1Q 2025 Cost Report: Increases in Executive Compensation Fall From Record Highs

After a strong surge in executive pay coming out of the pandemic, compensation is returning to historic norms. Average annual compensation increases for executives hit a high mark in 2023 at 5.6%—the highest level since 2000, according to data from industry compensation research firm PAS. Last year, it appeared that employers had reached their limits, pulling back annual pay bumps to 5.2%.

This year, construction firms appear set to further tighten the purse strings, forecasting anticipated increases of 4.4% in PAS’s 2025 Executive Compensation Survey for Contractors. However, Jeff Robinson, president of PAS, notes that firms tend to underestimate salary forecasts by 0.3% to 0.5%. He expects that annual increases could land around 4.7% this year.

Robinson cautions that although compensation hikes may be on a downward trajectory, the average is still historically high in construction and outpacing other industries. Between 2015-19, pay hikes averaged between 3.9% and 4.2%, according to PAS. Coming out of the pandemic, pay increases blew past forecasts and ramped up significantly. Now, data suggests that average compensation increases could be headed back to pre-pandemic levels. “It is certainly trending down, but still very high compared to other industries,” he says.

Regionally, New York and New Jersey remain at the low end of increases, at an average of 4.5%. Those two states have ranked at or near the lowest since 2020. The highest average last year, 5.9%, was in the south-central region, which includes Arkansas, Louisiana, New Mexico, Oklahoma and Texas.

Among various market sectors, PAS data shows that construction firms that focus on industrial and municipal work gave the largest increases by percentage. Mark Jones, executive vice president and national sales manager at executive search firm Kimmel & Associates, agrees demand is high for executives in the industrial sector. Candidates with experience in water and wastewater as well as mission critical construction are also highly sought after.

In terms of specific positions, Jones says he sees high demand on the operations side. “Searches for senior project managers and project executives—we’ve seen those go way up over last year,” he adds. “I’ve been really surprised by some of the offers that have come out.”

Jeff Wittenberg, managing director for construction at Kaye/Bassman, says that he continues to see very strong demand year after year in preconstruction, as a dearth of available job candidates drives up compensation offers. “In estimating and preconstruction, I see fewer and fewer people wanting to go into that role, to the detriment of the industry,” he adds. “Companies have not made that role as attractive as they have in operations, both in terms of compensation and in terms of career path. Most senior executives come through the project management side of the business. Why not pre-con?”

In recent years, recruiters have noted a strong trend among job candidates seeking work-life balance through flexible work hours or remote work. Jones says while that has been a hot topic since the pandemic, many employers are reaching their limits in terms of what they can offer. “Senior leaders say, we know times are changing and we’ve got to be willing to flex, but there’s only so much we can flex,” he says.

In the C-suites of construction firms, employers often wrestle between finding executive candidates who can bring decades of experience to a firm and recruiting younger candidates who could potentially lead a firm far into the future. Jones says he sees many employers not only prioritizing the need for experience, but also recognizing that many executives are enjoying longer careers than previous generations. “I’m seeing people working longer,” he says. “I don’t see that changing. I think people work because they love to work, not because they have to work. If somebody is a nine or a ten on a scale of one to ten, I think that the vast majority of the time, employers don’t care, as long as they are physically healthy and technically astute.”

Wittenberg says that while some companies going through succession planning may seek younger candidates, they also recognize the need for experienced talent. “If [a company] is at an inflection point where they’re ready to go to the next level, they may have identified an internal candidate [in their succession plan], but that candidate may not be ready for another five to seven years,” he says. “That’s a reason to go outside the company and consider an older candidate. That’s a great gig for the right candidate who is in the final years of their career.”