Remodelers Tighten Up Labor Costs to Stay Afloat

According to Professional Remodeler's 2009 Business Results Survey, labor is a remodeler's biggest expense, accounting for 44 percent of expenditures. To tighten up labor costs while the economy remains in a slump, remodelers are utilizing a variety of approaches including layoffs, reduced work schedules and cuts in wages and benefits. Some are bringing work in-house that used to be subcontracted. The following are the stories of three remodelers who made some tough decisions to keep their businesses going.

In January 2008, Anthony Home Improvements/Housecrafters in Elkins Park, Pa., had a backlog of big-ticket jobs such as kitchens, baths and sunroom additions, "but our pipeline wasn't filling up," says President Stephen Klein. It was clear that several employees had to be let go, though Klein emphasizes that it was done with compassion.

"We didn't just say seven people had to go and that's it. We analyzed the impact of the layoffs on different departments and how it would affect people psychologically," he says.

The remaining employees were asked to take pay cuts. "I took a large cut, around 35 percent, and asked [employees] to take a 3 or 5 percent cut," Klein says. "The good part was that we got a lot of buy-in. They realized we're in it for the long haul and wanted to stick with us."

Some employees went from full-time to part-time schedules; others from five-day to four-day work weeks. The company is also subbing out less electrical work and plumbing, Klein says.

Remodel Works Bath & Kitchen in Poway, Calif., didn't let anyone go, but there were pay cuts. "I cut what I was paying my trades by 15 percent, and nobody complained," says Joe Christenson, president of the firm. "They're very happy they still have work. We also cut employee salaries by 10 percent, across the board."

Christenson asked his staff if they would rather keep their health-care benefits or their Simple IRA plan. They voted to eliminate the latter. "My people are doing the best they can under the circumstances, so we gave bonuses this quarter. It wasn't a lot, but at least we acknowledged their hard work."

Before the market crashed, a typical project for Weidmann & Associates in Roswell, Ga., was in the $50,000 to $500,000 range. Now Dan Weidmann and his brother, Bill, are taking on smaller jobs, reaching out to past clients and paring overhead costs. They've also readjusted the division of labor.

"I've got five project managers and two carpenters on staff," says Dan. "For a period of time we moved one of the project managers into a carpenter position, and asked all project managers to spend more time with tool belts on, doing work that would otherwise have been subcontracted." 

Much of the design work on smaller projects is being delegated to Weidmann's on-staff interior designer. When Weidmann's office manager left, the company hired someone on an as-needed basis who is paid only for the hours she works. Weidmann also reduced benefits and pay for regular employees, with the brothers taking the lion's share of the cuts. Health-care deductibles and co-payments increased and certain bonus programs were put on hold. But Dan emphasizes that there have been no staff reductions: "I don't know of any other remodeler of any size that has not cut staff."