As compensation for labor and staff continues to rise, executives are keeping pace and garnering some of the biggest pay increases seen in the C-suite in over 15 years. After a strong rebound in executive compensation between 2020 and 2021, many companies provided another significant bump in pay in 2022.

Going into 2022, construction firms predicted that base pay for executives would increase by 4.25%, according to data from industry compensation research firm PAS. That forecast held steady with 2021 compensation, which showed a 4.3% average bump in base pay.

However, survey numbers collected for PAS’s 2023 Executive Compensation Survey for Contractors revealed that actual base pay increases in 2022 reaching a whopping 5.54%—the highest average yearly increase for executives since before the 2008 recession hit.

Jeff Robinson, president of PAS, says that companies typically underestimate base salary increases by 0.3 to 0.5 percentage points, so a jump of 1.3 points above estimate is highly unusual. PAS initially predicted last year that actual compensation increases would be 4.8%, but later adjusted that forecast.

“We watched the data change from March to May [2022], and we could see things were changing very quickly,” he recalls. “In September, we predicted we’d be at 5.6 for executives and it came in just below that by the end of the year.”

Within different sectors, contractors in the municipal market gave its executives the highest average increases, 5.61%, while heavy civil firms gave the lowest, 4.9%. Specialty contractors offered executives the highest average base pay increases at 6.3%. Construction managers gave the lowest, at 5.15%. Notably, firms working in municipal construction and specialty contractors initially predicted the lowest increases for 2022, but ended up paying the largest increases.

“When we dug into the data, we could see it was mostly the large specialty contractors that were influencing [the higher base pay increases],” Robinson adds.

Regionally, firms in the northwestern states—including Oregon, Washington, Idaho and Alaska—offered the highest base pay increases in the U.S. at 6.05%. The lowest increases—averaging 4.99%—were among firms in New York and New Jersey.

Based on PAS survey data for 2023, construction firms anticipate average base pay for executives won’t increase at the same pace as last year, and will drop back to 4.67%. Robinson disagrees, saying he anticipates that base pay will hold steady with around 5.5% average increases in 2023.

“The way it looks to me right now, I just can’t see it being anything less than what the actual increase was in 2022,” he adds. “The competition for people hasn’t gone away.”

Robinson added that average 2022 bonuses were flat to down compared to 2021. As a result, bonuses as a percent of base pay were down in 2022. “If you put [compensation] in the base pay, it stands to reason that it’s going to affect bonuses at the end of the year,” he says. “If you’re having the same kind of returns that you’ve always had in terms of profit, there’s only so much money to go around.”

The strong upward tick in executive base pay comes at a time when costs are rising across the board for employees and employers. Meanwhile, aging executives are exiting the industry, says Jeff Wittenberg, managing director for construction at executive search firm Kaye/Bassman. “The industry is notoriously bad at succession planning,” he says. “They don’t start nearly early enough and if those efforts to train and promote the right people fail, they are stuck.”

When firms look to recruit executives, Wittenberg says he tells firms to go into a search budgeting for a 20% increase in the candidate’s pay. “Will the candidate take 17%? Probably.” He adds. “Will the candidate take less than 15%? Not likely.”

Wittenberg also notes that money alone generally won’t prompt a move. Candidates, especially at the executive level, are often more interested in company culture. “[The candidate] needs to feel good about whoever they will report to,” he says. “Will they give me the latitude to make decisions? Those types of dynamics become much more important.”

Tom Helbling, president of executive search firm Helbling & Associates, says that while compensation is important for executives, it isn’t the main driver for a job search. “[Candidates] are more interested in career opportunities,” he says. “They want new challenges and opportunities to push the envelope.”

One trend that Helbling says is upping executive compensation is industry consolidation. As large institutional buyers and private equity firms snatch up construction firms, Helbling says many are looking for executive talent from outside the industry to bring in fresh ideas that can boost business and profitability.

“Even though technical and functional expertise is necessary, the leadership and business fundamentals are more so [for those firms],” he says. “And that’s when they seek out talent from outside the industry.”