Hamstrung by H-2B

Hamstrung by H-2B

State of the Industry Report - 2015 State of the Industry Report

How a government shutdown of the seasonal program exacerbated the industry’s ongoing labor crisis.

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October 13, 2015

For the last 15 years, Schill Grounds Management has prepared for the season by hiring H-2B workers in the early spring. These are skilled, seasonal employees who help tackle the large volume of work through the start of summer.

“We can’t make the grass grow all winter and we can’t make it snow all summer. Our H-2B staff only come in and fill seasonal jobs,” says Jerry Schill, president of the North Ridgeville, Ohio-based company.

In the spring, a lawsuit and intra-agency bickering forced the H-2B program to shut down for two weeks. Applications started being processed again, but the program’s future – and landscapers’ ability to secure workers through it – remained in question throughout the season.

In Ohio, the 20 H-2B workers Schill expected to start work in April weren’t admitted into the program at all. And Schill didn’t find out that this critical labor pool would not be available for the firm until May.

In the past, by the time Memorial Day came around, an estimated 60 percent of man-hours dedicated to cleanup, pruning and mowing were already completed.

“It was all hands on deck when we lost that staff,” Schill says. “We had to hire a fractional HR firm and spend a ton of money on social media and advertising to recruit in any way, shape or form that we could. We were forced to expedite training and cram what we might take a couple weeks to do into five days to get people out in the field.”

In all, he spent $19,500 for the HR firm, $2,450 on advertising, $18,522 for online training assessments and orientations and figured an acquisition cost per employee of $336. The company’s attrition rate was 55 percent. And after all that, Schill’s crews still blew budgeted hours on jobs, and quality suffered.

Not getting the H-2B crews this year set Schill back for the year, and there’s a trickle-down effect of how a labor shortage impedes his business in the long term.

“You slow down growth, stop buying trucks and mowers, quit opening other locations, stop hiring managers,” he says, and the list goes on.
 

Labor crisis.

The delays and problems with the H-2B program are long-standing and are just the latest chapter in a growing labor crisis in the landscape industry. Based on the latest State of the Industry data, more than a third of landscapers have one to three open positions at their companies. And two-thirds say a lack of quality employees hinders their location’s growth. A shortage of good help is cited as the top problem facing landscapers’ business success in the next three years – more of a problem than fuel costs, prices, health insurance costs and low-ball competitors.
 

Local replacements.

Josh Denison, vice president of labor and human resources at D.C.-based Denison Landscaping, knows Schill’s story all too well. His company’s H-2B workers were 9½ weeks late this year, and he figures actual revenue lost at $70,000 per week – or about $665,000 for the season. Add in opportunity loss (work turned away, missed deadlines, lost contracts) and that figure jumps to $120,000 per week.

To cover the missing crews, the company clocked a total of 90,000 hours of overtime in the spring and workers were “dead on their feet,” Denison says. “It was like working a 36-hour snowstorm and continuing at that pace for two months in a row,” he says. Denison finally finished spring cleanup on July 2.

H-2B has been a significant part of the labor pool for Denison Landscaping for many years, but the program has become increasingly difficult to manage. But the company struggles to find employees domestically.

“There is a lack of local workers,” Denison says. “If companies such as my family’s cannot perform on our contractual obligations, then we lose business. If we lose business, we lose customers. If we lose customers, we do not need our current employees. Without the H-2B program or a viable labor force, Denison and many companies will not survive and will be out of business.”

Denison took a gamble while watching the cap ahead of time, seeing that he might not receive his 200 workers on the date of need he prefers in February.

“So, I called my agent and I asked, ‘Is it too late to change my date of need?’ He said, ‘You’re crazy,’ and I said, ‘I don’t care,’” Denison says. “If I would have gone with the Feb. 15 or March 1 date like I normally do, we would have been capped out of the program completely. I would not have gotten any of my guys. But through all of the processing delays and the governmental red tape, I made the call to move our date of need to April 1.”

Denison’s first group of H-2B workers showed up on April 24. The last group arrived by May 8. To make up for the delay, Denison hired 142 people locally between mid-February and late May. Of those, only a half-dozen were still working for Denison Landscaping in August.

“The average turn-around time was one week,” he says.
 

Careful planning.

Shayne Newman, president of Yard Apes in New Milford, Conn., posts a “help wanted” sign in the window of his high-visibility headquarters every spring. Usually that sign is up for a month before the busy spring season starts.

“We kept the sign up all year,” he says.

Recruiting quality part-time labor locally is one of the biggest challenges for landscape firms, and programs like H-2B fill a critical personnel void. With the construction industry more vibrant now, the local labor pool in many regions is even more scarce, says Joe Gonzalez, president of ArtisTree Landscape Maintenance & Design in Venice, Fla.

ArtisTree did not get its H-2B workers this year, and usually the company is awarded the same team of individuals from Mexico who have become part of the company over the last decade. “They know what the job requires, so they come and get right to work,” Gonzalez says.

When Gonzalez found out two weeks before the expected arrival of his H-2B that no one was coming, he scrambled. “We sent scouts out around town, and we ran ads, of course,” he says. “We went to a temp agency and got the required people.”

But the quality of work dropped and overtime increased. “We only accumulated half of the number of employees we needed, and the quality level was much lower so our jobs came under more scrutiny in that first month or two before we were caught up,” Gonzalez says.

Gonzalez estimates overtime cost of $20,000 per week because of not having his usual H-2B crews on board, and the local part-timers he brought on just didn’t compare. “Their pace of work and familiarity of the job and endurance is just not there,” he says.

Gonzalez knows he will have to curtail growth if he cannot recruit dependable labor – either H-2B or domestic. With the healthy HOA market in his region, there is plenty of maintenance work, he says. In spite of labor challenges, the company grew its landscaping business (staffed by local workers) by 30 percent in 2015. “We are getting ready for next year,” he says, “and I believe that whether or not we have H-2B we can plan more intelligently and not get caught by surprise.”



 

Worth the headache.

Planning in advance for H-2B requires at least a seven-month window, says Newman of Yard Apes, who got his 12 H-2B workers this year. He can tell the labor market is getting even tighter, though. When Yard Apes put out its fall advertisement for local workers as part of the H-2B process, the company received no applications. Usually, the firm receives 10 or so phone calls in response to the ad.

During peak season, Yard Apes needs 20 seasonal workers. Half of those are local staff, and the other positions are fulfilled by H-2B visas.

“H-2B employees are proud of our industry; they’re proud to call themselves landscapers, and they’re real happy to show up to work every day,” Newman says. “They are eager to learn.”

That’s also why Denison has brought on more than 200 H-2B workers on average per year for its three locations since 2001 – even though the cost and headaches, and downright risk of not getting employees, are a reality of the program. This year, Denison spent about a quarter-million dollars on the H-2B program. He figures the cost of one H-2B worker – “to get them up the road, processed and to work” – is $1,600. That includes processing and visa fees, transportation/travel costs and uniforms.

That’s nothing compared to the loss of revenue when H-2B workers are not on the team, as Denison learned for two months last spring. Denison says politicians and even other business owners are shocked when he shares the numbers. Denison has traveled to Capitol Hill several times a month for the last nine months to make the case for removing cost and administrative obstacles from a program that provides the workers that are so vital to his business.

“I tell people this and they look at me like I’m crazy,” he says. “But that is the truth behind what the federal government has done to the H-2B program.”

Denison wonders what will happen if he doesn’t use the H-2B program next year. His company has already moved forward with the application process – as have Schill, Yard Apes and Artis Tree. Denison wants to wean off the program. Right now he’s spending as much as $2,000 a week advertising for fall labor. But as Gonzalez noted, it’s not that easy. Workers in Mexico and El Salvador are a dependable part of the team for nine months out of the year, and have been for the last decade and more. They’ve come to rely on the work just as much as the landscapers who hire them.
 

One more fight.

With prevailing wage a concern and the DOL no longer accepting private or government wage surveys, the cost of paying H-2B and all employees could make the program, and simply keeping people on board, more expensive than what companies can afford. Denison is expecting his prevailing wage to come in at $13.80/hour, which is a 35-percent wage increase.

“This causes a ripple effect in all wages across the board,” Denison says. “If your $10.30 basic domestic or H-2B laborer has an arbitrary wage increase, then you have to adjust wages across the board in a sliding scale to keep it fair and balanced. What happens to the $12 guy if the new guy is making more? And what happens to the $15 guy?”

Prevailing wage is one more labor battle to fight. In the meantime, Denison doesn’t want to cut off H-2B.

It’s a conundrum. You can’t work with the program; you can’t work without it. The cost and administrative stress is mounting, but backing off isn’t a solution if there’s no other labor to fill the gap.

“These are jobs we have proven (to the government) that we cannot fill domestically, so H-2B is not a short-cut or a crutch,” Schill says. “We have this need.”