From a pay perspective, many employees in the heavy/highway and municipal sectors were experiencing some great times throughout 2019 and into early 2020. Employers were actively recruiting and looking for that edge to get the best people. Of course, that meant maintaining a competitive pay program, which in turn provided some key people with above average pay increases.

Depending on your location and your essential classification, the last 4 months saw some contractors operating as business as usual, with others shutting down and then having to gear back up. In each situation, the need for good people didn’t go away, just put on the back burner – which is likely the same with your compensation practices. This article will explore how compensation started out in 2020 and what has changed since the pandemic hit.
 

The Early Months

From our Construction/Construction Management Staff Salary surveys, we know that 47% of contractors make adjustments to their pay programs between December and March. As nationwide responses to the pandemic started about mid-March, it would make sense to believe that the majority of that 47% had already given pay increases for 2020. As of December 2019, construction executives reported individual pay increases averaged 4.2% for 2019 and were expecting 2020 pay increases to an average of 3.9%. Also, a snapshot in February 2020 showed contractors reporting professional and middle management increases of 3.8% for 2019 with an expectation of 3.6% for 2020.

In early April we observed that some clients:

• Continued to provide pay increases – business as usual;
• Provided annual increases, only because they had a substantial backlog of work;
• Postponed their scheduled increases to wait until the crisis is over;
• Decided to freeze pay for all their professional and management staff for the year;
• Cut pay for either the entire staff, just for executives, or just for a select employee group; and
• Provided pay increases just for key job families or key people.

Then There Was June

Of course, some of this was anecdotal, so in late June, we did a quick update on what’s happened or changed since our December and February snapshots of pay activity.

Survey responses indicate the combination of contractors that have or will give increases (62%) and the 11% that delayed increases resulted in 73% taking positive pay action in 2020. Those that postponed increases projected a four-month deferment of pay adjustments. They are now approaching an end to that postponement period.

We began seeing demographic differences starting to emerge with commercial/building contractors projecting 3.6% for staff and 3.8% for executives, industrial contractors coming in on the lower side with 3.3% for staff and 3.2% for executives, and heavy/highway/municipal (HHM) contractors in the middle with 3.4% for both staff and executives. While these differences seem small, it was enough for us to explore differences between construction sectors.

Eleven percent of all contractors said they are freezing pay compared to the HHM sector where only 3% decided to halt pay increases for 2020. Nine percent of all survey participants cut pay for executives whereas only 3% of the HHM firms reported an executive pay reduction. By the way, it’s likely executives may experience a catch-up by means of variable pay at year end.