Why finding workers is so hard these days
Whether you are searching for subcontractors, employees, or even piece workers, one thing is very clear: there is a shortage of skilled labor.
There are two reasons for this:
1.) The 2008 housing market crash caused many construction companies to go out of business, limiting how many new people were entering the workforce.
2.) At least here in the United States, very few people are willing to work in the trades and this has become a problem for contractors who are looking to teach construction skills to a new generation.
How to address the labor shortage problem
With today’s current labor shortage, scaling your business may seem impossible, but if we understand how hiring in construction works, it may be easier than you think…
There are three types of hired labor in construction:
- Piece Workers
Each of these labor types have an important place in your business, but in the next few sections we will look at the pros and cons of each and understand how you can make the most of your hired labor.
Labor type #1: Employees
Employees are workers who work full-time and are paid hourly or on a salary.
An advantage of the employee is that they are fully dependent on you for income, so they usually will be more willing to learn and more willing to work harder.
For this same reason, a disadvantage to hiring an employee is that they come with more risk as you will generally go through more costs as you try out different ones.
If you are looking for an employee to invest in long-term, be willing to pay them more than the market price. Even paying a few dollars above the hourly rate will ensure they don’t leave you for anyone else, which is crucial in a volatile industry like construction.
Labor type #2: Piece Workers
Piece workers are workers who do only a piece of the work and are usually hired on an “as-needed basis”.
The advantage to piece workers is that they can supplement the workload of your permanent workers, which is good if you want to increase how many jobs you can do.
Especially for smaller contractors and subcontractors, piece workers are vital for scaling your business, but make sure not to overuse them!
Although they are not as costly as employees, they are usually less trustworthy and more difficult to manage.
Labor type #3: Subcontractors
Subcontractors shouldn’t be confused with piece workers. While piece workers handle a specific aspect of the job (framing, drywall, insulation, etc.), subcontractors handle a scope of the job (drywall, framing, and insulation).
For a general contractor, an advantage to subcontractors is that they require less management and can handle large aspects of the job without any supervision costs since they have their own supervisors and vendors.
Which labor type is right for you?
Knowing how much of each labor type you should hire for your business is crucial for scaling your business. The truth is, the answer is different for everyone…
With that being said, there is a general formula for how you should structure your construction business.
The most efficient way to scale your business is to have a core circle of employees (project managers, supervisors, etc.) that manage subcontractors and piece workers who then handle the brunt of field operations.
Especially for general contractors and smaller businesses, you should completely subcontract your jobs because this will allow you to pursue more jobs at a time and increase your business’s earning capacity.
Even though outsourced workers won’t be as dedicated to your business, outsourcing is the key to scaling your construction business in today’s labor market.
The Secret to 10X your Construction Business
If you are interested in growing your construction business, I’ve prepared a short training video for you that you can watch for FREE: