Retaining Your Skilled Construction Labour and the Costs if You Don’t
Labour is one of the largest expenses for a construction company. But with the often harsh job conditions and the cyclicality of the work, it is often difficult to retain an adequate roster of skilled labour making retaining your best, skilled labour even more important for the success of your business.
Unforeseen Labour Costs
Motivation in Extreme Conditions
The extreme weather conditions and physical demands of construction work make keeping staff motivated very difficult and can have a significant impact on productivity and the bottom line. Having an extreme weather policy in place that is actually used will show your construction labour that you understand what they are working in and that you care about their safety. As trivial as it seems, this acknowledgement will help keep your labour motivated in tough conditions. Policies like this also have benefits for your company in the form of decreased injuries and accidents which not only stall a project but can be costly in terms of both man-power and dollars.
With the potential to have employees spread out at multiple job sites at all times, communication can also suffer. Without a strong leader at each site acting as the voice of management, it is easy for staff to be unsure of expectations which can lead to errors and cost overruns.
Additional hours of work at a higher wage can be seen as an instant motivator for skilled labour, however long periods of overtime can quickly drop productivity and the margin on the job. This drop in productivity means that you are getting less work completed while paying a premium for that labour. Overtime can also have huge impacts on your projected profit for a job if overtime was not planned for at the time of the bid. Overtime therefore needs to be monitored to keep job profits in check and labour from getting fatigued and injured.
The Cost of Turnover
Although estimates vary widely, the turnover of one employee could cost as much as 150% of that employee’s wage in terms of lost productivity, costs to fill the position and train a replacement and so on. These costs can be even greater for highly skilled or experienced labour. Losing even one of your key employees can be detrimental to your company’s ability to complete jobs at a profit.
Solutions for Stronger Skilled Labour Retention
Even with the additional challenges for labour management in the construction industry and therefore additional costs that can drain your job profits, there are steps you can take to retain your best skilled labour without breaking the bank.
- Hold team meetings whenever possible. These meetings allow field staff to understand what is going on in the company and gain some job security by knowing what jobs are coming up.
- Keep key employees busy, even during slow times. If necessary, schedule professional development and seek out different types of work during down time.
- Use apprentices. Although apprentices mean training costs, they are often highly motivated and some of those training costs can be recovered in their lower wages (compared to journeyman) and tax credits.
- Show appreciation for a job well done. Especially on long jobs, having a small meeting to celebrate the completion of the job can have a highly positive impact on staff. The costs can be as low as the cost of doughnuts for the staff on the job, but earn you far more in rejuvenated morale.
- Offer company cell phones to staff who have been with the company for several years. Having a direct line of communication to the office and management can increase the feeling of ownership and accountability that is greater than the cost of an additional cell phone plan.
- Offer key employees additional incentives such as bonuses based on job profits. This increases the employee’s connection to the project goals, while never creating a loss.
- Offer partial ownership for key employees. This retains those key workers while aligning their goals with those of the company. Having an ownership stake can prevent those key staff from leaving to start out on their own and can be part of a future retirement/exit strategy for the current ownership.
Harsh conditions, skilled labour-intensive jobs, segregated work sites, physical demands and competitive bids all lead to an extreme human resources situation. Therefore retaining and attracting the right skilled labour is what makes the difference between profits and losses. By focusing on the costs of not having adequate labour management in place, you can minimize profit fade while keeping your staff happy, safe and most importantly, loyal.
Written by Dana Gidge, CHRP, CHRL and Kimberly Aitken, CPA, CA of RLB ’s Construction Team. Contact them at 519-822-9933 or visit rlb.ca.