Revolutionising Compensation in Construction and Engineering: Insights from Dayforce Connect EMEA 2024

Yesterday I had the privilege of hosting a thought-provoking session at Dayforce Connect EMEA on Wednesday, 11 September 2024, at the prestigious St. Ermin's Hotel. It was great to be joined by Becky Statham and Faisal Hawa who contributed some great insights.

The focus of our discussion? The pressing challenges facing the construction and engineering sectors, particularly in light of the evolving landscape of employee compensation.

The Current Landscape: A Perfect Storm

The construction and engineering industries are grappling with a unique set of challenges that demand innovative solutions:

1. Skills Shortage: With 77% of firms reporting difficulties in filling vacancies (CITB, 2023), the talent crunch is real and pressing.
2. Ageing Workforce: We're seeing a significant gap as experienced workers retire without enough skilled replacements in the pipeline.
3. Financial Stress: A staggering 56% of workers report that financial stress is impacting their work (CIPD, 2023).
4. Wage Growth vs. Inflation: In 2022, construction wage growth (5.4%) lagged behind inflation (9.1%), putting additional pressure on workers' finances.
5. Lack of Savings: 24% of workers have no savings at all (Salary Finance, 2022), leaving them vulnerable to financial shocks.

The Pay on Demand Debate: A Potential Game-Changer?

We debated the concept and merits of Pay on Demand. This innovative approach could allow employees to access their earned wages before the traditional payday. The debate was well rounded, with attendees recognising both the potential benefits and the challenges of implementation.

The Case for Pay on Demand

1. Improved Financial Wellbeing: By giving employees more control over their earnings, we can potentially reduce financial stress and improve overall well-being.
2. Talent Attraction and Retention: With 43% of UK employees preferring jobs that offer flexible pay (EY, 2023), this could be a significant differentiator in a tight labour market.
3. Reduced Reliance on High-Interest Alternatives: Pay on Demand could help employees avoid payday lenders, high-interest credit cards, and other potentially harmful financial products. We saw some of the frightening interest rates that employees are exposed to with these schemes.

Considerations and Controls

The consensus in the room was that while there were historical concerns about companies acting as "custodians" of employee finances, this view is increasingly outdated. However, participants agreed that implementing Pay on Demand requires thoughtful controls:

1. Setting Limits: Establishing caps on how much can be drawn down helps ensure financial stability for both employees and employers.
2. Targeted Access: Some suggested limiting Pay on Demand to overtime earnings or bonuses, which could encourage shift-filling and reduce reliance on external agency workers.
3. Financial Education: Pairing Pay on Demand with robust financial literacy programmes can help employees make informed decisions.

Addressing Multi-Generational Workforce Challenges

The construction and engineering sectors face unique challenges with their multi-generational workforce:

• Younger Workers: Tech-savvy but lack hands-on experience. They expect flexible work arrangements, challenging in project-based environments.
• Mid-Career Professionals: Bridge the tech gap between generations but require continuous upskilling to keep pace with evolving technologies.
• Experienced Veterans: Crucial for knowledge transfer, but may resist new technologies and face physical limitations.

To address these challenges, firms are implementing mentorship programmes, creating flexible roles, and offering targeted training. Some are also exploring phased retirement plans to retain experienced workers part-time, easing knowledge transfer.

We even heard how some construction companies are paying to have large screens on sites to inform workers of key announcements to help drive change to employees who typically do not have access to a corporate email address.

The Impact on Recruitment

Interestingly, companies that have implemented flexible pay processes are seeing a marked increase in job applications. One UK engineering firm reported an 18% reduction in turnover and a 12% increase in job applications after implementing a Pay on Demand system.

Beyond Pay on Demand: Holistic Approaches to Compensation

While Pay on Demand generated significant interest, our discussion also explored other innovative strategies to address the unique challenges of the construction and engineering sectors:

1. Skills-Based Pay Structures: Implementing compensation models that more directly reward the acquisition and application of critical skills.
2. Flexible Benefits Packages: Offering personalised benefit options that cater to the diverse needs of a multi-generational workforce.
3. Project Completion Bonuses: Structuring incentives around successful project milestones to boost motivation and retention throughout long-term projects.
4. Technology Integration: Leveraging advanced payroll and HR systems to provide real-time insights into labour costs, skills gaps, and employee financial health.

The Path Forward

The construction and engineering industries are at a critical juncture. The challenges we face in attracting, retaining, and supporting our workforce demand innovative thinking and bold action. Whether through Pay on Demand, skills-based compensation, or other novel approaches, the key lies in recognising the changing needs of our diverse, multi-generational workforce and adapting our practices accordingly.

As we move forward, it's clear that open dialogue between industry leaders, HR professionals, and technology providers will be crucial. The insights shared at Dayforce Connect EMEA 2024 are just the beginning of what I hope will be an ongoing conversation about revolutionising compensation in our sectors.

I invite all of you in the construction and engineering fields to share your thoughts and experiences. How is your organisation addressing these challenges? What innovative compensation strategies have you found effective? Let's continue this important dialogue and work together to build a stronger, more resilient workforce for the future.