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How setting the right compensation strategy can really "pay-off"

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Remodeling Industry Facts and Figures

Dear Friend:

February is always a busy month for us at HomeTech. While the month of January seems to be spent wrapping up the previous year and starting to think of the upcoming year, by February, everyone is "full steam ahead." It's very exciting! We are charged up with inspiration and ideas for the upcoming year and anxious to put our plans together for all we want to accomplish.

And with these pending plans, for me, also comes a time of reflection for my team whom is instrumental in carrying out these plans. My team works hard, and I expect that. I also want my team to know how much I appreciate how hard they work. In this month's article we discuss one of the ways you can let your team know how much you appreciate them. Putting together a competitive compensation package for your employees takes effort -- but effort that is very worthwhile. Read on for more!

Walt Stoeppelwerth
HomeTech Building Business Ideas

P.S. Interested in online estimating? Check out our recently redesigned CostEstimator.com website for more.

Walt Stoeppelwerth

 

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2008 HomeTech Remodeling Industry Compensation Survey is now available!

Results for the 2008 HomeTech Remodeling Industry Compensation Survey are now available! Order your copy before midnight on February 22, 2008, and get 25% off of the list price! This discount is only being offered to newsletter subscribers -- order your copy now!

(NOTE: If you participated in this year's survey, in the next couple of days we will be sending you your promised coupon for 50% off the list price.)

Get 25% off. Order before 2/22 »

How setting the right compensation strategy can really "pay-off"

In a service business, such as a remodeling business, your success depends upon two primary things -- how good was the work that was performed, and what was your customer's experience with your business as they were having the work performed.

For remodelers, these two primary "success measurements" are more related than you might think. Both the work performed and your customers’ experiences are based on the same thing: the people you have working for you. If your people are not skilled -- your work is not good. If your people are not courteous and respectful -- your customers' experiences are not good. If you put the "human factor" aside for a minute, and really think about what your staff means to your business, you'll realize how much of an asset good people really are.

You need to invest in your employees
As with any asset in your business, you need to invest in that asset to keep it performing at its best. Your trucks need oil, tires, repairs. Not unlike your equipment assets, your staff needs to know that you are willing to invest in them too. Whether it be a potential new employee ready to join your team, or someone who has been with you for years, your staff needs to know that you are making decisions that reflect how important they are to you and your business. And, a lot of it comes down to the compensation you offer -- how much you will pay your staff, and the benefits that go along with being on your team.

"Compensation" versus "Pay"
For both employer and employee, it's important to understand the difference between "pay" and "compensation." While pay typically means an hourly wage, compensation includes both pay and all the benefits you offer in addition to the wages. Do you offer short and/or long-term disability insurance? Vacation pay? Holiday pay? A 401k plan? A compensation package costs your business real dollars but it can be a very wise investment. A robust compensation package is a great employee attractor and retainer. So, how do you determine what’s in your compensation package?

Understand your market
First you need to know what people in your market expect in terms of compensation. For starters, look at compensation studies, like the one HomeTech publishes, to determine what pay rates and benefits are being offered in your market. Based on customer feedback, HomeTech's 2008 study significantly expanded its benefits coverage, further illustrating just how important benefits are in the compensation equation.

Next, ask around. Perhaps the Chamber of Commerce in your area tracks these types of numbers as well, at least for the common positions across businesses.

How do you know what you should offer?
Again, if you've done your research, you will understand the pay ranges and benefits being offered in your area, relative to your firm's size. Armed with this knowledge, you can competitively set a pay scale for your employees. And, you will be able to determine the right mix of benefits to offer too. Both pay rates and benefits can vary significantly based on the area of the country in which you operate and based on how large your business is in terms of annual revenue.

In the 2008 HomeTech Compensation Study, for example, overall, only 20% of those who answered the question offer a 401k plan. This changes significantly, however, for larger firms -- 62.5% of firms that are $2-4 million in annual sales offer a 401k plan to their employees.

In terms of offering benefits, you should understand your market's offerings of the following:

• Vacation, sick and holiday pay
  How many days do you offer and for which employees?
• Health insurance
  Do you offer and do you pay a portion of the premium? Are dependents covered?
• 401K retirement plans
  Which employees do you offer a 401k plan to? Do you provide a matching percentage too?
• Short term disability
  Do you offer and who’s eligible to participate?
• Long term disability
  Do you offer and who pays the premium for this benefit?
• Overtime, cash bonuses, referral bonuses, life insurance
  What do you offer, how much do you offer for each of these additional benefits?
  

We provide statistics on all of these benefits and more in the 2008 HomeTech Compensation Study [ link to the study purchase page ].

Review your compensation strategy annually
One last point is that it's good practice to review your compensation annually. While you might not make changes to what you offer annually, understanding compensation trends allows you to prepare and make the right adjustments when you need to. If you are not currently offering short term disability, but market trends are showing that more and more of your competitors are, you should probably start your research into the plans that you could offer and when best to make this offer to your team.

Select results from HomeTech's 2008 Compensation Survey and what they mean to you
As promised, we wanted to provide some of the results here for you to get an idea of what we learned by analyzing our recent compensation survey data:

• As shown in the below graphic, the positions with the highest increase in salary over the last year were roofers, tile layers and mason and brick layers. We do have to be careful, though, as this increase may have not been as dramatic as you may think because of a very few who reported very high numbers this year. As was with the previous year's survey, these positions might reflect sub-contractor rates which would be a bit higher than what is offered to employees. Interestingly, however, electricians -- which were one of the highest salaries last year -- saw an overall 5.62% decrease in salary this year from the previous year.
• In terms of benefits, the majority of respondents offer overtime pay (74%), but very few respondents offer long term disability (only 9% overall). If you are in the Northeast, however, you most likely to offer long term disability benefits.
• As was in the previous year, more often than not, higher average wage rates were paid in the West and Northwest.
• It will be interesting to compare wage rates and compensation benefits over the next few years as we continue to recover from recent natural disasters (Hurricane Katrina) and watch adjustments in the housing market as baby-boomers continue to move in to their retirement years.

(Click here to see a larger version of the figure.)

A robust compensation package is a great employee attractor and retainer. So, how do you determine what's in your compensation package?

 

Additional Resources

Compensation: Total Reward Plans that Atrract, Retain and Motivate

Show Me the Money?:
Top talent and A-list organizations are learning that compensation goes well beyond base dollars

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Remodeling Industry Facts and Figures
The most recent release of the Leading Indicator of Remodeling Activity (LIRA) projects a modest decline in remodeling spending by homeowners over the next 9 months. Total spending is projected to be $175.6 billion dollars on an annual basis by the third quarter, only 2.6% lower than the rate in the third quarter of 2007. If accurate, total remodeling spending in the quarter will be the fifth highest on record.

Source:
Joint Center For Housing Studies, Harvard University
LIRA Release, January 17, 2008

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