Labor
2Q 2024 Cost Report: Base Salary Increases Begin to Fall as Employees Seek Additional Incentives
Paid time off and signing bonuses are among the perks offered by employers
Related Link:
ENR 2024 2Q Cost Report PDF
(Subscription Required)
After years of historically high salary increases for construction staff, many employers appear to have hit the ceiling for the compensation bumps they can offer. In 2023, base salary increases for construction staff averaged 5%, according to data from compensation consultant Personnel Administration Services. That is a slight dip from 2022, when base salary increases hit 5.1%—the first time since 2000 that average increases surpassed 5% in the PAS Construction/Construction Management Staff Salary Survey.
For 2024, employers are taking a more conservative look at salary increases, forecasting that average salary increases may end up around 4.4% for the year. However, Jeff Robinson, president of PAS, notes that employers typically underestimate increases by 0.3% to 0.5% and he expects the average to ultimately hit around 4.8% by year’s end.
Robinson says the pullback in increases could be a natural progression of salaries settling down after hitting a historically high mark. However, many employers could be taking a hard look at their business prospects in the coming years.
“It all has to do with, what’s the forecast for work?” he says. “Is it still looking good on the horizon? Is our backlog increasing or staying at least the same? Are we going to still be in the same boat work-wise, 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 of a need to retain or attract employees for projects in those markets, those same contractors continue to see strong growth in other markets. “There’s certainly a holdback in areas like commercial, but a lot of those same builders do well in light industrial work, so [company-wide] it balances out,” Robinson says.
Superintendents continue to be in high demand and command some of the highest annual compensation increases, he adds.
The Southeast reports the highest average annual base salary increases, while employers in the Midwest, Gulf Coast and the northwest are forecasting lower increases that the rest of the country.
Looking for quick answers on construction and engineering topics?
Try Ask ENR, our new smart AI search tool.
Ask ENR →
Robinson says it’s likely that companies may face compensation compression issues. In particular, he notes that some companies have increased offers for entry-level employees by so much that they could have a domino effect on salaries for employees at the three- to five-year level.
“It costs the company so much to bring in these new unskilled employees, but then their pay is going up quicker than the people who are supervising them,” he says. “Eventually, you get to the point where your three- to five-year people have only been getting nominal increases every year and now the entry level people are making as much as them.”
PAS found that average entry-level estimator pay changed 5.1% from 2023 to 2024, whereas experienced estimator pay rose only 3%. Entry-level accountant salaries increased 6.7% from 2023, while experienced accountants moved less than 4%. During that period, entry-level project engineer pay rose 5.4% while project manager and senior project manager pay only changed by 3.5%.
Robinson predicts that employees with years of experience will demand higher increases, starting with employees at the three- to five-year level and eventually moving up to the senior ranks.
While compression may affect which positions see higher increases in the coming year, Robinson and others still predict an overall flattening—or even reduction—in average salary increases. Bob Honour, president of recruiting firm H&H Consultants, says “we’re probably at the top” in terms of the level of salary increases that contractors can offer.
Honour says that benefits remain a significant part of total compensation package negotiation. “I see people looking at a huge swing in the cost of health care premiums, where one company may be at $500 and another is at $1,200,” he adds. “[Job candidates] are very attuned to that.”
Some candidates also push for more paid time off. “That may not mean they want more vacation time,” Honour adds. “They would just like to be able to knock off early on a Friday from time to time.”
James Huddleston, president of recruiting firm ProSearch Intl., says that while younger candidates once pushed “work-life balance” concerns, now seasoned employees are demanding the same. “Employees are willing to work within a 40- to 50-hour work week, but I don’t see the days of 60-plus-hour weeks coming back.”
Huddleston agrees that salary compression is a real concern in the coming years. One way he sees employers managing to avoid raising base salaries across the board is by offering signing bonuses.
In a recent negotiation, an employer stuck to the salary offer and sweetened the deal with a signing bonus and other perks. “[The contractor] stuck to their guns because they didn’t want to upset their 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.”
