The average salary of a residential subcontractor in the United States will vary widely depending on the service the subcontractor provides and where they provide it. As you’ll see in the further in this article, the southeastern states will offer the lowest total compensation, while the northeastern states will offer the highest.
In states like California and New York, residential subcontractor salaries can be double those earned by subcontractors in Mississippi or Tennessee. However, the cost of living index is higher in those areas offering higher pay, so higher salaries don’t always equal more buying power.
Generally, the dense population of metropolitan areas will allow subcontractors to earn a bit more due to the higher volume of work. However, working in these areas often requires more time and effort dealing with approval applications and committees.
Here we will discuss what affects the average compensation for residential subcontractors in the United States and offer some advice for maximizing your salary.
For our purposes here, we will define a residential subcontractor as any business offering their construction services to either an end consumer, general contractor, or homebuilder.
Collecting salary data for residential subcontractors can be a little confusing because although they share the same title, residential subcontractors offer a vast array of services and charge accordingly.
To be clear, we will use the term “salary” to describe total compensation, not just subcontractors paying themselves a salary. This data will also include subcontractors paying themselves by the hour or project as well.
How you pay yourself can have an impact on both your total compensation and how you approach running your subcontracting business.
The subcontractors that prefer the business side of construction tend to pay themselves on a set salary.
Subcontractors that are more hands on during projects tend to pay themselves by the hour.
Neither approach is right or wrong as both have advantages and disadvantages, but understanding how your approach compares to others may help you make more profitable decisions.
Perhaps the easiest way to determine your natural approach to business and profits is to ask yourself questions like:
The owner-type subcontractor tend to pay themselves a salary and bonuses, depending on the profitability of the prior quarter. These subcontractors will be involved in the entire project but may depend more on a team leader for onsite judgment. Salaried, owner-type residential subcontractors have the advantages of:
However, owner-type subcontractors paying themselves a salary must contend with:
Operator-type subcontractors often prefer to leave financial and long term planning to outside professionals. This allows the operator to do what they do best, which is get a project completed on time and on budget.
Operator-type subcontractors have advantages like:
On the other hand, operators are constantly dealing with:
Operators tend to be subcontractors that began as employees before starting their company, with limited experience or guidance running a business.
Many operator-type subcontractor business failures have little to do with the quality or speed of their work. In most cases, the cause is a lack of planning or poor investments. These subcontractors should employ both an attorney and accountant and follow their advice.
There are several websites that provide economic data and employment statistics by state. Many are in the business of employment recruiting, like ziprecruiter or indeed. These sites track work migration, so the data they collect is usually current.
Other companies, like comparably, act as a collection point for client reviews and pricing data from various sources. The data is made available to those that join.
The Bureau of Labor Statistics (BLA) is a good source for wage reporting data. The BLA sorts the information by national, region, and state averages. Although the data is reliable, note that the data is not available by city or county, but an average of all within the state.
Here we will summarize our findings from recruitment companies, real estate marketers, and government websites. We separated the regions into Northeast, Southeast, Southwest, and Northwest.
Here is an average of some of our findings from the data we collected:
Here is an average of some of our findings from the data we collected:
As you can see, a subcontractor working in the pacific northwest region collects about 18% more in average pay than one working in the northeast. However, as mentioned earlier, the cost of living is generally higher in states that have the highest overall pay.
Some residential subcontractors may offer a service that does not require a team, like a trim painter. Other trades, like roofing or framing, usually require the subcontractor to hire employees. One trade makes more profit per job, but the other can do a higher volume of work.
Residential subcontractors that offer the most services will often produce the most work, and thus, gross profits. However, subcontractors that work alone or with a small crew have fewer expenses, so increased net profits can provide a comparable salary.
Owner-type residential subcontractors will tend to focus on volume and average profits, while an operator will likely focus on profit per job. Both are very effective, but identifying your type might help you make better decisions in the future.
Some subcontractors can charge a bit more to certain homebuilders and general contractors. Upscale builders with a good reputation can offer higher pay for stronger skills, so they tend to attract the most skilled tradespeople.
Reputation also plays a huge role in the salary a residential subcontractor can earn. Subcontractors that are always early and rarely make avoidable mistakes will always find work. When the building market is hot, these top level subcontractors can often name their own price.
Subcontractors needing specific qualifications like licensing can often offer both consulting and services. For example, a homeowner might want to provide a certain amount of material and/or labor, but still need the supervision of a licensed professional.
Consulting requires little to no investment, so some professionals like security technicians, electricians, and plumbers will offer to review another’s work, point out deficiencies, and charge a fee.
These subcontractors will usually provide an affidavit to the client asserting that although the client is ultimately responsible, the work was professionally supervised. This practice can give building inspectors more peace of mind knowing the work was backed by a trained professional.
Subcontractors need general contractors and home builders to provide them with steady work. Those new to subcontracting often first offer their services to local builders because builders can provide repeat business.
Successful subcontractors will nurture this relationship and make sure the builder benefits from their work. Producing profits usually guarantees another job offer, so subcontractors that consistently make their general contractor money can charge a bit less in exchange for the additional work.
In addition, residential subcontractors that form trusting relationships with successful builders spend much less time and effort on marketing efforts because work tends to find them.
When residential subcontractors fail, it’s most commonly due to financial mismanagement. Construction is a dynamic business, so changes are often made on the fly. Anything from poor weather and damaged material to sickness and broken tools can affect a construction schedule.
Paperwork is unavoidable, so many subcontractors turn to software that integrates their personal technology with their internal system. This allows the sub to spend less time looking for information like invoices, time sheets, and packing slips and more on getting the job done.
The most successful subcontractors are constantly looking for ways to improve their profits by keeping a pulse on new tools and technology that can help save time and increase their margins.
Utilizing construction management software has quickly become the most popular way for subcontractors to improve their efficiency and increase their salary. With the majority of subcontractors still relying on notepads and spreadsheets to manage their projects and business, those that have already shifted to software have gained a noticeable market advantage.
With more modern and affordable construction software now available, the learning curve and barrier to entry has been eliminated, allowing subcontractors to modernize their business without spending $1,000’s or hours of training.
BuildBook construction management software has become a favorite among subcontractors due to its speed and simplicity.
BuildBook offers subcontractors tools to create and manage contacts, estimates, tasks, schedules, and so much more in a modern interface that doesn’t require any training to use. Whether you are a subcontractor tracking progress across several projects or you’re on the jobsite putting together a daily report, BuildBook makes it easy.