Inflation, labor shortages, supply chain challenges, Oh, my!:
By John Wallen and Jim O'Shaughnessy
As the U.S. economy and construction industry face potential challenges around inflation, labor shortages and continued supply chain issues, the ability of construction firms to keep their benefits flexible, personalized and unique will put them in the best position to attract and retain skilled workers and grow their business.
Despite the recent rise of inflation and interest rates, the U.S. labor market is strong, with an unemployment rate of 3.5%[1]. In 2022, the construction industry had a need for 650,000 additional workers,[2] a demand that is expected to continue throughout 2023.
There are myriad reasons for the shortage of workers in the construction industry. It’s estimated that 41% of the current workforce will be retired by 2031.[3] Other workers are leaving as they find better working conditions and wages, and the pipeline of new entrants into the industry is running dry.
The need to attract and retain workers is immense, and one of the greatest tools construction companies have in their toolbox is to offer competitive employee benefits (EB). While higher materials costs and supply shortages make spending on EB less appealing, many construction business owners are looking to integrate unique and strong EB offerings in 2023 to retain strong workers and attract new ones.
Trends and best practices for construction EB
The success of any business rests firmly in its ability to keep its employees satisfied. As you look to update your EB plan in 2023, it’s important to consider some of the recent trends and best practices to remain relevant and position yourself for success.
· Understand the SECURE 2.0 Act’s benefits and changes. Signed into law in late 2022, the Setting Every Community Up for Retirement Enhancement 2.0 Act (SECURE 2.0) will shepherd in big changes over the coming years as the law kicks in. Among other changes, SECURE 2.0 includes automatic enrollment in retirement plans and part-time worker coverage requirements, increasing the number of employees who qualify for the Saver’s Credit[4] and offering help with student loan debt.
The passage of SECURE 2.0 is expected to help better prepare workers for retirement and provide greater access to those without a retirement plan. Stay abreast of the law as not all changes take effect immediately.
· Keep your benefits flexible. Workers are 1.8 times more likely[5] to stay at their job when they’re satisfied with their work flexibility and work-life balance. In part due to the COVID-19 pandemic, workers are prioritizing their mental health over work demands, especially when they don’t feel rewarded for the extra time and effort they’ve put into their jobs. To keep their organizations vital and fully staffed, employers are making their benefits and work policies more flexible.
Employees are twice as likely[6] to recommend working for an employer when they’re happy with the company’s flexibility policies. Flexibility also includes paid leave policies. Eighty-two percent of employers cite paid family leave as “very important,” despite only 31% offering this option since the pandemic.[7] It’s also worth considering making employee financial well-being a priority when you’re thinking about your EB package. Providing a retirement plan as part of an overall financial well-being strategy can help maximize employee preparation and engagement with their employer. Financial well-being initiatives for younger employees are just as essential as having strong retirement assistance for older workers.
· Personalize the benefits you offer. In addition to offering flexible, contemporary benefits, it’s important to think about how you can tailor benefits to your workers’ needs. As older generations leave the workforce, your ability to attract qualified workers is dependent on what you can offer individual employees. Identifying and delivering personalized benefits that create quality employee experiences can differentiate companies as highly desirable employers.
· Consider unique benefits. For most non-union and small- to medium-sized shops, benefits are rarely available, or are offered as an optional buy-in. But companies pursuing qualified construction workers will need to offer and/or improve current benefits to successfully recruit and retain strong candidates. Construction firms with a non-unionized workforce are offering dental and vision benefits, and some are considering paid leave — including vacation and sick days. To stay competitive, you may also want to consider offering employer-sponsored retirement plans, including auto-enrollment and an employer contribution match to boost participation.
Employee stock ownership plans (ESOPs) are also more popular today, enabling company owners to strengthen their capital structure while building workers’ loyalty. Nearly 20% of the nation’s top contractors have opted for ESOPs[8] — a trend that is expected to snowball in 2023 and through the decade.
2023 growth and beyond
It’s impossible to predict where the U.S. economy and labor market will steer us between now and the end of 2023, but it’s safe to say that retirement benefits will continue to grow and evolve, especially as SECURE Act 2.0 rules take full effect in the next few years. Even if the labor market cools and unemployment rises, making it easier for employers to find workers, the construction industry still has many headwinds to face.
Staying ahead of EB-related trends and on top of best practices is the greatest way to prepare to weather the unknown.
[1] Bureau of Labor Statistics U.S. Department of Labor “The Employment Situation — January 2023,” February 3, 2023.
2 Associated Builders and Contractors “ABC: Construction Industry Faces Workforce Shortage of 650,000 in 2022,” February 23, 2022.
3 NCCER “Restoring the Dignity of Work: Transforming the U.S. Workforce Development System into a World Leader,” July 2018.
4 IRS “Retirement Savings Contributions Savers Credit (Saver’s Credit),” December 21, 2022.
5 MetLife “MetLife’s 20th Annual U.S. Employee Benefit Trends Study – The Rise of the Whole Employee,” 2022.
6 LinkedIn Talent Solutions “2022 Global Talent Trends - The Reinvention of Company Culture,” 2022.
7 MIT/Sloan Management Review, “Cutting Parental Leave Is A Bad Business,” September 1, 2022.
8 Forbes “Why Construction Companies Are Leading The ‘Decade Of ESOPs’ Trend,” February 21, 2022.
About the authors:
John Wallen is Vice President and Wisconsin Construction Practice Leader for global insurance brokerage Hub International. He has more than 30 years of experience providing risk management consulting, effective insurance solutions and innovative risk and cost reduction strategies for the construction industry. John is active in multiple construction industry trade associations including ABC, AGC, ASA, Plumbing and Mechanical Contractors Associations as well as the Construction and Financial Management Association. John has been a featured speaker for several of these and other construction associations on various risk management topics.
Jim O’Shaughnessy, AIF®, is President, Retirement and Private Wealth for global Top 5 insurance brokerage Hub International Midwest West. In this role, he serves as a strategic and operational leader for both the institutional and private wealth management teams. Jim has over 25 years of experience in the retirement plan industry. In 2005, he co-founded Sheridan Road Financial, growing the company to over $13 billion in assets under management before joining HUB International Retirement and Private Wealth through acquisition at the end of 2018.
[1] Bureau of Labor Statistics U.S. Department of Labor “The Employment Situation — January 2023,” February 3, 2023.
[2] Associated Builders and Contractors “ABC: Construction Industry Faces Workforce Shortage of 650,000 in 2022,” February 23, 2022.
[3] NCCER “Restoring the Dignity of Work: Transforming the U.S. Workforce Development System into a World Leader,” July 2018.
[4] IRS “Retirement Savings Contributions Savers Credit (Saver’s Credit),” December 21, 2022.
[5] MetLife “MetLife’s 20th Annual U.S. Employee Benefit Trends Study – The Rise of the Whole Employee,” 2022.
[6] LinkedIn Talent Solutions “2022 Global Talent Trends - The Reinvention of Company Culture,” 2022.
[7] MIT/Sloan Management Review, “Cutting Parental Leave Is A Bad Business,” September 1, 2022.
[8] Forbes “Why Construction Companies Are Leading The ‘Decade Of ESOPs’ Trend,” February 21, 2022.