Salary increases were higher than expected in 2022 and AEC workforce demographics continue to shift.
In 2022, base compensation took center stage as firms raced to find ways to recruit and retain talent in their organizations. Zweig Group recently published its 2023 Salary Report of AEC Firms, and the data highlights a few interesting themes. Salary increases across the board were higher than expected, increases in IT and marketing staff salaries were particularly strong, and the age demographics of the workforce continue to shift. In early 2022, we surveyed 85 firms and found that they expected to increase their base compensation packages by roughly 4 percent from 2022 to 2023. Over the second half of 2022, we surveyed 258 firms and found that, on average, firms actually increased salaries by roughly 8 percent, more than doubling adjustments from years past.
In aggregate, we saw an average year-over-year increase in base compensation of around 8 percent, compared to a 3 percent increase from 2021 to 2022. Firms in the Central and Eastern U.S. regions gained by 6.6 and 7.4 percent respectively, while the Mountain-Pacific region increased by nearly 9 percent. Salary increases were strongest for entry-level and early career engineering professionals with fewer than seven years of experience. This group outpaced their elders by quite a margin, which continues to be one of the dynamics firm leaders and HR professionals grapple with as they map career progression and compensation ranges in their organizations. Wage growth for professionals with fewer than seven years of experience was nearly 9 percent, compared to roughly 4.5 percent in more seasoned professionals. The average project manager in the Mountain-Pacific region had 13 years of experience and made $112,000. For the same role in the Central region, we found the average project manager had 15 years of experience and made $102,000. In the Eastern region, it was 16 years and $113,000.
In a separate but coordinated study, we found that the industry appears to be retaining young women in the workforce more effectively than in years past. Women under the age of 45, as a percentage of the total, have rebounded since 2020, gaining roughly 4 percentage points since then and 2 percentage points from pre-pandemic studies. We also a noticed a younger workforce than in years past, with noticeable drops in the 36- to 55-year-old segment. Though this group still makes up roughly 41.5 percent of the industry, this is the first year on record where the younger than 35 cohort (42.5 percent) makes up a larger percentage of the sample. Zweig Group continues to monitor the dynamics of the industry as it changes from the old guard to the new. In years past, we only saw 4 percent of the under 40 cohort in an ownership position, but this has jumped up to nearly 9 percent in a recent sample. Though these statistics may not seem surprising, they have profound impacts on the way AEC firms are managed and the incentive structures firms use to retain talent.
Remote workforces and the emerging hub-and-spoke production model are expanding our ability to grow outside of the more traditional “downtown office” setting. Remote work stations, co-working facilities, and work from home models are here to stay and some firms will build their growth strategies around that phenomenon. Zweig Group has always been a proponent of thoughtful investments in areas of the business that promote growth and innovation. As such, investments in HR, marketing, and IT functions are an important part of running a successful business today. This is reflected in increases in IT director salaries (roughly 15 percent over last year, averaging around $130,000) and marketing director salaries (averaging around $120,000). These increases were consistent across geographies. Regardless of your firm’s approach to the remote versus in-office work dynamic; design firms are increasingly reliant on cloud based technology for production platforms, project management tools, and communication software. Ensuring your firm has appropriately compensated leadership in HR, marketing, and IT is just one way to ensure your firm’s efficiency and image stay intact.
Over the last year Zweig Group has engaged a number of firms, conducting comprehensive benefits and compensation studies. If you’re a firm leader and are struggling with the rapid changes in expectations from your staff, there are a few ways to back up or even create your compensation program. You can:
- Establish a compensation philosophy
- Benchmark your salaries and benefits often
- Create flexible programs that match your firms structure and career pathing
This year’s edition of Zweig Group’s Salary Report is just one resource to help your firm in developing a competitive total rewards program, but it’s perhaps the most effective tool you can leverage to align expectations with your most valuable asset – your people!
Will Swearingen is a principal and director of ownership transition advisory services at Zweig Group. He can be reached at wswearingen@zweiggroup.com.
