Wages
Wages
Forty-four percent of remodelers said salaries increased from 2007 to 2008, citing a median increase of 6%. Just 5% said salaries decreased, and 51% kept salaries at the same level as 2007.
A slightly smaller percentage (40%) of remodelers planned to give raises during the next 12 months, projecting a median increase of 5%. Anticipating a potentially challenging 2009, many others have instituted pay freezes for all employees or even cut pay at some levels.
“Historically we have given 6% annual raises,” said a Massachusetts remodeler. “But this year I can’t offer them, and I’m taking a big pay cut myself.”
Said another owner instituting a pay freeze, “We usually give 5% raises, but with the economy the way it is, we’re spending a lot more on marketing. That money has to come from somewhere.”
But others see raises as earned. “The men worked hard for it,” said a Connecticut owner projecting 3% increases. “Raises are given on their previous year’s work.”
Rather than definitively slashing wages, one remodeler reported repackaging his project managers’ compensation packages to be more incentive-based. “In the long run, they could make more than they were earning, but this way we are at least operating more efficiently,” he explained.
The conventional wisdom, however, is that most employees recognize the effects that the current economic crisis has had on the industry and understand that sacrifi ces are necessary. Said a Charlotte remodeler who will not be giving his usual annual raise in 2009: “Right now most people are just thankful that they’ve still got their jobs.”
For more on ways in which remodelers are surviving the downturn, see “Surviving the Fall.”
Bonuses
Overall, 45% of respondents gave bonuses in 2007, and 83% said all staff are eligible for a bonus. The bigger the company, the more likely the bonus. Nearly 80% of companies bigger than $2.5 million gave bonuses in 2007, compared with 29% of firms under $500,000.
“Our bonuses are down but they’ll still go out this year,” said an Indiana remodeler with revenue over $4 million. “We like to reward our key players whenever we can.”
Two-thirds of companies that pay bonuses do so annually; the remaining third distribute them more often.
While larger companies are more likely to pay bonuses, anecdotal evidence suggests that bonuses are among the first benefits to be cut regardless of company size. A Massachusetts remodeler with revenue over $3 million reported suspending his bonus program indefinitely — an increasingly common trend among remodelers adjusting to lower-than-expected revenue in 2008.
A $2 million remodeler in Virginia said, “We gave out bonuses for individual job performance, but unless something drastic happens, there won’t be any end-of-year bonuses for overall profitability.”
While bonuses may be considered a luxury in tough economic times, one Maryland remodeler anticipated resuming his bonus program when possible. “We stopped profit-sharing last quarter,” he says. “We’ve got retained earnings, but right now that money is [crucial to the company] and can’t go toward employee bonuses.”