonuses fell from 10.2% to 7.9%, mid-level estimator variable compensation dropped from 13.6% to 10.4%, senior estimators declined from 15.4% to 13.3%, and chief estimators fell from 24.5% to 20.3%.14

Though there were some upward blips between 2018 and 2022, the accounting job family also saw a small drop in variable pay. Entry level accountant bonuses declined from 7% to 6.4%, mid-level accountant bonuses fell from 9.1% to 7.6%, accounting supervisor variable pay dropped from 11.5% to 10.2%, and accounting managers declined from 14.9% to 13.2%.15

The average bonus percentage for CFOs from 2018 to 2022 hovered at 50% of base pay, dropping slightly to 48% in the 2023 Executive Compensation Survey for Contractors. Controllers maintained an average of 23% for the same time frame. The 2022 bonus percentages for this job family were the lowest in the past five years.

Base Pay Updates

The following provides a look at a few operational and core services positions from the 2023 Executive Compensation Survey for Contractors and the 2022 Construction/Construction Management Staff Salary Survey. Market data for each position is summarized and accompanied by a detailed chart by revenue size.

Project Superintendents

Project Superintendents oversee total construction efforts to ensure projects are completed according to design, budget, and schedule. On smaller projects, they may be “first in command.” The typical overall range of base pay is $112,000-$142,000 for this position, with an average salary of $127,000 and an average bonus of $19,000.

General Superintendents

General Superintendents are the senior superintendents who provide overall direction and guidance to field superintendents and construction managers. The typical overall range of base pay is $131,000-$174,000 for this position, with an average salary of $156,000 and an average bonus of $41,000.

Senior Project Managers

Senior Project Managers are responsible for overall direction of a company’s largest revenue producing projects. They establish project objectives and policies, maintain the connection with prime client contracts, and monitor construction and financial activities. The typical overall range of base pay is $122,000-$148,000 for this position, with an average salary of $136,000 and an average bonus of $21,000.

Operations Managers

Operations Managers are responsible for the day-to-day administration of a major segment of work and provide direction and guidance to subordinate managers. The typical overall range of base pay is $130,000-$182,000 for this position, with an average salary of $155,000 and an average bonus of $53,000.

Vice Presidents of Operations

Vice Presidents of Operations are responsible for the day-to-day administration of a major operational work segment and provide direction and guidance to subordinate executives and officers. The typical overall range of base pay is $166,000-$221,000 for this position, with an average salary of $196,000 and an average bonus of $85,000.

Senior Estimators

Senior Estimators are responsible for the preparation of full estimates on large and complex work. They work with project owners, architects and engineers, and contractors to resolve technical matters during negotiation and contract execution. This role normally requires at least six years of related experience. The typical overall range of base pay is $102,000-$133,000 for this position, with an average salary of $118,000 and an average bonus of $15,000.

Chief Estimators

Chief Estimators are responsible for planning and directing a major estimating function; they review all final estimate packages to ensure accuracy and completeness. The typical overall range of base pay is $130,000-$170,000 for this position, with an average salary of $154,000 and an average bonus of $31,000.

Vice Presidents of Preconstruction

Vice Presidents of Preconstruction are responsible for direction of multiple functions preceding the construction phase including estimating, marketing, contracts, etc. The typical overall range of base pay is $154,000-$201,000 for this position, with an average salary of $182,000 and an average bonus of $76,000.

Vice Presidents of Business Development

Vice Presidents of Business Development are accountable for all of a company’s market planning and business development activities. The typical overall range of base pay is $152,000-$193,000 for this position, with an average salary of $177,000 and an average bonus of $69,000.

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About the Author

Jeff Robinson

Jeff Robinson is President of PAS. Inc. in Saline, MI.

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