Stay!

When the board of housebuilder Barratt sanctioned a 15% pay rise for their regional directors last summer they were probably confident that they had made a market-beating move that would tie key employees to the business for the foreseeable future. If so, then they will find this year’s Building/PSD housebuilding salary survey uncomfortable reading.

“Companies are petrified of losing their staff and so salaries are continuing to rise,” says Mark Heald, director of the residential division of recruitment consultancy PSD. “People know that if they lose someone, they are going to have a hell of a job replacing them and so they are paying way beyond what they were prepared to in the past. Clients don’t want to raise their salaries carte blanche, but have recognised that they may have to in order to keep staff.”

The results of the survey suggest that Barratt’s competitors have been adopting a similar stance. The average take-home pay of managing directors soared to £129,000 last year, an 8.4% increase, and even the lowest pay rises – 7.1% to £45,000 for sales and marketing managers in the South-west – easily beat the rate of inflation.

One of the few compensations of a downturn in the housing market is that chief executives can rely on it to curb wage inflation. At the moment, however, the market looks too bullish for that to happen.

But what’s really worrying head honchos is the rise of a new and aggressive player in town: the developing housing association. “Larger housing associations have begun to be much more professional in their approach to business,” says Stephen Oxley, head of social housing at Faithful + Gould. “The dirty word profit isn’t a dirty word any more. Housing associations are having to be much more commercial – also, they are delivering homes for outright sale just like housebuilders. They are taking on people from contractors and developers who they feel will be good for their businesses. Housing associations are not shying away from mixing it a little bit.”

Housebuilders don’t want to raise their salaries carte blanche, but have recognised that they may have to in order to keep staff

Mark Heald, PSD

Cara Davani, group director of corporate services at London-based Genesis Housing Group, agrees. She thinks that concentrating the Housing Corporation’s development cash into just 74 associations as opposed to the previous 300 has led to “housing associations upping their games and behaving in a far more focused manner than they have in the past”.

And businesses such as hers aren’t afraid to play hardball. Like housebuilders over the past few years, Davani has been finding it hard to recruit and retain staff. “Development staff in our organisation are headhunted on an almost daily basis. In the past we have failed to match what housebuilders were able to offer. However we have definitely increased our salaries in recent years to try to combat this.”

This is one reason why housebuilders such as Barratt should be worried. Davani says she pays up to £65,000 for a development manager and “well over £100,000” for senior development positions. Tony Hart, group HR director at Family Mosaic Housing Association, says he pays similar rates for development managers and up to £90,000 at director level. According to Building’s survey, this puts most housebuilders in the shade – even in the South-east where salaries are traditionally highest. The top rate for a land and planning director there is £86,500 and for a senior land manager £68,000.

And salaries are not the only area in which housing associations are matching their private sector counterparts. “Pretty much every housing association I know of now operates a bonus system,” says Hart. “Ours is not massive but it operates across the business from housing officers to the chief executive. We have to hit a certain amount of surplus and customer satisfaction before the money is released for bonuses. The maximum you can get is 12.5%. The average in 2006 was 4.5%. I expect this year to be slightly larger.”

A quick look at the PSD findings shows that this would appear to be one area in which housebuilders – with bonuses of 40% not uncommon – continue to enjoy an advantage. But Genesis’ Davani warns that they should not rest on their laurels. “We are looking to change our bonus system to be able to compete much more with the private sector.”

Profit isn’t a dirty word any more. Housing associations are not shying away from mixing it a little bit

Stephen Oxley, Faithful + Gould

She adds that the Genesis board has just signed off on a plan to overhaul the recruitment and retention strategies of the business in the next few months. This will include the use of golden hellos and golden handcuffs for key development staff as well as recruiting overseas for problem positions, extending a trainee programme that was piloted in the development department last year and training the next generation of managers across the business.

PSD’s Heald says housebuilders need to start planning their counter-attack. “They have to appreciate that it’s not all about money any more. A lot of people are focusing on their quality of life and are realising that they have skills that they can use for themselves earning the same amount of money as they were, or more, but only working three days a week. Housebuilders are also going to have to change in a big way over the next couple of years in terms of the hours people work – they want more flexibility and don’t want to come in and work from eight to eight any more.”

Further pressure on recruitment is going to come from having to meet the government aim that all new homes be zero carbon by 2016. “This agenda is coming more and more to the fore,” says Heald. “But housebuilders still don’t appreciate the skills gaps they will have to fill if they are to meet the 2016 goal.”

Doug Gillan, group HR executive at Crest Nicholson, agrees that a lack of forward planning for recruitment – particularly among the next generation of workers – is a common problem in the industry: “We need to have a more consistent and positive approach to sourcing, training and, most importantly, retaining young people.”

For Barratt, according to Heald, the recent pay hike for regional directors was the first evidence of the change in emphasis brought by Mark Clare, the company’s new chief executive. “Mark has come from a bluechip background at Centrica [owner of British Gas] and for him the priority is to retain quality people – it’s as simple as that.” Sparks are sure to fly.