Labor shortage increases risks for employers

With employers taking on more risk in the form of unskilled, untrained or improperly trained employees or operating with staffing shortages, the opportunities for more frequent claims multiply as well. Claims teams need to be aware of this elevated risk exposure and prepared to identify the claims that result.

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Problems for skilled trades

After the housing market crashed in 2008, many workers left the construction industry to pursue new trades, join the booming energy sector or find work in another country. This market shift has been seen in the past, but this time the workers aren't coming back, as Greg Brooks, founder of the Building Supply Channel Inc., described in a recent blog post.

Many employees are choosing to go to college rather than pursue a skilled trade, and vocational classes are no longer part of school curriculums. The numbers of immigrant workers are also declining with new national attention focused on immigration law, Brooks wrote. All of this, he said, is leaving the industry with a "graying problem" — older employees or no employees.

These days, a high percentage of students are graduating high school and going off to college. While this is a positive trend, some of these students may be better suited for a trade. In fact, today, it's fair to say there is a certain stigma tied to not going to college. Parents and students see the college path as the only way to succeed in life when, in fact, jobs in the trades can provide a nice income. Woodworkers and cabinetmakers, for example, are highly trained and skilled and as a result are compensated well.

Many young people joining the workforce (and their parents) may not understand that today's vo-tech schools have changed dramatically — for the better. No longer seen as last-resort options for high school graduates who couldn't or wouldn't go to college, they now offer a variety of high-level coursework that includes welding, cooking, computer training and more.

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Employers hiring unskilled or untrained workers are inadvertently increasing their risk exposure. (Photo: Shutterstock)

Where does this lead?

Without the workforce they'd normally have available to them, employers are hiring individuals they wouldn't have considered under more favorable market conditions — individuals who might lack the skills necessary for the position. Where these candidates may have been discounted in recent years, employers are now saying, "That's okay, we'll just train them."

Whether it is a candidate who lacks knowledge, training, experience, hours behind the wheel or, in some cases, has a felony record or can't pass a drug test, employers are considering less than ideal candidates. What's key here is that there are certain candidate qualities on which they should never compromise.

Sadly, some employers are becoming so desperate to hire that they've considered discontinuing their drug testing programs because they can't find a good candidate who can pass. This is a critical mistake.

Consider this possible scenario. A company stops drug-testing employees because they have had difficulty finding candidates or employees who can pass it. Their employee, who hasn't been drug-tested but has an illegal substance in his system, gets behind the wheel of a company vehicle and crashes it into a school bus. Discontinuing drug testing is a dangerous game for any employer that will in many cases need to file a costly claim that could endanger the entire business.

Employers cannot prioritize filling a position over hiring a candidate who has been properly screened. They need to consider the consequences of settling on a candidate or discontinuing certain job requirements like drug tests. On the other hand, within the industry, employers have been hiring former prisoners and in some cases these employees are working out very well. These are individuals who have paid their dues for crimes they've committed and are learning a trade.

Those employers ready to hire an untrained or unskilled candidate with the thought of offering training are also inadvertently increasing their risk exposure. If the employer is doing the training himself, he may find that difficult as he continues to move forward with hiring additional candidates while assisting with operations — especially if the company is short-staffed. This scenario often puts green employees to work without the adequate training in the hopes that productivity doesn't suffer.

Additionally, without adequate training, in many cases these employees will produce an imperfect product. For those in customer service, insufficient training can lead to weakness in customer care. Lumberyard employees without solid training could be stacking materials in an unsafe manner or storing flammable materials improperly.

Other employees may be insufficiently trained to operate a forklift or load and unload a vehicle. Non-English speaking employees who are not properly trained on the work site, can also increase risk exposure if they are not taught to understand and observe caution signage among other things.

One of the most significant risks of untrained employees is driving inexperience. Just  five years ago, a lumber truck may have left the lumberyard once a day for four days a week. In today's robust economy, trucks are coming and going from that same yard two to three times every day. At the same time, more drivers are on the road, increasing risk exposure for everyone.

Without proper training, these drivers (and other contributing factors) can cause more accidents. Those accidents may spell claims related to driver and pedestrian injuries and fatalities, not to mention marred or lost inventory or other related property damage.

Aside from hiring good drivers in the first place, driver safety can be improved by incorporating new technology into commercial vehicles, such as telematics that can monitor driver performance, track their location and more. Frequent checks of motor vehicle records is also critical.

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The solution

During this tight labor market, hiring managers need to understand and be reminded of the threat a poor hire can be to a thriving business. Claims personnel can assist in helping to raise awareness. When onsite, they can keep an eye out for compromised hiring practices, safety violations and more, and then bring those to the business owner's attention.

Employers also need to make sure they are communicating clearly and often to their employees — particularly if they are new to the business. Employers should go over safety rules and regulations repeatedly and share those messages clearly to any non-English speaking employees.

Insurers and their claims teams can point their policyholders to loss control resources. They can provide training videos, safety signage, safety checklists and more to help keep greener, and more seasoned employees, on track.

In a recent blog post for the lumber industry Brooks said, "We are in an environment where jobs are plentiful, and workers are scarce, and in an industry that has long been lampooned as a career of last resort. However, you do it," he said, "finding the people you need will take more creativity than it has in the past."

Just don't be so creative that you sacrifice quality control in hiring. It is critical in mitigating risk and in keeping a business viable and profitable for years to come.

John Smith (jsmith@plmins.com) is president and chief executive officer at Pennsylvania Lumbermens Mutual Insurance Company (PLM). With more than 40 years in the insurance industry, he has been a part of PLM since 1998.