By David Hegstrom, Harris CPAs
If you have had to hire a new employee in the past year, how was the hiring process and did you have any difficulty finding the right candidate? The answers I get from my clients range from “I would rather go to the dentist every day for a month than do that again” to “Is wrestling a grizzly bear on the table?” While these answers are facetious, the sentiments behind them are very real and are being echoed across the country. Since the end of 2015 the US unemployment rate has stayed below 5% and just last month the unemployment rate was reported at 3.8%. Couple the unemployment rate with the 3% average growth for the US economy in 2018 and is there any surprise that there seems to be a lack of qualified candidates? After clients explain to me their experiences trying to find qualified employees, I am inevitably asked, what are other companies doing to find people? Well I am going to share the secret here and, in true CPA fashion, provide some numbers to show my conclusion.
At the beginning of 2019 Harris CPAs, in conjunction with CICPAC and PAS, Inc., published a survey reporting the 2018 national salary levels for 3 key positions in the construction industry. The salaries for these positions, which were Senior Project Managers, Senior Estimators, and Controllers, were further categorized by revenue thresholds for the companies surveyed. Finally, mean and median averages were calculated/identified for each revenue category.
So what did we learn? While we could look at any number of data sets, there was one that was particularly interesting. When comparing the difference between the mean and median wages, there was only 1 instance out of 18 (for all 3 positions surveyed in each of the 6 revenue categories) in which the median wage was larger than the mean wage. In other words, 94% of the time the companies that were the top 50% of revenue earners in each category paid their employees more. That may seem like a no-brainer, but if we look a little deeper, it isn’t just that our top earners are paying more, they are paying exponentially more than their counterparts.
The table below illustrates what we are discussing. Note that the total compensation for each position is calculated using a standard average for all revenue thresholds. As an example, if I had a Senior Project Manager (SPM) that I was currently paying at the 25th percentile, if I wanted to increase that SPM’s compensation to be in line with the 50th percentile, it would require a 10% raise. Now if I wanted to increase the total compensation for that same SPM to be in line with the 75th percentile, it would now require a 15% raise. That increase in raise percent’s (delta) appeared again and again even when looked at minor subsets of the data.
So to answer the earlier question, the companies that are experiencing, or have experienced, the most growth have a different strategy in hiring in this economic climate. Namely, staying out of the hiring arena! Now realize that total compensation does not just mean a bigger salary, it also encompasses the fringe benefits offered by your organization. Many organizations are increasing their fringe benefits to employees rather than just providing an increase in salary, mainly because the return in benefit, dollar for dollar, is more advantageous for both the employer and the employee. So if your organization has been spending too much time recruiting and trying to find the right candidates, ask yourself this question, “what does your total employee compensation package look like?” Maybe your answer to the hiring dilemma is not more or different people, maybe its retaining the good employees you already have.
If you would like a copy of this full survey, or to talk more about your organization’s compensation structure, please contact me at email@example.com.
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