Firms turn to pay hikes, bonuses, mental health programs, and AI to stay competitive in a costly construction environment.

As labor shortages persist and building costs continue to rise, New York construction firms are stepping up their game when it comes to compensation and benefits, according to a new report from The Bonadio Group, a national accounting and advisory firm based in New York City.

The 2025 study surveyed over 200 contractors across the state and found that many firms are being forced to make difficult decisions, including passing costs on to clients or postponing projects altogether. Materials and nonresidential input costs are now 0.8% higher than last year and more than 40% above pre-pandemic levels from February 2020. Compounding the pressure, the construction industry has seen a jump of 17,000 worker quits — the second consecutive month of increases.

In an interview with Construction Dive, Nancy Cox, construction and real estate industry leader at The Bonadio Group, offered insights into how New York firms are trying to attract and retain talent in such a challenging climate. Among the strategies: increased wages, broader benefit offerings, flexible work policies, mental health support, and better workforce development.

Pay Increases and Performance Incentives

“Based on the results of our study, we found that wages have increased by 12.4% on average as labor shortages persist in the industry,” said Cox.

In addition to base pay increases, employers are offering enhanced compensation structures. “To stay competitive, companies are also implementing other strategies such as offering performance-based bonuses, profit-sharing retirement plans and training and workforce development programs,” she explained.

Bonuses appear to be a popular strategy, with 79% of surveyed firms offering cash incentives tied to performance or employee referrals. Meanwhile, over 90% of firms now provide retirement plans — most of them designed as profit-sharing arrangements that align employee incentives with company success.

Cox noted that to remain sustainable amid ongoing cost pressures, firms will need to embrace new tools and technologies. “Much like most other industries, companies are going to have to implement new tools such as artificial intelligence and other operational efficiencies in order to balance wage growth amongst rising costs,” she said.

Personalized Benefits on the Rise

Contractors are also recognizing the value of customized, worker-friendly benefits. “Our survey found that companies are expanding their employee benefits, such as flexible work arrangements, financial planning assistance and mental health support and wellness programs,” said Cox.

Some firms are investing in advanced safety measures as part of their benefits overhaul. “Further, companies are investing in advanced safety monitoring systems and smart personal protective equipment to improve worker safety and satisfaction,” she added.

These modern additions not only improve on-site safety but also contribute to employee morale and retention — both critical in a competitive labor market.

Overlooked Opportunities

Despite these proactive measures, many firms are missing out on tax incentives that could ease financial burdens. “One thing we found interesting is that a majority of the respondents are not currently taking advantage of available federal and state employment tax credits such as the Work Opportunity Tax Credit,” said Cox.

She said 82% of survey participants were unaware of these incentives, which can reward employers for hiring veterans and individuals from underrepresented groups. “WOTC is nuanced, but could provide for substantial credits for hiring veterans and underrepresented groups,” she noted.

As New York’s construction industry continues to navigate rising costs, talent shortages, and a shifting labor landscape, Cox emphasized the importance of combining competitive compensation strategies with operational innovation and better awareness of financial tools. The right combination, she suggested, could help firms not only survive but thrive in today’s high-pressure environment.

Originally reported by Sebastian Obando in Construction Dive.