Have The Right Compensation Strategy For New Carpenters Before You Hire Them!
One of the benefits of the great recession was that as business slowed down businesses got rid of underperforming and or overpaid employees. This article is intended to help those remodelers who had or may still have such employees. I hope by reading this information they can avoid repeating the same mistakes again as the economy eventually improves.
During the boom times many contractors, trying to get enough field labor to keep up with volume demands, resorted to overpaying carpenters and other field workers just to get them on board. Also, over time, many remodelers gave wage increases to these people just to keep them, either in fear of losing them and or because another business offered the employee more money. Additionally, many employees received wage increases based on longevity, perhaps with little or no consideration for any actual advancement in performance, responsibility or productivity. One could fault the business and or the economy for why this was happening, but certainly not the employees. After all, if market demand stimulated increased wages, employees would be foolish not to pursue and take the increases.
Then the bottom fell out
The great recession changed this scenario somewhat due to layoffs and downsizing. The surplus of unemployed field workers got as high as 27% for the construction industry during the recession. Unfortunately many skilled workers left the industry for other jobs, less physical jobs and or better job security. This has set up what is expected to be a major labor shortage problem for our industry as the economy and construction pick up again. Many contractors around the country are already reporting challenges finding skilled carpenters to keep up with construction demand. As the demand goes up, so will the wages that carpenters can demand to either stay at their current jobs or that other contractors will use to lure workers away to work for them.
Finding, attracting and keeping the best carpenters will require strategic thinking
If you plan to hire additional carpenters as your business volume picks up now is the time to put a plan together for not only finding, but also attracting good carpenters to work for your business and then to get them to stay with your business. The compensation package you put together should not only capture their interest, but also help them see opportunities for future growth and increased compensation if they are loyal and motivated.
This provides a great opportunity for remodeling business owners to get compensation and any future wage increases in line with actual performance, rather than continue using the subjective reasons so prevalent the past. It should only make sense for a business to put a plan in place that properly compensates employees based on the value they bring to the business. It also makes sense to put such a plan in place so employees will know how they can and when they have earned the right to expect increased compensation.
Buying a boat or getting married is not a good reason to give a carpenter a raise!
The automobile industry uses a flat rate manual to determine the labor costs for auto repair services. The strategy they use is not to estimate the number of hours to do a certain task, but rather the typical actual cost of the labor to perform the task. A repair shop that uses flat rates pays their employees for what they accomplish, not how long it took them to do it. A construction or remodeling business could do something similar. Such a strategy could also help the business and the employees learn where to invest training to improve performance and stimulate wage increases for those who buy into performance based opportunities.
If remodelers and other contractors continue to use purely subjective methods to determine compensation for field employees, they will be setting the example for and encouraging employees to also continue using subjective methods to assess their own performance. If this plagued your business in the past it’s up to you to make sure it doesn’t happen again.
Before you hire new employees or bring previous employees back into your business take the time to think out and document compensation plans based on merit. If you introduce such a plan to job candidates it could even act as a filter. Top performing candidates will be attracted to such a plan, but those who can’t or won’t perform will likely find somewhere else to work. After all, as a business owner your compensation is based on actual performance. Why not offer the same opportunity to employees. If they make more money participating in such a plan, so will you!