As the home service industry retirement rate continues to outpace new talent entering the space, independent business owners in the home service industry can feel increasing pressure to keep their best employees happy and retain them for the long term. How can privately owned companies compete with the draw of better benefits, and often better pay, from larger competitors? It may require a bit of creativity and flexibility, but there are ways to reduce turnover.

Looking at employment trends in early 2025, the solution appears to be based on total compensation (not salary alone), plus an employee’s connection with the company culture and values.

Major factor in employee turnover: Financial rewards 

Like it or not, employees often measure their value to their employer by the financial compensation they receive. For a start-up or small business, competing with larger organizations on base salary alone might not be an option. 

In a recent survey of HR professionals by SHRM, 74% of respondents cited inadequate compensation, including base salary, bonuses and profit sharing, as the leading reason for employee loss. The results emphasize the importance of maximizing financial incentives however you can. 

As an independent home service provider, raising base or hourly pay isn’t always an option. However, adding a long-term equity or profit-sharing program to your compensation package for key employees can keep you competitive.

• Profit sharing. One of the most popular financial rewards available to even the smallest businesses is a profit-sharing program. As your business grows, giving your employees a financial incentive based directly on profit can be a great motivator. Frequent payouts of profit sharing — perhaps quarterly or annually — can directly motivate your team to increase revenue and decrease expenses. 

Offering this type of reward is easy to explain to your employees and to implement quickly. If you need an immediate boost to help keep your service team intact and pay raises are not an option, profit sharing is the place to start.

• Equity program. If you’re more interested in long-term incentives for senior staff and other experienced team members, a better option could be offering an equity program instead of or in addition to profit sharing. 

Offering equity without offering ownership

Privately owned businesses often don’t have true shareholders or publicly traded stock, but that doesn’t mean you can’t give your team a sense of ownership of the business and its future. Phantom stock is a type of deferred compensation plan that offers employees equity in the company. It provides an excellent opportunity to retain your best workers for the long haul. 

Learning about the different types of plans offered by publicly traded and privately owned organizations can help you commit to adding an equity plan to your compensation package.

• Stock ownership plans. Larger companies can establish an employee stock ownership plan (ESOP) through which their employees can become actual shareholders in the company where they work. Some benefits of an ESOP include tax advantages for both the employee and company and no upfront cost to employees, who can earn more shares over time, but this option is very costly and complicated to set up and administer.

• Employee stock option (ESO) plans. Other organizations establish a plan where employees have the right to purchase company stock at a certain time and for a predetermined price. ESOs are offered to employees as an incentive to grow the company. Buying stock at a discount can allow an employee to sell at a later date for a big payout, but only if their company expands on its success.

• Phantom stock plan. As an alternative to ESOP or ESO, a phantom stock plan offers similar benefits with a feeling of ownership and responsibility for the company’s success, but your employee would have no true ownership claim. This key difference allows privately held business to offer financial incentives that are similar to larger corporations. 

Employees would see no payout from their phantom stock unless a triggering event happens, while they are still employed by your business. The longer your valued team member remains with the company, the better their payout will be.

So, true ownership is really the key difference between traditional equity plans and a phantom stock program. The former makes an employee an immediate stakeholder in the company, while phantom stock offers employees equity in the company’s future value. For an LLC or other private business, a phantom stock program allows an improved ability to compete with some of the stock-based compensation packages offered by big business to lure the best talent.

Many home service businesses don’t offer profit sharing or a phantom stock program alone. Some see greater success offering both as a way to compete and to keep their team intact. This approach grants more frequent rewards through profit sharing while at the same time giving key members more skin in the game with shared equity. The combination of these two programs can provide a powerful package to encourage loyalty and long-time employment. 

The advantages to your company of retaining experience and wisdom on your teams will more than make up for the expense of sharing profits and equity. 

Not all about the Benjamins 

While financial compensation remains a big factor in workers’ decisions about sticking with a job or exploring other options, the landscape has shifted to include other incentives to sweeten the pot. Showing that you value all members of your team in more qualitative ways helps with retention, too. There are some key things employees are looking for in 2025, beyond money.

• Career advancement opportunities. Even a team’s most junior members are planning for their future. If they can see a clear commitment from your organization to their long-term success, they are more likely to stick around. Offering a personalized plan or a mentorship program to help in career development makes your team members feel valued and can motivate them to stay and grow in your company. 

• Positive workplace culture. Employees, in particular the younger generations, place increasing emphasis on workplace culture. Workers expect to feel heard by employers and respected by co-workers. This type of environment nurtures productivity and loyalty among team members. 

Some easy ways to shift your culture is to make open communication a priority, recognize a job well done and make everyone feel included. Also, finding a way to recognize your team beyond their paychecks builds and promotes trust among the group, and between employees and the company.

• Company values and working with purpose. Committing to and communicating about a set of core values for your organization makes for a happier team. Providing a straightforward way for employees to get involved with purposeful work cements a positive attitude. When employees align with these values and see opportunities to promote them, loyalty and trust grow. 

Extending your company’s values to include community involvement makes team members proud to say they work for you. Studies show that employees who feel more connected to the values and priorities of their employers will stay more committed to their job.

In 2025 and beyond, providing a combination of good financial compensation options and valued softer benefits will help you build a strong, stable team. With more stability comes less stress and greater success because you need not worry as much about your team’s future. 

Having a team who is invested in and ready to support your company’s ongoing success allows you to make growing the business the top priority, which benefits everyone.