Competition surrounds your business at all levels, but perhaps nowhere more consistently than with respect to employees. The shortage of technically proficient trades-oriented mechanically-adept potential employees is headed towards a cliff. As a result, the competition between potential employers has become more intense with each passing year. When I first entered the PHVAC trades in 1972, it was virtually impossible to land a job because there was an abundance of qualified candidates and very few jobs available. Employers had the upper hand. Today, that has been flipped on its ear with jobs going begging due to a lack of qualified candidates and a public reluctant to pay for that helper on their jobsite. Entry wages have risen to a point where an entry-level trades person can earn a living wage and receive benefits packages we could only have dreamt possible.

Once you recruit and invest in a new employee, the last thing you want to have happen is losing them to your competition. Here are 6.5 suggestions for employee retention:

1. Treat them well

Treat them like family, because that’s exactly what this is. Surely dysfunctional at times and frustrating, because it can seem like a family comprised of teenagers that never grow up! Treat employees like family, which means forgiving mistakes; tolerating pushback; giving guidance constantly; praising often; and using gentle discipline. By gentle discipline, I mean privately admonishing an individual politely rather than yelling while dressing them down in front of others, which ultimately reduces your status to bully and will leave a negative indelible impression on everyone.

Remember, respect is a two-way street, and yours is the heavier load to carry here. Document the good, the bad and the ugly for employee reviews, potential raises, and for the rare firing.

2. Vacation time

Years ago, an employee had to work a full year before being eligible for a single week’s vacation and, even then, it was pro-rated: If you only worked for six months, you were only eligible for 2.5-days vacation time. Today, it’s a given that new employees will be eligible for vacation starting on day-one. How much time off is entirely up to you. If you want to recruit a seasoned technician who’s already enjoying multiple weeks vacation, you stand a far better chance if you are matching, or beating, the vacation package they currently have.

3. SPIFFS

SPIFFS are spin-offs and one simple example centers around selling maintenance agreements. Everyone wins if there’s a cash reward for each contract sold, and that can include office staff. Provide the reward in front of staff and employees to incentivize everyone. You can create SPIFFS around tons of sales items.

4. Benefits

Benefits that you create can extend beyond just the routine paid holidays, and the more varied, the better. Get creative, but check with your accountant to ensure you don’t run afoul of the IRS.

We had lots of hunters, so I set up an overtime “bank” where 1-hour of overtime banked resulted in 1.5-hours’ time off at the time of the employee’s choosing, or they could receive it as extra cash in their next paycheck. Our accountant put a stop to that because the IRS wants their cut when the time is earned towards the paycheck, not deferred until some future date. Our hunters loved it, as did others who treated it like a Christmas savings fund.

5. Retirement

None of us can work forever. Knees and backs wear out. Social Security won’t allow your employees to live the good life once they retire, so why not set them up with a plan where retiring a millionaire can be a reality?

You can do this on your own by doing what one employer I know did: set up a savings account in-house that deposits $X per hour worked. The only problem with this is the employer has access to the money, and the fellow I know who did this saw some troubled times, and stole the cash he had set aside for each of his employees.

When we set up a retirement fund that incorporated profit-sharing, we did so using an independent administrator who managed the 401(K) accounts. The check we sent each month was cash out-of-our-control the moment they deposited it into the separate accounts. Although the employee was not fully vested for several years, the money was in their account, and could not revert back to the company. If an employee was fired or quit, the unvested amount of money was distributed into the other employees’ accounts. Each employee could decide (with guidance from the 401(K) management financial advisors) where to invest their portfolio. Here are several options:

Simplified Employee Pension IRA: 100% employer funded up to 25% of the employees' compensation with a ceiling of $72,000.00. The one advantage with the SEP IRA is the amount is solely at the employees' discretion. You have a down year and profits are low, you can decide what, if any, amount will be contributed. All funds are fully vested upon your depositing the money.

Savings incentive match plan (Simple IRA account): Businesses with 100 or fewer employees can participate. In 2026, employees can contribute a maximum of $17,000.00 and employers are mandated to match 3% of the employee’s contribution or a fixed 2% for all employees.

401(K) accounts: Robust, full-featured plans where both employer and employee can contribute. As we learned, there are administrative costs, but we felt the value far outweighed the oversight fees. There are limits to the amounts the employer can contribute to their own account to act as a safeguard, and are based on employee participation in the plan.

We set ours up as a profit-sharing plan with a minimum percentage of each employees’ gross pay so that there was guaranteed growth in each individual account even if an individual employee did not contribute to their account.

Profit Sharing Plans: The employer has full discretion regarding contributions to individual employee accounts. Only the employer can contribute and has the ability to vary the contributions based on the overall performance of the company.

In all cases, the best advice is to set up a retirement plan via your accountant to ensure 100% IRS compliance, but to also remove yourself from any access to the funds once deposited. Temptation is the playground of the devil!

6. Health Insurance (the Gorilla in the room!)

Everybody needs it, yet nobody can afford it. When the so-called Affordable Health Care Act came along, we had employee health insurance through our local Builder’s Association. That alone was an incentive to be a member, and held great value. Then came the Unaffordable Health Care act shoved through Congress and a meeting held by the Builders’ Association insurance carrier to warn us of the pending whopping increases in the health insurance.

It rapidly became our single largest chunk of overhead, and a constant headache to challenge our yearly budgeting as both deductibles and premiums increased dramatically year-after-year. This alone caused us to raise labor rates in order to just tread water. Structure your business to incorporate health insurance as an invaluable benefit and incentive for employee retention.

6.5. Wages, salaries, and compensation

These are last on the list, but by far not least as an incentive to attract and retain employees. From my perspective, I tried my best to treat employees as I would have wanted to be treated. Employees are the lifeblood of your business, and cut a wide swath of influence with your customers.

Track employee productivity and business they generate. I knew of one partnership breakup where the partner who broke off to form a competing business took roughly half the employees with him. The accountant, hired by the remaining partner, ran a productivity analysis for the firm, which revealed the departing partner had taken all the dead wood with him to start up the new company. The accountant accurately predicted the demise of that new company before they even opened their doors for business. Pay (reward) according to performance!