10 Challenges in Construction That HR Can Solve

The construction sector relies heavily on its workforce, but managing people in such a complex industry presents unique challenges. From high turnover to compliance risks, construction companies face significant hurdles that can impact projects, timelines, and profitability.  

Fortunately, a strong HR function goes well beyond hiring, addressing workforce issues that directly affect your business outcomes. In this blog post, we’ll explore 10 common challenges in construction and how HR can solve them.  

 1. High Employee Turnover Rates

The Challenge 

Construction turnover rate is one of the highest among industries at 5.9% in 2024, compared to the national average of 3.7%. The industry’s high turnover rate is leading to increased recruitment and training costs. 

How HR Can Solve It 

• Retention programs: HR teams can create clear career paths for employees and offer mentorship opportunities, or recognition programs to help retain more workers. 

• Exit interviews: Identify the root cause of turnover at your construction company by conducting exit interviews, then adjusting workplace policies accordingly.  

• Competitive benefits: Research industry standards and what your top competitors are offering in terms of health insurance, retirement plans, and flexible schedules to help retain workers. 

2. Skilled Labor Shortages

The Challenge 

The construction industry is also facing a labor shortage, especially for skilled trades like electricians, plumbers, and welders. An estimated 1.9 million construction workers are expected to leave the field in 2024 alone. What’s more, to meet industry demand, construction companies will need to hire over 450,000 new workers on top of their normal pace of hiring in 2025. Finding and retaining qualified workers is becoming increasingly difficult.  

How HR Can Solve It 

• Proactive recruitment: Partner with trade schools, apprenticeship programs, and industry organizations to recruit skilled workers early on. 

• Upskilling programs: Invest in training to develop your current employees’ skills and create internal pipelines for career advancement. 

• Diversity and inclusion: Expand your hiring pools by creating initiatives to attract underrepresented groups in construction. 

3. Worker Safety and OSHA Compliance

The Challenge 

Construction is one of the most dangerous industries, with high rates of injuries and fatalities. According to the Occupation Safety and Health Administration (OSHA), the construction industry accounts for 20% of all work-related deaths, most commonly caused by falls, struck-bys, electrocutions, and caught-betweens. Failure to meet OSHA standards can result in fines, project delays, and reputational damage to your construction company. 

How HR Can Solve It 

• Safety training programs: Develop ongoing safety training to ensure compliance and minimize on-site risk.  

• Onboarding processes: Standardize safety training for all new hires and subcontractors. 

• Safety-first culture: Foster a culture where employees and management prioritize safety and can report hazards without fear of retribution.  

 4. Workforce Classification Issues

The Challenge 

Misclassifying workers — such as treating employees as independent contractors, for example — can lead to legal and financial penalties. Recent updates to the Fair Labor Standards Act (FLSA) have created stricter compliance requirements regarding classification.  

How HR Can Solve It 

• Clear classification policies: Working with legal advisors to craft company policies helps ensure all workers are correctly classified to avoid non-compliance.  

• Document management: You should maintain detailed records for all subcontractors, contracts, and payment terms to back up classifications.  

• Training for managers: Ensure your hiring managers understand the differences between employee and contractor classifications to eliminate errors.  

 5. Managing a Diverse Workforce

The Challenge 

Construction teams often consist of full-time employees, subcontractors, union workers, and temporary labor. Managing a diverse workforce creates significant complexity in payroll, scheduling, and compliance.  

How HR Can Solve It 

• Workforce management tools: Implementing construction-specific software to streamline scheduling, payroll, and communication across worker types. 

• Effective onboarding: Tailor your onboarding processes for each worker type to ensure consistency, and outline any role-specific responsibilities to set clear expectations. 

• Clear communication channels: Use centralized communication tools to ensure all workers stay informed, and consider a feedback channel for workers to share concerns. 

 6. Payroll Challenges

The Challenge 

Added complexities due to job costing, certified payroll for government projects, and varying pay rates for workers create significant payroll challenges. Late or inaccurate payments can damage workplace morale and increase turnover on top of any financial and legal penalties the company may face for non-compliance.  

How HR Can Solve It 

• Automated payroll solutions: Use tools like hh2 Remote Payroll to streamline job costing, track time accurately, and ensure compliance with prevailing wage laws.  

• Payroll audits: Regularly review your payroll process to identify and fix errors, reduce bottlenecks in the approval process, and increase efficiency. 

• Transparent policies: Clearly communicate your company’s payroll timelines, overtime rules, and deductions to your employees to set expectations. 

 7. Lack of Employee Engagement and Morale

The Challenge 

Low employee engagement can lead to poor performance, increased turnover, and reduced productivity. Your construction employees may feel undervalued if there is a lack of recognition or growth opportunities at your company.  

How HR Can Solve It 

• Recognition programs: Celebrate employee achievements more regularly through awards, shout-outs, or bonuses.  

• Career development opportunities: Offer training, construction certifications, and pathways to promotion to retain qualified workers and boost employee satisfaction. 

• Regular feedback: Conduct surveys and check-ins with workers to understand and address any employee concerns. 

 8. Navigating Union Contracts and Labor Relations

The Challenge 

Construction companies with unionized labor have to navigate complex collective bargaining agreements (CBAs) while maintaining positive labor relations. Any mismanagement of union-related issues can result in strikes or legal disputes. Understanding CBA regulations and interpreting real-time data is key for staying in compliance and navigating the nuances of union contracts. 

How HR Can Solve It 

• Union contract management: Ensure everyone on your HR team is well-versed in terms of CBAs.  

• Conflict resolution training: Train managers throughout the company to handle disputes with union workers effectively and diplomatically.  

• Collaborative approach: Foster a partnership mindset unions to avoid an adversarial relationship. Ensure clear and open communication and encourage more collaboration between union and non-union workers. 

 9. Keeping Up With Evolving Labor Laws

The Challenge 

Construction companies must comply with federal, state, and local labor laws. These laws include regulations on overtime rules, prevailing wage requirements, and workplace safety. Falling behind on compliance or failing to adjust to changing laws can lead to audits, fines, or even project shutdowns.  

How HR Can Solve It 

• Compliance tracking tools: Use software designed to automate construction compliance reporting and monitor any regulatory changes. 

• Legal partnerships: Consider working with labor law experts to stay ahead of revolving requirements and ensure strong company policies. 

• Employee training: Provide regular training on compliance and workplace safety to all employees. Be sure to feature any new regulations or important changes. 

 10. Addressing Mental Health and Well-Being

The Challenge 

Construction workers often face high-stress environments, long hours, and physically demanding work, which can take a toll on their mental health and well-being. In fact, nearly half of surveyed construction workers reported experiencing depression. Mental health issues can lead to reduced productivity, higher turnover, and even increase safety risks on-site. 

How HR Can Solve It 

• Mental health resources: Offering Employee Assistance Programs (EAPs) and increasing awareness of access to counseling services helps workers address any mental health concerns.  

• Work-life balance initiatives: Encourage flexible scheduling and time-off policies to prevent burnout and reduce stress. 

• Open conversations: Create a workplace culture where employees feel comfortable discussing mental health challenges and any issues are approached seriously and professionally. 

Why HR is Essential for Tackling Construction Challenges 

By addressing these common challenges, HR not only supports the construction workforce but also drives better project outcomes, profitability, and business growth. Investing in HR tools, training, and specific strategies can help your HR team create a resilient workforce. 

Learn how hh2 Remote Payroll and workforce management solutions can help your HR team overcome construction challenges — schedule a demo today.