A storm is brewing for the construction industry as a skilled-labor shortage lengthens job times and contributes to higher rates of injury. But there are risk tools that can help contractors get ahead.
A lack of labor in any industry has many implications, from decreases in productivity to increases in workers’ compensation claims. For the construction industry, a labor shortage can contribute to delays in project completion, issues with quality control, increased builder’s risk costs and more.
“Labor is a significant issue in today’s industry,” said David DeSilva, Head of Construction for The Hartford’s Middle & Large Commercial. “Skilled labor shortages hinder the ability of construction companies to uphold the timeliness or contractual requirements with the owner or higher-tiered contractors.”
An Associated Builders and Contractors analysis revealed the construction industry will need more than half a million workers above its current pace of hiring in order to meet demand. That would mean, the report estimated, an additional 650,000 workers.
“When you think about shortages and some of the issues they can cause, there are job delays, reengineering of construction sequences, a shift in the business model. They may be going from self-performed to more subcontracted work,” DeSilva said.
“As an example, if a trade doesn’t have enough workers and laborers to complete the job, they may subcontract part of that or all of that work out to someone else.” And even this practice has its own risk implications to contend with.
It’s no doubt, either, that the pandemic has increased the need for laborers. According to DeSilva, however, this was a growing concern pre-pandemic as well: “More workers were leaving the field than entering it, and firms were beginning to address the issues pre-pandemic.”
Now with the Great Resignation in the mix, an aging workforce and low interest from younger professionals, the construction industry needs to act in order to attract and retain skilled talent and mitigate against risk.
Here’s a deeper dive into what’s going on in construction, the insurance implications of a labor shortage and how construction professionals can start to course-correct and bring on the skilled talent they need to thrive.
Understanding Your Labor Shortage Exposures
David DeSilva, Head of Construction for The Hartford’s Middle & Large Commercial
As noted, a lack of labor can lead to several risk exposures. For the industry, specifically, there are a few key things that construction risk professionals should know in order to get a grip on mitigating risk.
A key component of construction is job bidding. Contractors meet with potential clients to give them a proposal for completing their project. Subcontractors use this bidding process to showcase their skills to the contractors to be considered for the job.
But with less labor, contractors aren’t able to take on as many jobs at the same time.
“You’re seeing firms be more selective in their bids and more selective in the work they’re taking on,” DeSilva noted. This means bidding has become more competitive in nature, thus driving up project costs for higher-tiered contractors or the owner, placing a strain financially on the project.
Less workers can also lead to workmanship issues.
“When you think about less experienced workers coming onto site and completing these jobs, there is a potential for downstream implications on the quality of work,” said DeSilva. Added to that, he said, newer workers could lead to timeliness issues as they take their time to become more familiar with the requirements of the job.
Also, less labor impacts timeliness in that contractors must adhere to safe shifts for workers, and fewer employees means less shifts, which could lead to longer project completion times. Some construction jobs last months — and even years — depending on the type of program and project it is.
Insurance Strains to Note
A skilled-labor shortage has the potential to impact all lines of insurance, no matter the size or scale of the project. DeSilva called attention to a handful that should be at the top of the consideration list for construction risk professionals to review.
Number one is workers’ compensation.
“It’s no secret that older workers take longer to recover from injury, which clearly impacts claim dollars and claim payouts,” he said. “Data has shown that less experienced workers, at the opposite end of the spectrum, tend to get injured more often, and with less workers in the field, there are higher demands on the workers that are left.”
It’s the perfect storm for potential mistakes or oversights, which can lead to more injuries.
It also has workmanship implications, as fewer workers under more pressure could possibly miss key performance and quality checks. That can lead to builder’s risk, yet another insurance line that feels the strain of the lack of labor in construction.
“Then there’s the overall economic inflation, driving loss dollars, medical costs, material costs, safety equipment — everything is increasing at record highs,” DeSilva added.
He said depending on the insurance program structure, these loss dollars could be directly paid by the contractor and indirectly through the insurer.
Safety as a Way to Bring in Skilled Labor
Safety and training have to be at the forefront of recruitment and retention of workers.
Not only will a strong safety training program bring down the number of injuries and help prevent risk, but it will also create a culture of safety among laborers. That in turn shows these workers their employer cares about their wellbeing and gives them a sense of security in their job.
“Risk managers and safety directors are really beefing up their training and safety programs in an effort to mitigate loss and retain the talent that they already have,” said DeSilva. A key way they’re doing this is by looking to technology for safety solutions.
“When you think about the implementation of onsite imagery, or water sensors, wearables on workers, or telematics in vehicles,” said DeSilva, “these technological devices are going to help drive down loss costs and ultimately benefit both the firms and the workers.”
Partnering with a Team Skilled in Construction’s Demands
Once construction firms understand the labor shortage and its impacts, it can be hard to determine what to do next. Implementing a quality safety program is a good start, but knowing exactly what that entails will require an insurance partner that can guide contractors and construction risk professionals towards the best solutions for them.
At The Hartford, the risk engineering consultants are trained to know what to do to help.
“Our risk engineering team consultants have a wealth of knowledge and experience in the industry, as many of them have come from the contractor side,” said DeSilva.
“They have the training from the contractor seat and have the ability to review safety programs and identify hazards and offer recommendations for improvement. When you’re working through a labor shortage every day, it’s easy to overlook things. A new perspective from people who understand your industry goes a long way.”
The Hartford also has an Accredited Industrial Hygiene Lab dedicated to giving firms the opportunity to monitor and improve occupational health, further reducing workers’ comp claims and bolstering safety efforts to keep workers safe.
When a claim does roll in, claims professionals at The Hartford are ready to act: “We have medical clinicians who help manage claims, and data experts that are solely dedicated to claims. Our claims team is able to identify trends, highlight exposures and save on medical costs,” DeSilva said.
“The labor shortage is likely going to continue to be a challenge for the foreseeable future. How contractors handle the shortage will be a major factor in their performance and the reputation of their firm,” he added.
“The industry is continually evolving, and organizations that frequently update their safety and training programs are going to minimize and mitigate their exposure to loss.”
To learn more, visit: https://www.thehartford.com/business-insurance/construction.
The information provided in these materials is intended to be general and advisory in nature. It shall not be considered legal advice. The Hartford does not warrant that the implementation of any view or recommendation contained herein will: (i) result in the elimination of any unsafe conditions at your business locations or with respect to your business operations; or (ii) be an appropriate legal or business practice. The Hartford assumes no responsibility for the control or correction of hazards or legal compliance with respect to your business practices, and the views and recommendations contained herein shall not constitute our undertaking, on your behalf or for the benefit of others, to determine or warrant that your business premises, locations or operations are safe or healthful, or are in compliance with any law, rule or regulation. Readers seeking to resolve specific safety, legal or business issues or concerns related to the information provided in these materials should consult their safety consultant, attorney or business advisors. All information and representations contained herein are as of August 2022.
The Hartford Financial Services Group, Inc., (NYSE: HIG) operates through its subsidiaries, including the underwriting company Hartford Fire insurance Company, under the brand name, The Hartford®, and is headquartered in Hartford, CT. For additional details, please read The Hartford’s legal notice at www.thehartford.com.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with The Hartford. The editorial staff of Risk & Insurance had no role in its preparation.
The Hartford is a leader in property and casualty insurance, group benefits and mutual funds. With more than 200 years of expertise, The Hartford is widely recognized for its service excellence, sustainability practices, trust and integrity.
FAQs
What are the risks facing the hospitality industry today? ›
The hospitality sector is well-known for demanding long, hard hours of its workers. At times its possible that staff may be become overwhelmed by the workload, stress or the abuse they face in their role. Supporting staff with their mental health as well as their physic health is critically important.
What are the 7 components of the tourism and hospitality industry? ›- Accommodations and.
- Lodging.
- Recreation and.
- Entertainment.
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You must manage the health and safety risks in your workplace. To do this you need to think about what, in your business, might cause harm to people and decide whether you are doing enough to prevent that harm. This is known as a risk assessment.
How can we reduce the risk factors in the hospitality industry? ›- Developing and implementing safe systems of work;
- Making sure workers follow these safe ways of working and use appropriate personal protective equipment;
- Identity theft leading to credit card fraud. ...
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The risk of injury on premises is very high in the hospitality industry. Due to the high number of guests that go through your doors each day, it is essential to minimize this exposure by taking certain precautions.
What is hospitality industry in your own words? ›The goal of the hospitality industry is to provide customers with an enjoyable experience. Whether that enjoyment comes from eating a good meal, relaxing in a luxurious spa, or getting a good night's rest away from home, making sure each individual guest is taken care of is paramount.
What are the 5 most important industries in tourism? ›- Accommodation. The accommodation industry includes hotels, motels, resorts, bed and breakfasts, and campgrounds. ...
- Food and Beverage Services. ...
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take reasonable care not to adversely impact the health and safety of co-workers and customers. cooperate with your employer to maintain health and safety in your workplace. report any incidents or hazards to your supervisor. wear and maintain in good order any personal protective equipment connected with your work.
What is risk management in the hotel industry? ›Hotel risk management is the process of identifying, assessing and controlling risks. This includes operational risks, safety, financial and technological risks.
How does risk management help in managing hotels during risk? ›
Hotel risk management entails identifying, evaluating, prioritizing, and controlling risks to enterprises in the hotel industry. Hotel management faces several types of risk: Operational risk to day-to day operations. Project risk, encountered when building or expanding a hotel.
What is the importance of risk management in tourism industry? ›Tourism risk management provides a generic framework for the identification, analysis, assessment, treatment and monitoring of risk. It is the basis of both crisis management for destinations and businesses/organisations and of disaster management for communities.
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What are the 5 common risk in hospitality industry? ›You will not be surprised to know that slips, trips and falls are among the most common causes of injury in this industry, particularly among chefs and waiting staff. Food spillages, wet floors and trip hazards all contribute to this. Blocked walkways, and waiting staff rushing to serve tables can all act as hazards.
What are the five challenges within the hospitality industry? ›...
In this article, we will share with you five potential obstacles that we expect to impact the Hotel Industry in 2018.
- Competition. ...
- Customer expectations. ...
- Staff Retention and Recruitment. ...
- Sustainability. ...
- Technology.
- You should surround yourself with the proper individuals. ...
- Educate yourself in whatever it is you are doing. ...
- Only listen to the people who have what you want. ...
- Understand you can't have the good without the bad. ...
- Remember to enjoy the little things in life.
Risk management helps employees to identify, analyze, assess, and hopefully, avoid or mitigate risks coming from a variety of sources, such as financial upset, legal ramifications, accidents, natural disasters, data or cyber security breaches, and many more.
Why should people manage risk? ›Risk management enables project success
Employees can reduce the likelihood and severity of potential project risks by identifying them early. If something does go wrong, there will already be an action plan in place to handle it. This helps employees prepare for the unexpected and maximize project outcomes.
The hospitality industry is vast and can be broken down into separate sectors. The top four sectors consist of; 'Food and Beverage', 'Accommodation', 'Travel and Tourism' and 'Entertainment and Recreation'.
What are the three types of hospitality? ›The hospitality industry is a broad group of businesses that provide services to customers. The industry can be broken down into three basic areas: accommodations, food and beverage, and travel and tourism.
Why is hospitality so important? ›
Hospitality matters because it deepens existing relationships and creates the space for new ones to flourish. Hospitality matters because it feeds the most basic human need that we all have, to feel loved and accepted. That is not something to overlook.
What is hospitality Short answer? ›Hospitality means extending a welcome to travelers or offering a home away from home, and the word is derived from the Latin word “hospes” meaning visitor or stranger.
What is the most important thing in the hospitality industry? ›Service is the key in the Hospitality Industry
Good service is the key to success in any hospitality business. Many customers rely on internet reviews to decide whether to visit a business – and just a couple of dissatisfied customers sharing their experiences online can quickly put you out of business.
A restaurant is an example of a hospitality business. Restaurants generally rely on a high level of customer satisfaction to stay afloat. If patrons are displeased with a restaurant's service, they may stop dining there and, instead, choose a different restaurant.
What are the 8 tourism industry sectors give an example for each? ›| 8 Tourism Sectors | industries |
|---|---|
| Food and beverage | FOOD AND BEVERAGE SERVICE |
| Attractions | RECREATION, AND ENTERTAINMENT |
| Adventure tourism, recreation and ecotourism | TRAVEL SERVICESRECREATION, AND ENTERTAINMENT |
| Accommodation | ACCOMODATIONS |
Hospitality Services means any business operating within the service industry that includes lodging, hotel, event planning, and transportation.
What are the 8 tourism sectors? ›- Accommodation.
- Adventure Tourism and Recreation.
- Attractions.
- Events and Conferences.
- Food and Beverage.
- Tourism Services.
- Transportation.
- Travel Trade.
The major problems plaguing the hotel industry in India is the lack of skilled professionals and retaining the same. This is because the wages are not at par with international industry standards and more and more employees prefer to shift to aviation or retail management when they are not satisfied with their job.
What is the biggest environmental issue facing the hospitality industry as to this moment? ›Pollution -- This is an issue anytime there are high outputs of oil, natural gas, gasoline, or coal. Whether these are used for energy or they are used for transportation, the amount of pollution caused by organizations in hospitality can be a big problem.
Why make a healthy and safe workplace important? ›A workplace health and safety management system can minimise the risk of injury and illness from workplace operations. It is one of the most effective ways to make sure health and safety is embedded across your organisation and is a part of everything you do.
How do you ensure guest safety and security? ›
- Assess Your Security Risks. ...
- Keep Your Security Measures Visible. ...
- Create Security Checkpoints. ...
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- Consider Cyber Threats as Well. ...
- Develop an Emergency Plan. ...
- Screen Your Staff.
A risk assessment is a thorough look at your workplace to identify those things, situations, processes, etc. that may cause harm, particularly to people. After identification is made, you analyze and evaluate how likely and severe the risk is.
What are the major risks which can affect tourism? ›- Natural disasters – these include earthquakes, volcanic eruptions, tsunamis and floods, hurricanes and other extreme weather disasters. ...
- Political issues – political unrest is common in developing countries, and they often have an impact on tourism.
- Call Risk.
- Convertible Risk.
- Default Risk.
- Interest-Rate Risk.
- Management Risk.
- Marketability (Liquidity) Risk.
- Political Risk.
- Purchasing-Power Risk.
Risk Analysis is a proven way of identifying and assessing factors that could negatively affect the success of a business or project. It allows you to examine the risks that you or your organization face, and helps you decide whether or not to move forward with a decision.
What are the risks facing the hospitality industry today give some solutions to these? ›...
Slips, trips and falls
- Use effective signage and lighting.
- Clean up spills straight away.
- Ensure emphasis is placed on staff only as well public facing areas.
- Data privacy. Cybersecurity has been a big concern for a number of sectors, ranging from power and utility companies to government organizations. ...
- Guest behavior. Guests represent the fuel for any hospitality company. ...
- Staff. Staff is another critical risk. ...
- Branding.
The 4 essential steps of the Risk Management Process are:
Identify the risk. Assess the risk. Treat the risk. Monitor and Report on the risk.
- Developing and implementing safe systems of work;
- Making sure workers follow these safe ways of working and use appropriate personal protective equipment;
You must manage the health and safety risks in your workplace. To do this you need to think about what, in your business, might cause harm to people and decide whether you are doing enough to prevent that harm. This is known as a risk assessment.
How will risk management help you in your daily activities? ›
Risk is a unique tool to help guide us in life when making any and all decisions. Examples of risk could be how you manage your health (or not), how you strategize your performance at work and meet your goals, who you allow into your life, and the effects that have on your social life and network.
Why is workplace safety important in hospitality industry? ›It is important to note that every activity happening across industries or otherwise carry hazard and if proper precautions are not taken, there is always a possibility of an untoward incident. So, effective OHS management is very important in order to prevent injuries.
Why safety and security is important in hospitality industry? ›The application of these security measures will not only protect the customer during his stay in the hotel, but also protect employees from baseless allegations. And this, along with other aspects, will increase the reputation of the hotel and, consequently, increase its occupancy and make a positive guest experience.
What is risk and hazard? ›What is a hazard and what is a risk? A hazard is anything that could cause harm. And, risk, is a combination of two things – the chance that the hazard will cause harm and how serious that harm could be.
What is the biggest environmental issue facing the hospitality industry as to this moment? ›Pollution -- This is an issue anytime there are high outputs of oil, natural gas, gasoline, or coal. Whether these are used for energy or they are used for transportation, the amount of pollution caused by organizations in hospitality can be a big problem.
What are the main challenges of the hospitality industry and food sectors? ›The main challenges for the hospitality industry are the lack of predictability and the magnitude of such events – and how fast the industry can react and adapt. Hybrid operations might be one of the hospitality industry's possible responses to increased risks.
What are the factors that may risk the operations of the hotel? ›- Data privacy. Cybersecurity has been a big concern for a number of sectors, ranging from power and utility companies to government organizations. ...
- Guest behavior. Guests represent the fuel for any hospitality company. ...
- Staff. Staff is another critical risk. ...
- Branding.
Thus, a tourism destination loses its image which is very difficult to acquire and easy to get lost. natural disasters and epidemics). The conflicts that affect tourism development may be various. These are primarily: natural disasters and catastrophes, terrorism, wars, economic crises, epidemics.
What are the issues being faced by hospitality and tourism industry? ›Labor and skills shortage has been identified as one of the challenges that are facing the tourism and hospitality industry. This has mostly been complicated by the emergence of new technologies and trends that need to be satisfied and attended to.
What is the main problem of the tourism and hospitality industry today? ›Skilled labour shortage, staff turnover and Irregular working hours. This is one of the major challenges in the hotel industry. Staff turnover in the hospitality industry is almost double the average across industries. This can be said to the biggest management issue in the hotel industry.
What are the five challenges within the hospitality industry? ›
...
In this article, we will share with you five potential obstacles that we expect to impact the Hotel Industry in 2018.
- Competition. ...
- Customer expectations. ...
- Staff Retention and Recruitment. ...
- Sustainability. ...
- Technology.
Hotel risk management entails identifying, evaluating, prioritizing, and controlling risks to enterprises in the hotel industry. Hotel management faces several types of risk: Operational risk to day-to day operations. Project risk, encountered when building or expanding a hotel.
What are the sources of risk in the tourism and hospitality industry? ›Crises come in many forms, including health threats like the 2020 global coronavirus pandemic, natural disasters such as earthquakes and floods, political unrest and terrorist attacks. Such risks and crises pose significant threats to the tourism industry, destinations and tour operators working in the sector.
How can we solve hotel problems? ›- Act Quickly. When a guest comes to one of your team members with a complaint, don't hesitate. ...
- Show Compassion to Guests. ...
- Say “I'm Sorry” ...
- Avoid Arguments. ...
- Offer Room Upgrades & Free Hotel Perks. ...
- Follow Up with Guests. ...
- Ask Guests to Complete NPS Survey.
Examples of uncertainty-based risks include: damage by fire, flood or other natural disasters. unexpected financial loss due to an economic downturn, or bankruptcy of other businesses that owe you money. loss of important suppliers or customers.
How do you handle risk in your own personal life? ›- You should surround yourself with the proper individuals. ...
- Educate yourself in whatever it is you are doing. ...
- Only listen to the people who have what you want. ...
- Understand you can't have the good without the bad. ...
- Remember to enjoy the little things in life.
Definition. Risk analysis and risk management is a process that allows individual risk events and overall risk to be understood and managed proactively, optimising success by minimising threats and maximising opportunities and outcomes.