One Percent Means Something
An HR Director was lamenting the amount of time it took to address recruiting and retention issues in a 2017 email. The email went on to say… “because I’m spending so much of my time on recruiting/hiring activities and working to keep our key people”. It is a ‘crazy market’ when there is more work overall than people to perform it, leading to on-going poaching and compensation levels that are unsustainable.” “It will take more than one pay element to solve the problem.”
For many, the fall of 2020 seemed like the turning point as we came out of the pandemic and work rebounded and expanded in almost all sectors, but the signs that recruiting and retention issues had escalated were already there in 2017.
One percent in construction and the compensation world is a big deal. Whether it’s a change in margins, annual increases, or a change in the turnover rate, it is something to pay attention to. When the turnover rate for professionals and middle managers jumped from 13.7% to 14.8% between July 2017 and July 2018, it was affirmation of the 2017 email.
That 1.1% change didn’t seem to initially affect heavy, highway, or municipal contractors as their 2018 turnover rate was at 13.0% or less. Though late to the game, 2019 saw a jump in each of the 3 sectors to over 15%. There was a slight decrease in 2020 except for the highway sector where the turnover rate jumped to 16.1%. Turnover in the 3 sectors ranged from 16.0% to 18.3% during 2021 and 2022. There was a substantial change in 2023 where highway came in at 13.0%, heavy at 13.1%, and municipal at 14.8% (Chart 1).
Chart 1 - Staff Turnover rates
2019 | 2020 | 2021 | 2022 | 2023 | |
| All Contractors | 14.7% | 15.1% | 17.9% | 17.7% | 14.8% |
| Heavy | 15.8% | 14.7% | 18.3% | 17.9% | 13.1% |
| Highway | 15.5% | 16.1% | 16.0% | 17.4% | 13.0% |
| Municipal | 15.2% | 13.0% | 17.4% | 17.8% | 14.8% |
While the 2023 turnover rates seemed to rebound to the 2017 numbers, more than 40% of HHM contractors are still reporting superintendent turnover, with 30% reporting project manager turnover, and roughly 20% reporting turnover in estimators. Numbers that are still significant and impacting pay actions.
Pay Increases
Pay increases lagged during 2017 to 2021. COVID might have influenced some of the delay, but going forward there was a large uncertainly in the forecasts. Typically, we see projected increases to be .3% to .5% higher by year end. Seems the rules were thrown out as we saw year end actuals come in at 1% more than the original forecast (chart 2) in both 2021 and 2022.
Chart 2 - Projected increases versus actual increases
| Staff | 2021 Projected | 2021 Actual | 2022 Projected | 2022 Actual |
| All Contractors | 3.2% | 4.2% | 4.2% | 5.1% |
| Heavy | 3.2% | 4.3% | 4.3% | 5.1% |
| Highway | 3.2% | 4.2% | 4.4% | 5.5% |
| Municipal | 3.2% | 4.0% | 4.3% | 5.3% |
Though the end of year 2022 actual increase of 5.1% wasn’t a surprise to us, all of our data was more anecdotal and not survey driven. So, in June 2023 we surveyed our original group of participants in the 2023 Construction/Construction Management Staff Salary Survey to see if anything changed in their predictions or in their actual 2023 pay increases (chart 3).
Of those contractors who already made their 2023 pay adjustments, overall pay increases were 1.1% higher than the February forecast. Heavy and highway contractor actuals were about 1% higher than the earlier forecast. Only the municipal sector stayed the same. Of those who had not made their 2023 adjustments, forecasted pay increases ran about .5% higher, except for municipal sector where the forecasted amount declined (though that number will most likely be adjusted significantly upward by year end).
Chart 3
| Staff | 2022 Actual Increase | February 2023 Projected | June 2023 Actual’s | June 2023 Anticipated |
| All Contractors | 5.1% | 4.4% | 5.5% | 4.9% |
| Heavy | 5.1% | 4.3% | 5.1% | 4.8% |
| Highway | 5.5% | 4.4% | 5.3% | 5.1% |
| Municipal | 5.3% | 4.4% | 4.4% | 3.9% |
The 2023 year-end actual increase is expected to be 5.3%, with a varying range between heavy, highway, and municipal contractors.
Executive increases also displayed some unusual patterns from past practices. Traditionally, staff increases ran .3% to .4% lower than executive pay increases. Compare the 2021 actual executive increase in Chart 4 with the 2021 actual staff increase in Chart 3. Overall, there was only a .1% difference for all contractors and the HHM sectors were all below the staff levels. Very unusual. Now compare the 2022 executive increase to the 2022 staff increase. The universe seemed to correct itself and 2023 looks to be following the historical practices.
Chart 4
| Executives | 2021 Actual Increase | 2022 Actual Increase | 2023 Actual Increase | 2024 Anticipated |
| All Contractors | 4.3% | 5.5% | 5.6% | 4.7% |
| Heavy | 3.9% | 4.9% | 5.6% | 4.6% |
| Highway | 4.1% | 5.5% | 5.7% | 4.6% |
| Municipal | 4.0% | 5.6% | 5.4% | 4.4% |
Early 2023 forecast for craft wage increases hovered at 4.45%. By mid-year, that percentage had only slightly changed to 4.52%. We usually trust the reported numbers and anticipate a slight increase, but we think 2023 will end up over 5%. Part of the reason is led by client conversations and part is the Employment Cost Index (ECI) activity. The ECI - Construction reported a 4.5% change in base wage as of the third quarter 2023 and historically, pay increases run higher than the ECI.
Market Rates
PAS surveys are broken into multiple demographics reflecting type of contractor, type of construction performed, region of the country, revenue size, and so on. The following represents the national average base pay for a few positions by the type of construction performed as well as the average bonus amount expressed as a percent of base pay. As the craft survey is only about heavy, highway, and municipal work, rates are summarized as a range by piece of equipment or job function.
Base Pay
| Position | Heavy | Highway | Municipal |
| Controller | 143,258 | 136,520 | 138,939 |
| VP/Chief Financial Officer | 225,637 | 219,281 | 219,063 |
| Senior Vice President | 257,305 | 248,774 | 244,605 |
| Executive Vice President | 279,999 | 266,348 | 262,824 |
|
|
| |
| Assistant Superintendent | 88,107 | 86,015 | 82,706 |
| Superintendent | 111,132 | 109,865 | 103,291 |
| Project Superintendent | 133,879 | 134,532 | 130,990 |
| Construction Manager | 164,552 | 158,983 | 163,631 |
| General Superintendent | 166,722 | 164,857 | 156,675 |
|
|
| |
| Project Manager/Estimator | 115,186 | 111,482 | 105,631 |
| Project Manager | 115,625 | 119,904 | 104,998 |
| Senior Project Manager | 146,068 | 151,383 | 137,816 |
| Division Manager | 178,581 | 168,630 | 155,408 |
| Division Vice President | 201,750 | 202,874 | 192,420 |
| Vice President of Operations | 199,349 | 200,362 | 193,293 |
|
|
| |
| Senior Estimator | 126,481 | 126,421 | 120,450 |
| Chief Estimator | 166,496 | 166,411 | 161,923 |
| Vice President of Estimating | 179,089 | 191,382 | 157,069 |
Bonus percentages expressed as a percent of base pay
| Position | Heavy | Highway | Municipal |
| Controller | 21.6% | 22.8% | 23.8% |
| VP/Chief Financial Officer | 47.7% | 47.9% | 42.2% |
| Senior Vice President | 66.7% | 69.5% | 56.8% |
| Executive Vice President | 63.5% | 64.3% | 63.0% |
|
|
| |
| Assistant Superintendent | 10.0% | 7.4% | 8.2% |
| Superintendent | 12.8% | 11.2% | 13.1% |
| Project Superintendent | 16.7% | 16.3% | 14.5% |
| Construction Manager | 19.0% | 15.6% | 14.8% |
| General Superintendent | 23.2% | 22.2% | 22.7% |
|
|
| |
| Project Manager/Estimator | 18.7% | 15.4% | 18.7% |
| Project Manager | 14.8% | 13.9% | 14.4% |
| Senior Project Manager | 24.6% | 23.4% | 22.5% |
| Division Manager | 35.5% | 31.4% | 32.1% |
| Division Vice President | 38.9% | 36.0% | 38.2% |
| Vice President of Operations | 47.0% | 50.0% | 44.4% |
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|
| |
| Senior Estimator | 13.3% | 12.5% | 11.9% |
| Chief Estimator | 19.3% | 21.4% | 20.5% |
| Vice President of Estimating | 37.2% | 46.3% | 22.4% |
Hourly Pay
| Position | 25th %tile | Average | 50th %tile | 75th %tile |
| Backhoe Operator | 22.29 | 26.71 | 26.85 | 29.81 |
| Concrete Finisher | 22.85 | 25.46 | 25.00 | 27.16 |
| Dozer Operator - Finish | 23.83 | 26.33 | 26.40 | 28.84 |
| Dozer Operator - Rough | 22.39 | 24.90 | 24.10 | 27.73 |
| Excavator Operator | 23.99 | 27.19 | 26.01 | 30.90 |
| Form Builder/Setter | 21.78 | 25.21 | 24.89 | 28.47 |
| Laborer - Unskilled | 17.68 | 19.68 | 19.00 | 21.11 |
| Laborer - Skilled | 19.22 | 22.05 | 22.00 | 24.20 |
| Mechanic – Heavy Equipment | 26.71 | 29.37 | 29.33 | 32.29 |
| Pipelayer | 20.86 | 23.95 | 23.12 | 26.45 |
| Truck Driver - Dump | 20.76 | 23.07 | 22.98 | 24.83 |
| Truck Driver – Low Boy | 25.03 | 27.01 | 26.55 | 29.11 |
Back to the Beginning
Let’s end how we started the article with the Director’s comments that “I’m spending so much of my time on recruiting/hiring activities and working to keep our key people”. It is a ‘crazy market’ when there is more work overall than people to perform it, leading to on-going poaching and compensation levels that are unsustainable”.
Talent acquisition and preservation are at the forefront of almost every contractor’s human resource needs. The Bureau of Labor Statistics (BLS) defines Human Resources Specialists as those who “recruit, screen, interview, or place individuals within an organization” and excludes those specialists who job functions focus on benefits, compensation, training and development, and so on. In all industries, the number of specialists involved in the hiring activity was 553,950 in 2017. By 2022 the number of hiring specialists increased to 835,360. Or in other words, a 50.8% increase in 5 years. And expect this percentage to grow by the time we add in 2023. Consider your own company, how many people were added or reassigned in the past 6 years to positions that focused on recruitment and retention activities.
The demand for people is driving compensation changes and will certainly impact 2024 and future years. Look for 2024 average increases to run above 5% for executives, staff, and probably craft. And unlike the Director’s unsustainable comment, pay is viable as contractor’s are adept at meeting changing conditions, specifically focusing on a realignment of pay resources.
Sources
- Executive Compensation Survey for Contractors, multiple years of the annual survey.
- Construction/Construction Management Staff Salary Survey, multiple years of the annual survey
- Heavy, Highway, and Municipal Open Shop Wage and Benefit Survey, 2023 version
- Benefit Survey for Contractors, multiple years of the annual survey
- Bureau of Labor Statistics
https://www.bls.gov/oes/current/oes131071.htm
https://www.bls.gov/news.release/archives/ocwage_03302018.pdf