Construction Firms Use Signing Bonuses to Court Experienced Craft Workers

Construction Firms Use Signing Bonuses to Court Experienced Craft Workers

In the latest sign of the tight US labor market giving candidates the upper hand, many construction contractors in the US are now offering cash signing bonuses to skilled craft workers to sweeten the value proposition for joining their team, Jim Parsons reported at the Engineering News-Record this month:

“Signing bonuses are not new, but they are becoming more prevalent,” says Jeff Robinson, president of compensation consulting firm PAS Inc. Unlike the common practice of providing what he calls “mobilization pay” to compensate for relocation costs, contractors now are offering one-time bonuses ranging from a few hundred dollars to upwards of $1,500 per worker.

According to Robinson, a foreman might be offered as much as $3,000, although there may be an expectation that the person will bring other workers along to join the employer’s workforce. “The advantage of a bonus is that it’s a one-time payment that doesn’t affect base pay,” he says, adding that the incentives usually include a 60- to 90-day employment requirement before they can be collected.

The 2017 survey of workforce shortages by the Associated General Contractors of America reported that nearly a quarter of contractors used bonuses for craft personnel because of difficulty filling positions. The trend appears particularly strong in areas where labor demand is extremely high.

Construction is often thought of as a low-skill occupation where one’s qualifications depend more on strength and stamina than knowledge and experience, but in fact it employs a range of skills, while contractors, like most employers, prefer to hire experienced workers if they can, especially for delicate construction tasks that require high levels of skill and craftsmanship. Construction workers are in high demand as commercial and residential building is booming in many parts of the US, and so these workers are becoming harder to find and more expensive to hire.

The sector has suffered from the dwindling labor force participation among prime-age men in the US; as of last December, there were 158,000 unfilled construction job openings in the US, while related skilled trades like carpentry and plumbing are anticipating a shortage of 500,000 workers by 2026. These labor market gaps are the reason why home improvement retailers are investing in workforce development, such as Home Depot’s $50 million investment in training 20,000 Americans as construction workers over the next decade and Lowe’s new vocational education benefit to help employees cover the cost of pre-apprenticeship training programs in skilled trades. In the US, construction is also one sector that relies heavily on the H-2B seasonal guest worker program, for which demand continues to greatly outpace supply this year.

The use of signing bonuses to attract workers has been expanding to other sectors where this type of compensation was once uncommon. Last month, Disney revealed that it was offering bonuses of up to $3,000 for workers at its vast Walt Disney World resort in central Florida this summer, in an effort to fill some 3,500 roles from chefs and waiters to lifeguards, bus drivers, and housekeepers.