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The labor shortage is one of the biggest challenges contractors are facing today. According to the 2020 Construction Outlook Survey, more than eight in 10 construction firms report difficulty filling positions and more than half believe the problem will continue into next year. Failing to adequately staff a jobsite leads to numerous challenges, including turning down work, postponing projects, overworked employees, quality control issues and increased costs for the company.

Often, construction businesses look to pull in seasonal or temporary labor as a stopgap to keep projects progressing amid industry-wide labor challenges. Demand for seasonal and temporary employees in the construction industry has only increased. While tapping this workforce can seem like a perfect solution to help construction businesses meet growing demands, this approach creates unique challenges in ensuring jobsites are adequately insured. When hiring seasonal or temporary employees, construction businesses will benefit from considering the following.

Workers’ compensation doesn’t only mean employee compensation

Depending on state laws and regulations regarding workers’ compensation, contractors may be responsible for covering anyone working on the jobsite, regardless of whether they are employees or independent subcontractors. Contractors should ensure they are compliant with local laws and regulations and that they have the proper insurance to cover potential on-the-job injuries for everyone on the jobsite.

Invest in employee training to prevent losses

As this tight labor market continues, construction businesses may be tempted to hire unskilled temporary workers to help meet demand. Untrained employees present a higher risk to contractors from a general liability and workers’ compensation perspective. They are also more likely to negatively impact a business’ reputation and contribute to time lost.

Insurance exists to protect businesses when things go wrong, but prevention should be the goal. Training is an important way to reduce risk. It helps ensure that employees have the proper attitude, know how to use the equipment provided and understand they have the support of leaders to be safe. Pairing new employees to work alongside seasoned skilled workers can help demonstrate proper safety and hands-on skills.

Finding workers with some experience to build on can be another way to reduce risk. Compensating employees for referrals can be a great way to find applicants. Employees may know other tradespeople from past jobs or someone with a good work ethic who wants to start a career in construction. Offering creative incentives to employees may result in qualified candidates who require less training to get up to speed.

Know the difference between a subcontractor and a temporary employee

Engaging with a seasonal or temporary employee is different from engaging with a subcontractor when it comes to insurance policies and documentation needs. In fact, some construction businesses believe hiring subcontractors can save on premium costs. The thought process is that savings occur because subcontractors are not declared as workers under their insurance policies.

The reality is that without the proper documentation, subcontractors can leave construction businesses open to additional risk should the subcontractor cause damage or injury at a jobsite because bodily injury to third parties is an exposure, too. The best practice is to have written subcontractor agreements in place specifying the terms of the job and the types of insurance coverage and additional insured/waiver of subrogation endorsements the subcontractor must have. The written documentation must also include hold-harmless agreements in favor of the contractor.

Construction businesses should make sure all subcontractor policies are up to date and have the correct coverage for the specific job. They should also ensure their subcontractors’ insurance policies cover the total duration of the job and will not expire before the project is complete, leaving the contractor on the hook for any damages or injuries.

The bottom line is that working with seasonal and temporary employees, as well as subcontractors, adds complexity to jobsite management. Proactively taking steps to ensure the appropriate insurance coverage and documentation are in place, as well as implementing safety programs to mitigate risks, is necessary to run an effective construction business. Working with a trusted insurance partner with contractor-specific experience can help give construction businesses peace of mind that they have the proper coverage in place.