Rich Friedenberg, vice president of Windowizards in Bristol, Pa., speaks for many replacement contractors when he states that, given the market's labor supply, it's impractical to deduct a portion of subcontractors' pay to defray the cost of follow-up work on a project the sub can't or won't return to fix. “It's harder to get people to work for you when you're withholding a percentage of their money” is how Friedenberg puts it.
Not everyone sees it that way. Reserve pools, as they're known, “offer our company some downside protection,” says Chris Cardillo, president of Mt. Laurel, N.J.–based Castle “The Window People,” which withholds $100 per week per crew for six months and returns that money to installers one year after they separate from the company.
Spell it Out Replacement contractors whose companies require subs to kick into “service accounts” say they have little trouble hiring and holding onto subs, as long as policies are spelled out contractually and they can provide subs with enough work to make those deductions seem inconsequential.
“You have to explain to your subs the benefits of working for your company,” says Terry Seaton, general manager of Minneapolis-based Budget Exteriors, a company with three offices running 80 crews, most of them subcontractors.
Budget withholds 10% of each crew's invoice, which it places in a reserve fund. The company caps the amount withheld at $1,000 and returns the money to the sub after a job's one-year service warranty expires. If a problem arises with a particular job before then, Budget gives the sub “the right of first refusal” to fix it before the company dips into the fund, Seaton says.
Melani Bros., which offers lifetime warranties on labor, takes a slightly different approach with its 15 crews. The Yorktown, Va., contractor keeps 5% of each sub's pay per job, up to $3,000, which is returned, with interest, one year after the sub stops working for the company. “We've had guys work for us for five years who think they'll never see this money again,” says Lyle Brasher, Melani's director of operations.
Castle releases some of its reserve to long-time installers after a few years and occasionally lets them borrow against their accounts. Budget, though, won't allow subs to draw against these funds, and Melani makes this concession only grudgingly.
Screening Device While contractors may not view service accounts as management tools per se, they say their existence helps avoid subs who are less inclined to take responsibility for the quality of their work. “If a sub has a problem with this, then that's probably someone you don't want to work with,” Seaton says.
Requiring subs to ante up becomes less of an issue when they have steady work. Castle's crews pull in, on average, $2,500 to $3,000 per week, Cardillo says.