SEED Plan for Construction
In this article, we explore the various functions and types of Construction companies and their nature of employment along with a fair view of salaries across various job profiles.
The Construction industry is the backbone of a civilized society. All forms of infrastructure that house people or industries are created by the Construction sector. Every form of brick and mortar establishments and all the other support services that ensure smooth functioning of these are part of this industry. Over the years, owing to advanced technological developments, the Construction industry has evolved into a specialized sector employing millions of skilled and unskilled labor. Thus employee engagement is an important aspect of the smooth functioning of this industry.
The Construction industry is a reliable indicator of a nation’s economy. For instance, new home constructions directly indicate the purchasing power and confidence of consumers. In the US, this sector has posted an upward growth curve since the recession of 2008. As of the first quarter of 2020, the Construction industry clocked $900 billion in revenues, the highest ever since the great recession. But why is this sector this profitable? Let’s understand how it works and the various types of companies that contribute to it.
What Construction companies do?
According to the US Department of Labor, Construction industries are those which undertake the construction of buildings, large-scale engineering projects, and renovations of existing structures. Due to growing consumer needs and the impact on the natural environment, this industry also has an important responsibility to constantly source new materials and develop construction methods that can withstand the changing environment.
The Construction industry, on one hand, employs skilled professionals who are responsible for innovative design solutions including those required in geographically unstable zones such as earthquakes and hurricane-prone areas. These professionals include profiles such as architects, engineers, site managers, sales & marketing, advertising, HR, and accounting. Meanwhile, other sections of the workforce consisted of unskilled labor that contributes physical labor and executes project designs.
The Construction industry is broadly classified into a public sector and a private sector. The public sector is government-funded and undertakes projects such as bridges, highways, public schools, hospitals, etc. While the private sector is funded by individuals or privately owned firms and builds infrastructure for private use such as houses, offices, shopping complexes, etc.
Forecast for the Construction Industry
The coming years for the construction industry remain strong, despite a forecast of around 2-4% in 2021 in market reports, brought on by the effects of COVID-19 and the economic toll it had within the construction industry. However, the industry is forecasted to recover and post gains within the next few years, as more and more construction projects are needed within the market.
Types of Construction
The companies in the Construction industry can be classified broadly into three categories:
- Building construction companies: Build residential/non-residential complexes
- Infrastructure construction companies: Build institutional and commercial buildings
- Industrial construction companies: Build specialized industrial complexes
Among these overarching categories, some of the specialized functions executed by various companies in this sector are:
- Civil engineering
- Construction contracting
- Heavy engineering & construction
- Industrial infrastructure
- EPC – Energy procurements and construction
- Real estate
Construction Industry Statistics
By number of firms:
|# of employees||Average||2017||2016||2015||2014||2013|
As per these statistics, most of the companies in the Construction sector operate with less than 10 employees. This trend has been the same over five years between 2013 and 2017. On average 83% of the firms in the Construction sector belong to the category of 0 – 9 employees. Firms with employees between 10 – 19 form the next segment however their share in the Construction industry stands only at 9.03%. The least numbers are the firms employing more than 500 employees. They form only about 0.15% of this sector.
On the whole, the construction industry is dominated by small companies operating with only about 10 employees and this has been the pattern between 2013 and 2017. Therefore founders in small companies may want to utilize ESOPs in the Construction industry to motivate their employees to grow the firm.
By number of employees:
|# of employees||Average||2017||2016||2015||2014||2013|
Meanwhile, when the entire workforce of the Construction industry is considered, an average of 23.23% seems to prefer working in firms that employ less than 10 employees. This is closely followed by 18.08% choosing companies with 20 – 29 employees and 17.51% opting for firms operating with more than 500 employees. However, between 2013 and 2017, the first category of employment preference (0-9) displayed a 2.2% dip while firms with 200 – 499 employees have shown an upward trend of 1.2%.
If this trend is to be relied on, employees of the Construction industry seem to increasingly prefer working for large companies with 200 and more employees.
Top Jobs/ Average wages per job:
|Employment||Employment %||Average Salary||Average Salary||Average Salary|
|Construction and Extraction Occupations||4,611,400||61.99%||$52,780||$51,270||$49,910|
|Construction Trades Workers||3,778,940||50.80%||$51,550||$49,990||$48,730|
|Office and Administrative Support Occupations||682,740||9.18%||$41,910||$40,590||$39,630|
|Installation, Maintenance, and Repair Occupations||643,480||8.65%||$51,300||$50,110||$49,170|
|Other Installation, Maintenance, and Repair Occupations||480,020||6.45%||$49,380||$48,330||$47,550|
|First-Line Supervisors of Construction Trades and Extraction Workers||478,900||6.44%||$71,080||$69,930||$68,500|
|Pipelayers, Plumbers, Pipefitters, and Steamfitters||392,760||5.28%||$58,910||$57,200||$56,130|
|Plumbers, Pipefitters, and Steamfitters||365,680||4.92%||$60,030||$58,240||$57,100|
|Construction Equipment Operators||298,630||4.01%||$56,250||$54,910||$53,480|
|Business and Financial Operations Occupations||282,170||3.79%||$75,480||$72,470||$70,800|
|Other Management Occupations||268,280||3.61%||$104,120||$102,060||$100,370|
|Other Office and Administrative Support Workers||265,790||3.57%||$38,620||$37,140||$35,850|
|Office Clerks, General||262,070||3.52%||$38,640||$37,130||$35,820|
|Operating Engineers and Other Construction Equipment Operators||260,380||3.50%||$57,660||$56,340||$54,760|
|Heating, Air Conditioning, and Refrigeration Mechanics and Installers||253,570||3.41%||$50,410||$49,150||$48,490|
|Business Operations Specialists||238,650||3.21%||$75,230||$71,840||$70,190|
|Transportation and Material Moving Occupations||237,510||3.19%||$46,310||$45,540||$44,060|
|Helpers, Construction Trades||221,430||2.98%||$34,220||$32,800||$31,870|
|Painters and Paperhangers||192,960||2.59%||$43,940||$42,250||$40,890|
|Painters, Construction and Maintenance||191,500||2.57%||$43,870||$42,240||$40,860|
|Cement Masons, Concrete Finishers, and Terrazzo Workers||185,280||2.49%||$48,730||$47,520||$45,630|
|Cement Masons and Concrete Finishers||182,370||2.45%||$48,600||$47,520||$45,630|
|General and Operations Managers||172,190||2.31%||$122,050||$122,000||$121,990|
|Sales and Related Occupations||166,980||2.24%||$69,990||$67,180||$65,910|
|Secretaries and Administrative Assistants||157,680||2.12%||$40,440||$38,840||$37,830|
The classifications for these occupations often overlap one another, so total employment size % may result in a larger number than 100% for all jobs.
This data was derived from the employment and compensation trends of a sample size of 7,439,360 employees across various job profiles in the Construction industry. It is evident that this sector has been performing well and the average salaries show a promising growth of 6.09% between 2017 and 2019. In 2016 the average salary in the Construction sector was $53,830 that soared to $57,110 by 2019. The top five lucrative job profiles of this sector are:
- Construction and Extraction Occupations
- Construction Trades Workers
- Construction Laborers
- Office and Administrative Support Occupations
- Installation, Maintenance, and Repair Occupations
Construction and Extraction occupations are the most sought after job profile. It employed almost 62% of the entire workforce of the Construction industry in 2019. Since 2017, the average salaries of this profile show an upward trend of 5.75% beginning with $49,910 in 2017 and reaching $52,780 in 2019.
Construction Trades Workers profile is the second most job in demand, employing 50.80% of the workforce. This profile followed a similar trend to the first. In 2017, the average salary for this profile was $48,730 which rose to $51,550 in 2019 – a clear jump of 5.79%.
At an 11.65% employment rate, Construction laborer is the third most employment generating job. Since 2017, this job demonstrated an approximately 3% yearly growth in average salaries starting with $39,460 in 2016 and increasing to $42,320 by 2019.
Meanwhile, Office and Administrative Support occupations followed a similar trend employing 9.18% of the workforce. Average salaries were around $39,630 in 2017 which showed almost a 6% growth in the next three years and reached $41,910 in 2019.
Installation, Maintenance, and repair occupations are the fifth most sought after job in the Construction industry employing 8.65% of the total workforce in 2019. This profile too posted a 4% growth in average salaries between 2017 and 2019.
ESOP in Construction
ESOP or the Employee Stock Option Plan is the best way to offer employees ownership in company stocks. It is a tax-qualified retirement plan that is subject to the Employee Retirement Income Security Act (ERISA). In labor-intensive sectors such as Construction, ESOP is a good way to increase employee engagement and plan retirement benefits.
Why is offering ESOP a better option for Construction companies?
Construction companies are mostly family-owned and would want to keep their legacies intact. After a certain point, if the owners want to exit, sudden liquidation becomes an issue. Investing in an ESOP trust early on in company operations sets a long term vision for phasing out primary ownership. According to the ESOP Association, there are more than 10,000 ESOPs in the US covering more than 10 million employees. Besides, among all the ESOP plans across industries, the Construction industry covers close to 15%.
However for ESOP to work certain factors are important:
- Owners must be willing to sell shares to ESOP trust at a fair market value even though external investors might offer a better price
- The second line of managers must be strong enough to carry forward the company name. The company must identify resources early and invest in ESOP
- The company must ensure stable financial flow. Only if cash flow is consistent, the company can plan to buy out the owner eventually
SEED by Eqvista – Plan for Construction
Considering the importance of ESOP in the Construction industry, Eqvista has developed a unique product, SEED. SEED stands for Simple Employee Equity Development. It is a comprehensive equity rewards scheme that can be customized for diverse industries including the construction sector. Since the companies in the construction sector can be either private or public, companies of varying employee sizes are prevalent. SEED has a scheme for all of them.
SEED’s primary approach to equity rewards is by granting time based shares. The percentage might vary with the company size or seniority, but overall time based and sometimes a combination of time based/milestone based are suggested as a preferable way to grant company stock options. The vesting period varies between 3 – 4 years with a mandatory cliff period. This gives time both to employees and employers to assess performance. Milestone schedules are set at either 3 – 6 years or 4 – 8 years. However, the employee pool is suggested at 10% for early startups and can go up to 20% for large companies.
Ready to start using SEED plans for your Construction Company?
Construction industries are not only heavy on labor but capital investments as well. Such large scale investments are possible only by involving reputed investors who will grant funds in exchange for equity. Thus equity management is a crucial aspect of large sectors such as Construction. Eqvista is a unique software that automates equity management in-house. All equity-related activities such as the issuance of shares, electronic share certificates, and tracking them to ensure timely dividends can be easily handled with a couple of clicks. Besides, Eqvista also provided customized access to equity accounts for all stakeholders, something not possible with a cap table maintained on an excel sheet.
Here is a link to some resources that provide details of our range of services. These include our cap table software, 409a valuation services, financial modeling, and many more. To know more, reach us today.