Insurance Essentials: Don’t cut corners hiring subcontractors because of labour shortages

Journal of Commerce | Jon Hogg | August 10, 2022

The current labour shortage issue compounds an already tough economic environment for builders and contractors. But hiring uninsured subcontractors isn’t the way to go, as one accident or mishap involving an uninsured worker can devastate your finances and business.

Across Canada, construction firms and general contracting businesses are struggling to find the electricians, carpenters, plumbers and other workers they need to get up to full capacity and complete their projects.

Triggered in part by the pandemic, the labour shortage seems likely to continue. Data from Statistics Canada in late 2021 shows construction trades and labourers are among the top 10 occupations with the largest two-year spike in job vacancies (up by 158.4 per cent vs. 2020) and hourly wage increases (up by 14.5 per cent vs. 2020). That’s a double-whammy of trouble for general contracting businesses that need qualified help.

Meanwhile, a recently released report states the North American construction industry is facing a significant workforce shortage that hinders its ability to maximize the amount of construction activity that could be taking place. 

The labour shortage issue compounds an already tough environment for builders and contractors who are grappling with inflation, higher fuel costs and rising building material expenses in a shaky economy.

Furthermore, it may force contractors to drop some of their requirements and hire less experienced help or subcontractors who are not insured. The construction industry is already fraught with risk. Hiring uninsured subcontractors ups a general contractor’s risk significantly, as one accident or mishap involving an uninsured worker can devastate your finances and reputation.

The risks of hiring uninsured subcontractors

Whenever possible, hire an experienced subcontractor who’s insured, as they’re an extension of your business and reputation. That sounds easier than it is of late, so hiring less experienced subcontractors may be the order of the day but avoid the temptation of hiring anyone who doesn’t have insurance because you’re in a crunch and need to get a project wrapped up.

If you hire someone who’s not insured, it’s on you if an incident occurs and damages and injuries result. For example, suppose an uninsured subcontractor accidentally ignites a fire that significantly damages a building you’re constructing or renovating. In that case, you may think it falls to your policy to cover the cost of those damages. But it’s not that simple.

Your insurance company may reject your claim because you had uninsured subcontractors working at your jobsite, leaving you to pay for the damages. Moreover, the incident could prompt your insurance company to cancel your policy. Making matters worse, if an insurer cancels your policy, getting insurance in the future will be more challenging since other carriers will be less inclined to cover you because of that cancellation.

Six ways to find the subcontractors and labourers you need

There isn’t one strategy or thing you can do to resolve the labour shortage woes you may be tangling with currently. But here are six ways that might give you an edge in a highly competitive and challenging hiring environment:

1. Leverage your brand

When we think about a general contracting business’s brand, we usually think about marketing to potential customers. But your brand is also vital to attracting new employees — highlight why a subcontractor or labourer should work with your team versus another. For instance, show off your firm’s commitment to safety, employee wellbeing and flexible work arrangements, such as a compressed workweek (which is becoming far more common).

2. Utilize technology

At some point in the not-too-distant future, there’ll be a reckoning in the construction industry as scores of skilled tradespeople retire. That means appealing to Generation Z and Millennials to consider a career in construction and contracting or grabbing the attention of younger workers who are already trying to break into the industry.

According to research firm PwC, Gen Z and Millennials currently make up approximately 38 per cent of the global workforce, and this percentage will rise to about 58 per cent by 2030. These generations are highly computer-literate, meaning you need to up your digital recruitment game.

Ensure your company’s website has a compelling careers page detailing the benefits of working for you. Get current subcontractors and employees to provide video testimonials and let them tell job candidates why working with you is a cut above.

Use digital job boards (they’re not obsolete yet), engage with postsecondary trade schools to provide students with entry-level jobs and use social media channels to promote your available positions.

3. Support provincial apprenticeship programs

Support provincial apprenticeship programs by sponsoring students who are enrolled in them. The federal government provides a list of apprenticeship programs in every province and territory where you can learn more about each program and how to get involved.

4. Partner with recruiters

Partnering with a recruiting firm that specializes in finding qualified, pre-screened candidates specific to the construction and contracting industry does two things. Firstly, it targets applicants with the skill sets you need. Secondly, you can get valuable hiring data on your industry in your province or region.

5. Transparent interviewing

Have a plan for the interviews you hold with potential hires. Give them an overview of your business, existing team and projects, and be clear and concise about who it is you need and how you can help them advance their careers (remember, all job interviews are two-way streets).

Ask meaningful questions that require applicants to reply with more than “yes” or “no.” Also, keep your candidates updated as to what the next steps are. Be honest and frequently communicate with them. Taking the guesswork out of the process and being expeditious when hiring helps keep applicants engaged, and even if you don’t hire them, it won’t leave them with a negative impression of your business.

6. Offer continuous training

Think about compensation for a moment. Considering rising wage demands in a competitive market where employee loyalty is not what it used to be (or no longer exists), you need to get creative if you can’t afford to pay workers more than your competitors.
So, offer something others are not, like continuously training your employees and subcontractors. Ensure new, less experienced hires are partnered with a veteran who can show them the ropes and serve as a mentor (also worthwhile since professional experience is a factor when purchasing construction liability insurance).

If you don’t have the resources to implement a formal training program, offer labourers the opportunity to take certified training courses that you subsidize. Offering training isn’t just a way to woo applicants. It’s a great way to retain your existing workers for as long as possible.

Jon Hogg is a licensed broker and team lead, digital solutions, contractors at Zensurance, Canada’s leading source for small business insurance. Get a free quote for your insurance needs by visiting