Employee Retention in Construction Industries: Turnover rate, Strategies and Solutions

The construction industry is facing a growing challenge, i.e., employee retention. While the demand for construction services continues rising, companies struggle to stabilize their workforce.

Recent studies show that the construction industry has turnover rates much higher than the average for all industries.

According to the U.S. Bureau of Labor Statistics, the turnover rate for construction workers was 56.9% in 2021. In comparison, the average turnover rate for all industries was 47.2%.

As construction companies continue to evolve, finding ways to improve employee retention in the construction industry has never been more critical. It's not just about hiring the right people; it's about keeping them.

In this blog, we will explore the current landscape of employee turnover in the construction sector, dive into the key factors influencing retention, and outline actionable retention strategies and solutions for improving employee retention and engagement in the construction industry.

The Current Landscape of Employee Turnover in Construction: Rates and Trends

Employee turnover in the construction industry is a pressing issue, one that has shown little improvement over the years. As mentioned previously, turnover rates in the construction sector consistently surpass the all-industry average. This shows the challenges companies face in retaining skilled workers.

Here's a look at the turnover rates over the past few years:

What is the Average Employee Retention Rate in Construction?

Upon analyzing the previous few years' data released by the U.S. Bureau of Labor Statistics, this is what we have found about the Average Employee Retention Rates in Construction -

1. 2021 Retention Rates:

• Average Retention Rate: 53%

• Construction Industry Retention Rate: 43%

2. 2022 Retention Rates:

• Average Retention Rate: 53%

• Construction Industry Retention Rate: 47%

3. 2023 Retention Rates:

• Average Retention Rate: 59%

• Construction Industry Retention Rate: 46%

Factors Influencing Employee Turnover in the Construction Industry

Employee turnover in the construction industry is influenced by several factors. They range from compensation and work culture to career advancement opportunities. However, it's fair to say that these factors also loom large in all other industries.

Therefore, we'll have to delve deeper and understand the key factors. Understanding these will help you address the underlying causes of turnover and take proactive steps to improve retention.

1. The Impact of Project-Based Work and Short-Term Assignments

Construction projects are often temporary and contract-based, causing workers to feel a lack of long-term job security. This drives many to seek more stable opportunities elsewhere.

2. Challenges in Onboarding and Integration of New Hires

The fast-paced nature of construction sites sometimes offers inadequate onboarding. Without proper training, mentorship, or team support, new hires can feel overwhelmed and unsupported, leading to early departures.

3. The Generational Divide and Evolving Expectations

The construction workforce is often multigenerational, and different age groups may have varying expectations regarding -

• work-life balance,
• technology adoption, and
• communication styles.

Companies that fail to adapt, especially with younger workers, risk losing talent.

For example, not investing in modern technology or resisting flexible communication can push away newer employees.

4. The Role of Site Leadership and Immediate Supervisors

While we often focus on ineffective management, it's worth highlighting the crucial role of site leadership and immediate supervisors.

Site leaders and supervisors heavily influence daily employee experience. Poor communication, disrespect, or ignoring concerns can quickly erode morale and push workers away.

5. Limited Opportunities for Skill Diversification and Cross-Training

In some construction roles, employees may feel pigeonholed into specific tasks with limited opportunities to develop a broader range of skills.

Lack of cross-training and skill diversification can lead to boredom and a feeling of stagnation.

Providing avenues for skill development can not only improve retention but also create a more versatile and adaptable workforce.

6. The Strain on Mental Health and Well-being

The high-pressure and physically demanding nature of construction work can take a toll on employees' mental health and overall well-being.

Factors such as long hours, tight deadlines, safety concerns, and potential job insecurity can contribute to stress, anxiety, and burnout. Employers who don't prioritize mental health support and resources may see higher turnover as employees seek less stressful work environments.

7. Lack of Rewards & Recognition: Undermining Value and Driving Turnover

In construction's demanding work environment, employees often face hard labor and long hours. Without consistent rewards, they feel undervalued. This lack of appreciation can be verbal or tangible. It can also be a lack of opportunity.

When efforts go unnoticed, resentment grows. Employees seek employers who value their contributions. This ultimately leads to higher turnover in the industry.

Consequences of High Turnover on Construction Businesses

High employee turnover in the construction industry has real, tangible consequences. It can affect a company's bottom line, productivity, and reputation. Let's have a look at some of these consequences.

1. Elevated Project Costs and Budget Overruns

Beyond general hiring costs, high turnover in construction directly inflates project budgets. Replacing skilled tradespeople like experienced carpenters, electricians, or heavy equipment operators often requires premium wages to attract qualified replacements quickly to avoid project delays.

According to Gallup, the cost of replacing an employee can range from 50% to 200% of the employee's annual salary, depending on the role. This cost can include

• advertising for open positions,
• conducting interviews,
• time spent training new employees,
• Indirect costs like the disruption of ongoing projects, and
• potential delay in meeting deadlines, etc.

The learning curve for new hires can lead to mistakes, rework, and material waste, all contributing to significant cost overruns that can erode profit margins on already tightly bid projects.

2. Compromised Project Timelines and Missed Deadlines

Construction projects operate on strict schedules, and the departure of key personnel can create critical delays.

The sudden loss of a project manager, site superintendent, or a specialized crew can halt progress. These further impacts subsequent phases and may incur penalties for missed deadlines.

Unlike other industries where tasks might be more easily redistributed, specialized construction roles require specific expertise that isn't readily interchangeable.

3. Heightened Safety Risks and Increased Accident Rates

Safety is paramount in construction, and high turnover can directly compromise worksite safety. New and temporary workers are often less familiar with site-specific hazards, safety protocols, and equipment operation. This unfamiliarity can increase the risk of accidents and injuries.

The loss of experienced safety officers or foremen due to turnover can further weaken a company's safety culture and lead to costly incidents, legal liabilities, and reputational damage.

4. Erosion of Craftsmanship and Quality of Work

Construction relies heavily on skilled trades and hands-on expertise. High turnover can lead to a dilution of craftsmanship as experienced workers are replaced by less seasoned individuals. This can result in lower quality workmanship, increased defects, and potential rework.

All of these ultimately impact client satisfaction and the long-term integrity of the built structures. A reputation for shoddy work due to inexperienced teams can severely harm a construction company's ability to secure future projects.

5. Loss of Critical Certifications and Licensing

In construction, many roles require specific certifications and licenses (e.g., crane operators, welders, electricians). When experienced employees with these credentials leave, the company may face challenges in meeting regulatory requirements.

It can also lead to an inability to bid on certain projects until replacements are found and certified. This can limit the types of projects a company can undertake and diminish its competitiveness.

Key Strategies and Best Practices to Retain Employees in Construction

Retaining skilled craftspeople and dedicated professionals in the construction sector demands a tailored approach that acknowledges the industry's unique challenges. Here are some key strategies and best practices that construction businesses can implement to retain their employees and reduce turnover.

1. Targeted Recruitment and Realistic Job Previews

Instead of generic recruitment, construction companies should target individuals genuinely suited for the demands of field work.

Offering realistic job previews includes -

• site visits,
• honest discussions about the physical demands,
• weather conditions, and
• project timelines

This ensures new hires are better prepared and less likely to leave due to unmet expectations.

2. Competitive Total Compensation Packages Recognizing Field Conditions

Compensation needs to go beyond the base salary in construction. Companies should offer -

• Premium pay for hazardous work,
• travel allowances for remote sites, and
• overtime pay for the long and often unpredictable hours.

Similarly, benefit packages should prioritize robust health insurance to cover potential work-related injuries. Additionally, retirement plans should acknowledge the physically demanding nature of their careers.

3. Investing in Craft-Specific Training and Career Ladders

Construction companies should invest in specialized craft training, upskilling programs in new technologies (like BIM or drone operation), and clear career progression.

Sponsor apprenticeships, tuition reimbursement for relevant certifications (e.g., welding, heavy equipment operation). Also, create opportunities for lead roles or foreman positions.

4. Championing a Culture of Safety and Well-being On-Site

Safety shouldn't just be a policy; it must be a culture. Construction firms must go beyond basic safety regulations by actively promoting a safety-first mindset. They can start by -

• Providing high-quality PPE,
• Empowering workers to speak up about safety concerns without fear of reprisal,
• Offering resources for mental health support.

Given the stressful nature of the work, companies must encourage work-life balance and show a commitment to the holistic well-being of their employees.

5. Transparent Communication and On-the-Ground Feedback Mechanisms

Communication needs to be direct and frequent on construction sites. Regular toolbox talks should cover safety along with project updates and opportunities for feedback.

Site superintendents and project managers should be accessible and actively listen to concerns from the field. Implementing feedback mechanisms that are tailored to the on-site environment, such as regular crew meetings or informal check-ins, can foster a sense of being heard.

6. Tangible Recognition of Skills and Contributions on Projects

Recognition in construction should be visible and relevant to the work. This could include -

• acknowledging skilled craftsmanship,
• awarding bonuses for completing challenging tasks safely and efficiently, or
• publicly recognizing teams that overcome significant project hurdles.

Providing opportunities for experienced workers to mentor junior staff can also serve as a form of recognition, valuing their expertise and contribution to the company's growth.

Construction Employee Retention Solutions

Discussing key strategies is not enough. We also need solutions that can provide measurable benefits in terms of employee productivity and employee satisfaction. Here are some practical solutions for improving employee retention in the construction sector:

1. Integrating Rewards & Recognition Platform

One of the most effective ways to improve retention is by integrating a comprehensive rewards and recognition platform. Such platforms enable businesses to recognize and reward employees in real-time, ensuring that employees feel valued for their contributions.

These platforms can automate and streamline the process of acknowledging achievements, offering personalized rewards tailored to each employee's preference. By creating a culture of recognition, businesses can foster an environment where employees are motivated and engaged, reducing the likelihood of them seeking opportunities elsewhere.

These platforms can also enable peer-to-peer recognition, which is particularly valuable in construction, where teamwork is critical. When employees recognize their colleagues' hard work, it builds camaraderie and strengthens the overall team dynamic.

However, a challenge in the construction industry is that workers on-site may not have immediate access to digital devices. To address this, a phygital recognition approach (combining both digital and physical recognition) can be implemented for real-time acknowledgment.

Source: Vantage Recognition

For instance, a physical handwritten thank-you note with a QR code could be given to recognize a construction worker. Once off the field and with access to any digital device, they can scan the QR code, which directs them to the digital recognition platform where they can view and celebrate the appreciation received. This method ensures that recognition is accessible and meaningful, even for those who may not always be connected digitally.

2. Improved Communication and Collaboration

Strong communication is essential when managing large construction projects and teams. Construction managers should implement tools and strategies that foster transparent communication between workers, managers, and executives.

Real-time communication tools such as Microsoft Teams, Slack, or other software platforms help employees stay informed, share feedback, and resolve issues promptly.

3. Technology-Enhanced Training and Skill Development

The construction industry is constantly evolving, and workers must keep up with new technologies to stay competitive. Implementing training programs enhanced with technology can help employees develop new skills and certifications that benefit both the individual and the company.

For instance, virtual reality (VR) or augmented reality (AR) can be used for immersive training experiences, especially for safety protocols and equipment usage.

Similarly, offering employees access to online courses, workshops, and certification programs helps them expand their professional knowledge and demonstrates the company's commitment to their growth.

Additionally, 3D modeling technology and Building Information Modeling (BIM) tools enable project teams to create virtual representations, enhance collaborative understanding, and identify challenges before breaking ground on construction.

4. AI for Optimized Hiring and Retention

Artificial Intelligence (AI) can be a powerful tool in enhancing hiring and retention strategies. AI-powered recruitment platforms such as Workable, Humanly, and Paradox can help identify candidates who are not only skilled but also a good cultural fit for the company.

By analyzing data from past employee performance, tenure, and job satisfaction, AI can help companies predict potential turnover risks and take preemptive actions to retain valuable employees.

Moreover, AI can streamline onboarding processes, making them more efficient and personalized. With predictive analytics, companies can also identify which employees are likely to stay long-term based on engagement levels, performance, and job satisfaction metrics, allowing managers to focus on retaining these high-value workers.

Navigating the Regulatory Environment and Leveraging Industry Programs

The construction industry operates within a complex regulatory framework that impacts employee retention, especially in relation to labor laws, tax credits, and government-sponsored programs.

To maintain a sustainable and engaged workforce, construction companies must stay informed about these regulations and utilize the available programs to gain competitive advantage. This section explores the regulatory environment and industry-specific programs that can help retain employees in construction.

1. Compliance with Labor Laws and Regulations

Construction companies must comply with a wide range of labor laws that impact employee retention. These regulations ensure fair compensation, work hours, safety, and benefits for employees. Compliance with these laws not only helps avoid legal issues but also fosters a sense of trust and loyalty among workers.

Key regulations to be aware of include:

• Fair Labor Standards Act (FLSA): Ensures that workers are paid fairly for their work, including overtime.
• Occupational Safety and Health Administration (OSHA) Standards: Ensures that construction sites meet safety regulations, protecting workers from injury and health risks.
• Equal Employment Opportunity (EEO) Laws: Prevents discrimination in hiring, promotion, and firing processes, fostering a diverse and supportive work environment.

2. Employee Retention Tax Credit (ERTC)

The Employee Retention Tax Credit (ERTC) is a government initiative designed to encourage employers to retain their employees during difficult times. Although the ERTC was initially introduced during the COVID-19 pandemic, it can still provide financial relief to construction companies that qualify.

By taking advantage of this tax credit, construction companies can reduce their financial burdens, enabling them to invest in employee retention strategies such as better compensation, professional development, and recognition programs. This financial support can be used to stabilize the workforce, reducing turnover during economic downturns.

3. Federal Contractor Requirements

For construction businesses that work with federal contractors, there are specific requirements that must be met to ensure compliance with government standards. These include:

• Pay Transparency: Ensuring that workers are aware of the pay range for their roles and that compensation practices are transparent.

• Diversity and Inclusion Goals: Federal contractors must implement strategies to increase diversity and ensure an inclusive workplace.

• Workforce Development: Offering training and apprenticeship programs that align with federal standards for workforce development.

4. Recordkeeping Requirements for Government Projects

Another important aspect for construction companies working on government-funded projects is that they are often required to maintain specific records, such as -

• Project documentation that includes design drawings, contracts, and a request for information.
• Financial records that include invoices, payment records, etc.
• Employee hours,
• Safety compliance.

These records must be accurately kept and made available for inspection. Failing to meet these requirements can result in penalties and loss of contracts.

5. Industry-Sponsored Training and Apprenticeship Programs

Industry-specific programs, such as training and apprenticeships, are vital in helping construction workers build their skills while securing stable employment. These programs can also act as a retention tool by providing employees with long-term career growth opportunities.

Organizations like the National Center for Construction Education and Research (NCCER) offer certifications that are recognized across the industry. Providing employees with access to such programs not only helps them improve their skills but also gives them a sense of career progression within the company.

Additionally, apprenticeships can help fill the gap in skilled labor and create a workforce that is loyal and well-prepared for the future.

In The End: Fostering a Sustainable and Engaged Construction Workforce

Employee retention in the construction industry remains a significant challenge, but it's not insurmountable. By implementing the strategies and solutions outlined in this blog, construction companies can create work environments where employees feel valued, supported, and motivated to stay.

Effective retention requires a balanced approach that addresses compensation, safety, recognition, communication, and career development. Companies that invest in these areas will see tangible benefits, including reduced costs, improved project timelines, enhanced safety records, and better-quality work.

Construction companies that prioritize employee retention will build better structures and stronger teams capable of meeting the industry's evolving demands. It's time for construction businesses to recognize that their most valuable resource isn't their equipment or materials, it's their people.

This article is written by Nilotpal M Saharia, a Senior Content Marketing Specialist and R&R Evangelist at Vantage Circle. With a Master's in Business Administration and over seven years of experience, he has developed expertise in diverse fields, including marketing, human resources, and content creation.

In addition to being a regular contributor at Vantage Circle, Nilotpal's work has also been featured on Select Software Reviews.

For any related queries, contact editor@vantagecircle.com