What is a merit shop? The simple answer is a non-union contractor. The merit shop construction model is the alternative to union construction, and a far better option in terms of project efficiency, labor management, cost savings, and project completion time.
Merit shop contractors prioritize performance-based hiring based on skills and experience, while union contractors emphasize union membership. Better yet, merit shops provide better opportunities for career advancement depending on an employee’s proficiency and follow a contract awards system that rewards the lowest bidders with the required merits, such as work ethics, experience, and skillset.
The Merit Shop Philosophy advances the concept of the opportunity economy by fostering open competition in the industry. That’s why notable organizations such as Associated Builders and Contractors, Inc., (ABC) and Independent Electrical Contractors (IEC) advocate for merit shop contractors to advance their interests in the construction industry, Congress, and pertinent regulatory agencies.
Merit Shops Versus Union Shops: What’s the Difference?
While merit shops and union shops are the major labor force organizations in the construction industry, they follow distinct approaches.
Open Competition Versus Union Hiring Halls
Merit shop contractors follow the open competition model that favors candidates with the best skills from a large talent pool. They advertise job positions in the open market and recruit the top talent that exemplifies the required qualifications.
On the other hand, union contractors rely on union hiring halls to source talent on their behalf. Usually, union shops may only hire candidates from a union hall’s referral list. In such cases, workers with union membership boost their chances of getting hired, as union-established criteria such as seniority and non-discriminatory rules may favor them.
Merit-Based Compensation Versus Collective Bargaining Agreements
Merit shops follow a merit-based compensation structure that rewards workers according to performance or skill level. Contractors and workers negotiate wages and working conditions individually, but stay within the confines of respective labor laws.
Conversely, union shops follow the prevailing wage rates negotiated by unions on behalf of workers through collective bargaining agreements. Such agreements set tiered rates for different job groups. Workers are classified under specific job groups based on factors such as experience and training levels.
Project Labor Agreements Versus Flexible Contracts
Union shops prefer project labor agreements (PLAs) over flexible contracts. PLAs set standard rules for specific projects that dictate hiring procedures, wages, working hours, and other project-specific details, leaving little or no room for flexibility.
Conversely, merit shops favor flexible contracts that they can adjust to meet a project’s changing demands. Flexible contracts give merit contractors more wiggle room regarding work hours, hiring procedures, and wage setting. This adaptability allows them to complete projects within a shorter time frame when needed, all without compromising quality standards or bending labor laws.
Why Contractors Choose the Merit Shop Model
IEC’s recent research found that over 80% of electrical contractors prefer the merit shop model and proudly identify as merit shops. The Merit Shop Philosophy must be working right if this many contractors have embraced it and swung 60% of all electrical construction projects in their favor. Here’s why the merit shop model is taking over.
Better Project Control and Workforce Flexibility
While union shops must abide by the terms and conditions in their PLAs and contracts, merit shops enjoy more flexibility. For instance, merit shop contractors can adjust their workforce on the go and hire more workers straight from the job market when they’re required to complete a project earlier than anticipated.
However, union contractors must return to their unions to source extra labor. The back and forth involved can delay project delivery, especially when there’s an unplanned disruption, such as a sick employee who you need to cover for immediately.
Better Cost Savings
Because merit shop contractors can negotiate wages and work hours, select suitable vendors, and control other intricate project-specific details, they can negotiate better deals and enjoy substantial cost advantages.
More Room for Innovation
Merit shops don’t operate under rigid contract constraints. This allows them to try out new ideas and systems that foster innovation. Additionally, the fact that merit shop contractors have hiring and budgeting autonomy enables them to sponsor diverse ideas from their workers. And because they hire top talent, there’s a significant likelihood they’ll source innovative ideas from employees.
How Merit Shops Benefit the Workforce
Workers who partner with merit shops enjoy more privileges than their counterparts with affiliations to labor unions. Workers enjoy the following benefits of working for merit shop contractors:
- More opportunities for career growth thanks to the performance-based advancement system
- Easy access to apprenticeships and training programs through organizations such as IEC, Associated Builders and Contractors, and Merit Apprenticeship Alliance
- Merit-based reward system that compensates workers based on their performance, such that workers earn more by doing more
IEC is a big advocate for establishing more registered apprenticeship opportunities to boost skills and hands-on experience in the electrical trade. IEC supports legislation geared at improving merit shop construction. Learn more about our advocacy work here.
Why Merit Matters: A Culture of Excellence
The Merit Shop Philosophy promotes skills and expertise over other bureaucratic factors such as seniority and labor affiliations. By following a performance-based reward system, merit shop workers take pride in their craft and are fairly compensated for their effort and achievement. They find dignity in work and appreciate the rewards for real contribution.
All these factors build a culture of excellence, boosting your construction business to higher levels. The merit shop system is the present and future of the construction industry. Do your business a solid and join IEC’s Merit-Based Network to get more from the merit shop culture.