Surveys from previous years:
Everyone agrees it has been a difficult couple of years. In the face of dwindling job opportunities, some remodelers have changed their businesses to focus on smaller projects. Most remodeling companies have become leaner by making cuts in staffing and other overhead items. Some are prospering while others have shut their doors.
This year’s Wage + Benefit Survey, which REMODELING conducts every two years, sheds some light on how remodelers have faced the questions of compensation in a down economy.
The 379 respondents — mostly full-service remodelers, but also handymen, trade contractors, insurance restoration businesses, and custom home builders — answered questions about everything from total payroll and hourly pay rates to raise frequency, overtime, bonuses, profit sharing, vehicle use, health and other insurances, vacation time, and holidays. Company revenue ranged from more than $5 million to less than $150,000.
In comparing the 2010 survey — which covers 2009 data — to the 2007 and 2008 data (recorded in the 2008 survey), what emerges is a picture of an industry that has taken a lot of hits and has trimmed its workforce and spending habits to the bare bones.
There are more sole proprietors (38% of the companies responding in 2010, only 23% in 2008) — either new entrants into the industry or, possibly, larger companies that have pared back. The types of benefits that have been cut — such as overtime pay, bonuses, and paid vacation for first-year employees — suggests not only that there are fewer dollars to spread around, but that some of the larger companies with more corporate-type policies may have disappeared entirely. Yet 27% of respondents reported that nothing has changed since 2008.
Specpan (www.specpan.com) programmed and hosted the Web-based survey, collected and compiled the data, and provided pre- and post-survey analysis. Specpan is a business-to-business data collection provider that services the construction and home improvement markets. Specpan is owned and operated by The Farnsworth Group, an Indianapolisbased full-service research consultancy.
WAGES
Twenty-six percent of survey respondents reduced pay for most positions. The 2009 data shows that office managers and bookkeepers took the biggest hit, down nearly 25%; salaries for sales personnel were down about 10%.
It appears that laborers’ median hourly wage rose slightly and that laborers and helpers earn the same amount. Possibly, companies with few employees don’t differentiate between the positions. It is also possible that with layoffs, those employees left in place took on more tasks and earn more.
While IT/Systems people look to have nearly doubled their income, this anomaly is likely due to do the low number of respondents that actually employ full-time IT staff.
Since large jobs were few and far between, it is no surprise that production specialist salaries have decreased. And, for many companies, the marketing budget is often one of the first things cut. Hence the big decrease in marketing managers’ salaries.
Sixty-one percent of remodelers do not expect to give pay raises during the next 12 months. “Salaries have pretty much been stagnant across the board,” says Chris Kamis, owner of Absolute Roofing and Construction, in Parma, Ohio, a Cleveland suburb.
Bonuses
Seventy-one percent of respondents said they did not distribute a bonus in 2009. Of the 26% that did give bonuses, the median bonus was $2,500. Those same owners project the median in 2010 being less than half of that, $1,100.
The larger the company the more likely it was to give a bonus. Since 64% said that their bonuses were based on net profit, it’s not surprising that bonuses have declined or disappeared altogether.
In comparing bonus delivery with 2008, Grant Farnsworth, owner of Specpan, a business-to-business data collection provider that services the construction and home improvement markets (read more about Specpan above), notes that 53% of respondents said that they did not distribute bonuses in 2007, while 71% said they did not in 2009. “That’s almost a 20% difference — a [sizeable] chunk,” Farnsworth points out.
Most of the dozen or so people interviewed for this article had a response similar to this one from Alan Lutes, owner of Alpha Remodeling, in Ann Arbor, Mich., who says, “I haven’t given bonuses in three years — or something very minimal where they’d been sizeable before.”
Health Insurance
This area shows some of the biggest changes since 2008. First, many more companies are not offering any type of retirement savings program in 2010: 80% of respondents this year said they offer none, compared with 66% who said the same in 2008.
Only 29% of respondents offer either individual or family insurance plans, down from 43% who responded positively in our 2008 survey. Of those who offer health insurance, 46% have done so for more than 10 years and 50% of those offering health insurance pay the full 100% of the costs for an individual plan.
While health insurance is an important part of any benefits package, and 60% of respondents claim they neither increased nor decreased the portion the company pays for health insurance between 2009 and 2010, new federal regulations have created a scare. Few employers can continue to pay at past levels.
Alan Lutes, owner of Alpha Remodeling in Ann Arbor, will keep his company’s high-deductible insurance program but will terminate the health savings account. Chris Kamis, owner of Absolute Roofing and Construction, pays 50% of medical and dental plans but says that will change. Jim Basnett, owner of Basnett Design Build Remodel, in Littleton, Mass., who paid 50% for family and individual plans, removed all health insurance benefits. However, his state, Massachusetts, partnered with a private-sector company to offer group health insurance administered through employers and paid by the employee.
Changing health care benefits is not an easy decision. Many employers feel as Neil Kristianson, owner of Crimson Design & Construction, in Naperville, Ill., does: “The kind of guys I like in the field are family guys. If you want to take care of your family, you’ve got to have health insurance and other benefits.”
Financial & Retirement Benefits
For those that offer these benefits, each individual category shows that more companies have dropped their participation during the past two years. For example, in 2008, 15% of companies offered a 401(k) and in 2010 just 6% do; 8% offered a SEP IRA, now 2% do.
The only category showing an increase is the SIMPLE IRA option: 8% offered it in 2008; in 2010, 12% did. The SIMPLE IRA has easier and less-costly administrative rules than the other forms of retirement savings.
Remodelers who offer these types of benefits do so because they feel it’s important to “help people help themselves,” as Jim Basnett, owner of Basnett Design Build Remodel, in Littleton, Mass., puts it. “I want to help my employees to a better future and a better life.” Basnett had to drop his company match from 3% to 1%, but still, six of his seven employees participate.
Although it takes effort to engage employees — explaining the value of benefits, for example — it’s worth it, says Absolute Roofing and Construction owner Chris Kamis, who offers employees a 401(k) with a 1%, 2%, or 3% match (depending on employee longevity). Once a year Kamis has a benefits specialist talk with employees. “About half take us up on it,” he says.
Kamis offers the plan, he says, because “a lot of the guys have been with us a long time. They are all valuable pieces of the puzzle. They’re family to us and they have families of their own. Once you find a good person, you want to keep them, and it’s worth every penny to offer these things to retain good talent.”
Benefits
Paid Time Off
While paid time off is a nice, relatively inexpensive perk, more than half, 57%, of respondents said that they don’t pay for any holidays, and 56% do not offer company-paid vacation days even after 15 years of service. The same is true for company-paid sick days — 80% do not offer it even after 15 years of service. No surprise, the smaller the company, the fewer that offer paid time off.
Chris Kamis, owner of Absolute Roofing and Construction, in Parma, Ohio, who has been able to grow his company these past two years, continues to support paid vacation and government holidays for his 50 employees. “And we require that they take those [government holidays] off because we value family,” he says. Vacation is dependent on how long employees have been with the company. “Once you’re fully vested, you get a week’s paid vacation.”
Jim Basnett, in Littleton, Mass., who admittedly has struggled since 2008, still believes that “paid time off is really important.” He offers holiday and sick leave pay, and says, “If they don’t use it, I pay them for it at the end of the year. They take ownership of their jobs. Even project supervisors are out there selling us.”
Some remodelers, such as John Price, whose company is in Merced, Calif., the foreclosure capital of the country, have a different view, allowing their employees to choose. Price was able to save his company by turning to government work, for which he must pay employees the prevailing wage. “I don’t offer vacation days,” he says. “It’s in [employees’] pay already. If [they] want to take it they can; it’s already paid for.” Because work has not been steady, most employees don’t take vacation.
Determining Benefits
What makes some companies offer benefits and others not? It’s not that remodeling company owners don’t care about their employees, but there are a lot of mitigating factors, especially in this economy.
In the 2010 survey, the top three factors that respondents said have the most impact on the amount of benefits they offer are insurance rate increases/decreases (56%); previous year’s sales/revenue (50%); and projected sales revenue (46%). The same three factors were given in 2008, with projected sales revenue coming in second and previous year’s sales coming in fourth behind gas price increase/decrease.
“I’m hearing [from remodeling company owners] that things are tight: we’re not doing parties, we don’t pay out bonuses, we’re not giving raises, we’re not hiring,” says Grant Farnsworth, owner of Specpan, the business-to-business data collection provider that services the construction and home improvement markets. “It’s consistent with the data [over the past two years]. Things are tighter now and people don’t anticipate it loosening up soon.”
But those who have offered and continue to offer benefits see them as an important part of running a professional business, as a differentiator, and as a way to attract and keep the best and brightest employees. Many also feel a moral obligation to support their employees so they, in turn, can support their families.
Benefits are important “if you want to be a stable employer and retain employees,” says Alan Lutes, owner of Alpha Remodeling, in Ann Arbor, Mich. “They’re important for operating a proper business. And [we should] provide people with the things they need to take care of their families properly.”
Owners
The number of sole proprietors has increased in the past two years; 77% of respondents in 2010 are sole proprietors (64% in 2008).
About one-quarter have reduced pay for all employees, including themselves.
The average salary for owners with companies under $500,000 in revenue is $28,044. Those whose company revenue is between $1.1 million and $2.5 million have the highest salaries, averaging $123,277. But those owners of companies with revenue over $2.5 million are taking a smaller salary, $89,727, and are making up for it in bonus or profit sharing, $40,833, and in a higher yearly allowance for company vehicles, $8,644.
The past two years have been particularly difficult for the owners of small companies who don’t pay themselves a salary — who take only what’s left if there’s any profit. Survey respondent Chantal Devane, an interior designer who works closely with remodeling contractors, is one such small-business owner. “I pay myself based on profit, which changes depending on the jobs I do year to year,” Devane says. “It was a matter of just getting by in the past couple of years.”
But even remodelers who have more mature businesses and who always take a salary off the top have cut their own pay (along with that of their employees) or have gone without. “Many of us have gone through periods of not paying ourselves” in the past two years, says Michael McCutcheon, owner of McCutcheon Construction, in Berkeley, Calif., a highly successful 30-year-old design/build company. He took a nearly 60% pay cut and, at the advice of his accountant, is gradually ramping up and paying himself back. “So now it’s more of a 50% pay cut,” he says.
Devane says that her market has improved since early 2010. “This year I have tripled what I did all of last year,” she says, and she is beginning to pay herself again.
Jim Basnett, in Littleton, Mass., has cut his own pay almost 50%. Yet he says he’s optimistic and sees change as the way of the future. “Smaller projects are what we’ll be dealing with for a long time. We’ll use those as a differentiator. And social media is moving at such a fast clip. Basically, we just can’t do things the way we did in the past.”
Survival Mode
There’s a lot of doom-and-gloom talk and speculation about the year ahead. Everyone is waiting to see what will happen — with election outcomes, with health care, with a possible stimulus package. Yet most of the remodelers interviewed here are hopeful about the future.
To survive, remodeling companies have scaled back to bare bones — 39% reduced hours; 32% laid off employees; 26% reduced pay; and 24% eliminated bonuses. And yet, 50% of those with revenue under $299,000 said they have not been affected. They are likely doing smaller jobs and have lower overhead, which possibly put them in a better position than those companies with revenue between $500,000 and $999,000, and $1 million and $1.99 million. Only 6.2% and 10% of those companies, respectively, felt they have not been affected by the current economy.
Yet no one is truly immune to economic change; everyone has learned something these past two years. Brook Rush, owner of David Brook Rush Builders, in Perkasie, Pa., says he’ll hire more people when things turn around, but he still won’t allow himself to grow too big. “We’ll survive and be around and do whatever it takes to be in business. I’m very optimistic; it’s just going to take a little time.”
—Stacey Freed, senior editor, REMODELING.