Last year, Window World used outside subcontractors almost exclusively to install 660,000 windows, a 46% increase over 2004 for this North Wilkesboro, N.C.–based company with more than 145 branches in 40 states. In November, however, 2 of those branches started experimenting with employee installers. “Labor is the hardest thing for us,” says Todd Whitworth, Window World's president, “and we often find that we're training subs who end up working for someone else.” Whitworth says he'll know better after the busier spring and summer months which method is more cost-effective and productive.
In moves that five years ago might have seemed counterintuitive to most companies, a growing number of replacement contractors are shifting from subs to in-house installer crews. Despite the added costs — insurance, equipment, and benefits — contractors say that they're putting installers on their payroll not so much because there's a shortage of subs but because the quality of work performed is generally better, and because homeowners feel more at ease when they know technicians work directly for the company whose name is on the invoice.
This trend, though, raises a range of compensation issues, not the least of which is whether higher pay or steadier employment results in installer loyalty to a company. Contractors also are reassessing the motivational value of bonuses and what they should be based on. The majority of company owners interviewed for this article offer incentives to installers — both subs and employees — based on scores received in customer satisfaction surveys. “The less hassles I have, the more [money] they get,” says Tim Severson, owner of Exterior Concepts in Edgewater, Md., which pays subs up to 2% of the price of the project when they complete it on time and without customer complaints.
Subs Still Play Leading Role Figuring out what installers are worth has never been an exact science. “The industry standard might be 1 window install per hour, but I've done as many as 70 windows in two days with three other people, and it's also taken me two hours to do 1 window,” notes Charles Harris, production manager for Dayton, Ohio–based All-Seal Home Improvement. Severson notes that the going rate for roofers hasn't changed in his market for 10 years because “roofers aren't considered skilled laborers. Putting up a roof isn't regulated, so ‘truck and ladder' guys with no insurance do a lot of it.”
But conventional wisdom has long held that, all things being equal, subs are the better cost proposition for contractors because they don't need to be kept on full time during slow periods and they don't have to be insured (at least by the contractor). “If it's not broke, why fix it?” asks Bill Conforti, president of Siding-1 Windows-1 Exteriors in Chicago. Rembrandt Remodeling in Marietta, Ga., uses up to 15 two- and four-man sub crews, and pays them on a sliding scale, depending on the project, says installation manager Mike Moroney. Deck installers get paid by the linear foot, roofers and siders by the square ($67 for siding installers), window installers by the type of window ($60 for a double-hung, for example) and kitchen installers by the job.
Exterior Concepts is actually using more subs these days. Severson says the cost of workers' compensation insurance is simply rising too fast for his company to absorb, especially for roofers who do a big chunk of this $4.5 million company's projects. Right now, Exterior pays roofers and siding installers by the piece — for example, roofers get $60 per square. But this company still maintains a six-person roofing crew in-house, primarily so it has them “under our control,” says Severson, in the event he needs them on different jobs. Exterior pays its own crew between $100 and $125 per day, crew chiefs $220 to $240. Employee-installers receive health care benefits and are eligible for two bonuses per year, based on performance, which Severson says factors in such things as how long it takes them to complete a project (compared to subs) and how well they maintain the company trucks they use.
Two-Tiered Installation It has become common for contractors to use both subs and their own installers, and to set up different tiers of compensation for each group. Richard Kasunic, vice president of operations for Regency Windows in Twinsburg, Ohio, once was an independent carpenter, and says that he “lived the nightmare when there's no work and no one cares about you.” So six years ago, he set up Regency's installer compensation program, which now extends to the 42 employee-installers who work out of its Cleveland branch (which also uses 10 sub crews), and to the 15 company installer crews in Columbus, Ohio (where Regency uses 4 sub crews). Kasunic says that Regency has two pay scales, each based on piecework: the subs' rate is “slightly higher” (he declined to say by how much), but Regency's installers receive seven paid holidays, five sick days, and vacation time based on tenure.
Regency also pays 60% of its employees' health insurance, and kicks in 25 cents for every dollar up to 6% of their annual pay toward their 401(k), which Kasunic says is being raised this year to 50 cents. Kasunic says Regency's is the only employee-installer program among contractors in northern Ohio, and it's expanding. “When we started, we had just 1 crew truck; now we have 20.”
By having its employees do more of its work, Regency “has a better chance to grow,” Kasunic says. Other contractors are also taking a closer look at their workforce and compensation to determine whether they are properly positioned for future expansion.
Last year, sales at Coastal Empire Exteriors in Savannah, Ga., rose 160%, to $7.8 million. This year, owner Kip Lee expects revenue to jump to $11 million after he acquires the sunroom business of First Coast Rainguard in Jacksonville, Fla., which will leave him with the largest Four Seasons franchise in the country. Lee has used subcontractors as installers for most of the time he's been in business. But this year he plans to start hiring more employee-installers, with the goal of eventually having employees do all his company's installations. Jacksonville and Savannah are just two hours apart, and Lee says he needs the flexibility to send crews into all of the towns within his widened market, which now stretches between Charleston, S.C., and Daytona, Fla.
