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The skilled labor shortage in the construction industry continues to affect many companies’ ability to meet their performance and contractual obligations.

A Narrowing Labor Pipeline 

According to the Bureau of Labor Statistics, through the first quarter of 2018, employers have been looking to fill an average of nearly 225,000 construction jobs each month. The narrow talent pipeline has been particularly challenging for contractors during the summer months, the busiest season of the year for projects.

A survey jointly conducted in the second quarter of this year by USG Corp. and the U.S. Chamber of Commerce shows nine out of 10 contractors report a skilled labor shortage, particularly among concrete, electrical and drywall workers. Concern over the availability of steel erection tradespeople has grown since the first quarter of 2018, the report states.

Tackling the Problem 

The labor shortage is creating a host of issues, including financial losses and liability exposures, for contractors. Experienced risk consultants are working on a broad range of solutions to help construction companies mitigate some of the impact. The solutions include targeted claims review, contract review, proper implementation of loss control/safety measures and real-time analysis to help contractors better understand the financial impact of employee behavior.

Risk experts are also helping companies identify areas where costs can be reduced to allow payment of higher wages. Comprehensive workers’ compensation programs are being designed to address injuries that may result from understaffing.

Consider this case; a large mechanical contractor recently partnered with a risk adviser to conduct a review of its large claims and risk control measures. The review revealed that the company’s increasing workers’ compensation costs were driven by frequent workplace injuries due to inexperienced workers.

This escalating issue was having an impact on the company’s profits because the poor claims experience meant it couldn’t qualify for certain new projects. Following a detailed analysis of claim results, the company was able to identify claim trends and isolate the major causes of loss. Partnering with their risk adviser, they designed and implemented a targeted safety program for their employees. Subsequently, the detailed process reduced the company’s annual claims by more than $450,000 in the first year.

Tips for Minimizing Labor-Related Challenges

Despite the growing optimism and steady revenue growth within the U.S. construction industry, many contractors fear the labor shortage crisis will continue to worsen in the next six months, according to the USG/US Chamber of Commerce report.

As the pace of new projects picks up, it is more important than ever for contractors to pay close attention to contracts and insurance programs and seek expert risk management advice to ensure important details are not overlooked.

Five important tips to help construction companies minimize labor-related challenges are:

  1. Prepare detailed pre-employment as well as post-offer screenings with the goal of assessing candidates’ strengths and weaknesses.
  2. Provide in-house safety training programs to employees, especially new hires. Partner with a risk adviser or insurance carrier(s) to develop a training schedule that meets company needs. A number of construction industry groups offer training courses that companies can participate in at little to no cost.
  3. Take a serious position and ownership of the company’s claims trend analysis and identify problem areas sooner rather than later. Once identified, implementing corrective procedures will be critical for future success.
  4. Develop a culture of safety among all individuals within the company from the CEO to the administrative assistant. Safety is not just a craft labor or field issue.
  5. Require that all subcontractor agreements include indemnification or hold harmless language and “additional insured” coverage so the company is protected in the event of a loss. Understand the company’s risk tolerance. Do not engage in large, long-term projects if the organization’s current staffing capacity can only accommodate smaller jobs with shorter schedules.
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