The New Norm – Same Old Issues

After a year of pandemic uncertainties, pay activity has remained surprising stable for both craft and staff employees. But as positive as it looks, many long-standing compensation issues continue to exist. This update discusses recent pay activity, a few pay scenarios that almost certainly will pop up in the next year, some interesting (if not troubling) trends in total compensation, and finally how we believe 2021 year-end will look for the heavy construction segment.

Individual Pay Increases

For staff level positions, 2020 increases came in at 3.6% for contractors granting increases and 3.2% when the 12% who reported no increase were added in. Heavy contractors reported a 3.5% overall increase, and a 3.2% increase when those not giving an increase were included.

Looking at 2021, most consultants have predicted overall average increases of about 2.8% for all industries. Construction looks different as our 2021 Construction/Construction Management Staff Salary Survey (CCM) indicates all contractor types are projecting a 2021 increase of 3.2% with 4% indicating that they were freezing pay, as well as heavy contractors reporting similar staff increases of 3.2% with only 3% freezing pay.

Our 2021 Heavy, Highway, and Municipal Open Shop Wage and Benefit Survey (HHM) projected craft increases of 3.3% with 9% freezing pay this year. This is coming off of the last year’s reported pay increase of 3.4% with 12% not providing a pay increase.

The HHM survey was full of extremes, with an overall actual change (all crafts combined) of 2.96% from January 2020 to January 2021. That’s not the whole story as many craft positions remained stagnant – or had little year over year change – while others flourished, such as rough dozer operators increasing 5.7%, front end loader operators at 4.4%, and lowboy drivers at 4.1%.

Pay Compression

There are three pay compression scenarios to watch in 2021 and 2022. First, with the issuance of Executive Order 14026, the effect of the $15.00 per hour wage on federal contracts is probably not a concern for most contractors, but there are some that need to look at the impact on their pay programs. Based on the 2021 HHM Survey, slightly more than 25% of the survey participants pay less than $15.00 per hour for entry level craft workers such as un-skilled laborers and flaggers. In addition, entry level clerical, mailroom, and drivers/runners for some firms are also below this federal minimum wage.

Your pay program has a built-in differential to recognize your more skilled workers. If the overall market for non-skilled entry level jobs edges up, then so will those positions requiring more skill and knowledge, and those who supervise them, and so on. Even if your firm isn’t directly impacted by Executive Order 14026, somewhere down the road there will be an impact on industry market values for similar types of positions.

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