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After years of historically high pay raises for construction workers, it appears that many employers have reached a ceiling on the compensation increases they can offer. In 2023, base salary increases for construction workers averaged 5%, according to data from compensation consultant Personnel Administration Services. This is a slight drop from 2022, when base salary increases reached 5.1%, the first time since 2000 that average increases exceeded 5% in the Managerial Staff Salary Survey construction and PAS.
For 2024, employers are taking a more conservative look at wage increases, forecasting that average wage increases may end up around 4.4% for the year. However, Jeff Robinson, president of PAS, notes that employers tend to underestimate increases by 0.3% to 0.5% and expects the average to reach around 4.8% by the end of the year.
Robinson says the rollback in raises could be a natural progression of wages settling after hitting a historically high mark. However, many entrepreneurs could be taking a look at their business prospects in the coming years.
“It’s all about, what’s the job forecast?” he says. “Does it still look good on the horizon? Is our backlog increasing or staying at least the same? Are we going to stay in the same boat in terms of work, where we need more people? I think we’re seeing more of that kind of caution than anything.”
While contractors may see slowdowns in some markets and not have as strong a need to retain or attract employees for projects in those markets, those same contractors continue to see strong growth in other markets. “There is certainly a hold-up in areas such as commercial, but many of these same builders do well in light industrial work, so [company-wide] it balances out,” says Robinson.
Superintendents continue to be in high demand and have some of the highest annual compensation increases, he adds.
The Southeast reports the highest annual base wage increases, while employers in the Midwest, Gulf Coast and Northwest anticipate lower increases than the rest of the country.
Robinson says companies are likely to face compensation compression issues. In particular, he notes that some companies have increased offers to entry-level employees so much that it could have a ripple effect on the salaries of entry-level employees for three to five years.
“It’s very difficult for the company to bring in these new unskilled employees, but then their pay rises faster than the people who supervise them,” he says. “Eventually, you get to the point where your three-to-five-year people have only gotten nominal raises every year, and now the entry-level people are making as much as they are.”
The PAS found that the median salary for entry-level estimators changed 5.1% from 2023 to 2024, while the salary for experienced estimators increased by just 3%. Salaries for entry-level accountants rose 6.7% from 2023, while experienced accountants moved less than 4%. During this period, the salary of entry-level project engineers increased by 5.4%, while the salaries of project managers and senior project managers changed only 3.5%.
Robinson predicts that employees with years of experience will demand higher raises, starting with employees at the three- to five-year level and eventually moving up the ranks.
While the squeeze may affect which positions will see higher raises next year, Robinson and others still predict a general flattening, or even reduction, in average wage increases. Bob Honor, president of contracting firm H&H Consultants, says “we’re probably at the top” in terms of the level of wage increases contractors can offer.
Honor says benefits remain an important part of total compensation package negotiation. “I see people are seeing a big shift in the cost of health premiums, where one company might be at $500 and another at $1,200,” he adds. “[Job candidates] they’re very in tune with it.”
Some candidates are also asking for more paid time off. “That may not mean they want more vacation time,” Honor adds. “They just wish they could get out early on a Friday now and then.”
James Huddleston, president of recruiting firm ProSearch Intl., says that while younger candidates once pushed for “work-life balance” concerns, now seasoned employees are asking for the same . “Employees are willing to work a 40- to 50-hour work week, but I don’t see them returning to 60-hour weekdays.”
Huddleston agrees that wage compression is a real concern in the coming years. One of the ways he sees employers managing to avoid raising base wages across the board is by offering signing bonuses.
In a recent negotiation, an employer adhered to the salary offer and sweetened the deal with a signing bonus and other perks. “[The contractor] they stuck to their guns because they didn’t want to upset existing team members in that range,” he recalls. “So they gave him a signing bonus and offered him some tasty projects to satisfy his appetite.”
