The home service market is surging, spurred by rising rates of homeownership as well as the average age of homes passing the 50-year milestone.

This forecast brings welcome news for home service business owners, but not without a few caveats. The nationwide shortage of skilled labor continues to be an especially acute pain point for contractors, potentially limiting their ability to capitalize on this seismic growth.

One way to address the labor shortage is through a strategic emphasis on retention — encouraging top talent to stick around rather than wandering off in search of greener pastures. To ensure high-performing technicians stay, home service contractors actually have to give them a reason to stay, and there are a number of ways to do so, above and beyond competitive salary increases.

How investing in employees spurs business growth

An investment in long-term retention is an investment in the business itself and can be foundational for lasting growth.

This is true for several reasons. For example, employee incentives are often tied to performance. Frequently, the best way to encourage retention among top talents is by connecting specific incentives to monthly or quarterly milestones. A real-time goal board can be used to track key stats like customer satisfaction and on-time arrivals, with technicians receiving additional compensation or money in their tool account whenever they reach certain benchmarks. The upside is that technicians feel more engaged and appreciated, all while being incentivized to work efficiently and to create frictionless customer experiences.

Making long-term commitments to valuable employees can also help to reduce turnover. Note that the costs associated with losing an employee can be astronomical — conservative estimates put the average cost at around 33% of the employee’s annual salary. Providing technicians with opportunities to hone their skills and to be recognized for their performance can keep them happy where they are, mitigating the risk of top techs jumping ship and forcing those extravagant turnover costs.

And when home service contractors don’t have to deal with turnover expenses, it enables them to invest in other growth-oriented activities — like expanding their team, enhancing their training programs, or marketing their services to a broader market.

How to make long-term investments in top technicians

To demonstrate long-term commitment to an employee, home service companies can’t simply fall back on salary bumps — especially in a labor market where salaries are already competitive across the board. Beyond standard compensation, there are several ways to encourage technicians to remain in the fold.

Phantom stock can be one option worth pursuing. This is not literal stock — employees do not receive actual shares — but it does offer a means by which employees can benefit from overall business performance. Here’s how it works: Employees may earn phantom stock on the basis of their performance or tenure with the company and redeem at a time of their choosing. When they do so, they receive compensation that reflects the company’s current share price.

Phantom stock provides employees with some of the advantages of ownership, without requiring business owners to actually give up a stake in the company. Additionally, it offers a way to base employee incentives on the company’s real-world financial performance; phantom stocks provide a sense of “skin in the game” for technicians who stand to profit based on the company’s upside.

This is just one example of how home service contractors can show a long-term investment in their technicians beyond standard compensation increases. Additional examples include:

• Restricted stock units award employees with company shares that vest at a defined point in time, often a particular benchmark or milestone related to employee performance or tenure.
• Performance shares may also be awarded to employees. These shares vest only when the business itself meets specific performance goals. For example, meeting certain revenue or growth goals.
• Retention bonuses are paid in cash and over an extended stretch of time, typically in installments related to specific employee longevity milestones.
• Profit sharing plans are another option, allowing employees to get a direct cut of company profits as cash or as deferred contributions to a retirement plan.

A robust commitment to employee retention can incorporate one or more of these incentives and align with broader employee performance goals.

Investing in the future of home services

The future of the home service industry is promising, and to capitalize on that promise, it’s critical for contractors to invest in the longevity of their technicians. A strategic investment in employee retention provides top talents with a reason to stay, and to remain fully engaged with their work, ensuring a competitive edge even in a tight labor market.

About the Author

Chris Buttenham is co-founder of Reins, a pioneering technology firm founded in 2023 dedicated to empowering small businesses through modern equity solutions. Reins’ proprietary solution, the Modern Agreement for Rewards and Equity (MARE) program, was built by attorneys and is customizable to meet each business owner’s needs.