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5 Ways You Can Manage Risk When Working with Contractors


If you’ve never thought about the risks involved with hiring contractors to do work around your property, you might want to give the matter some serious thought.

In most cases, you’re probably safe to hire a contractor who doesn’t have liability insurance or workmen’s compensation, but there is always a chance that a contractor can be injured while doing work for you. 

If they don’t have the aforementioned insurance or compensation, this can open up some unpleasant scenarios that could impact you in negative ways.

Potential Risks of Working with Contractors 

As we mentioned earlier, it’s possible that a contractor can be hurt while working on your property, and if that happens, it’s possible that you could be sued.

Some contractors do not have workers’ compensation for themselves or for any other subcontractors working for them. This allows them to work much more cheaply.

Because they don’t pay for workers’ compensation, property insurance, or general liability insurance, they can save a considerable amount of cash and run a cheaper operation.

Whenever you hire a contractor who doesn’t have insurance coverage, you are liable for any of their work mistakes and any injuries that might occur while they’re on your premises.

contractor-working-on-roofIf you have a business that hires contractors to do work for you, there is always the risk of misclassifying workers, which can be a serious issue.

It is important that workers are classified as either independent contractors or as employees. Misclassifying an individual can result in negative consequences for an employer.

There could be back taxes and fines imposed, as well as class-action lawsuits. It’s extremely important to acquaint yourself with all regulations issued by the state, local, and federal government agencies to protect your business and remain in compliance with the law.

Classifying a contractor as either an employee or an independent contractor will dictate much of your relationship with that individual, as well as the kind of guidance or direction that can you supply them with in the conduct of their work.

As a business owner, you don’t want to run afoul of any of the laws associate with the misclassification of workers.

Recommended Read The Difference Between Risk Management and Enterprise Risk Management

Ways You Can Protect Yourself and Mitigate Risks

There are five major ways that you can protect yourself from the risks associated with working with general contractors.

  1. Seek out testimonials and recommendations from previous clients
  2. Require alcohol and drug tests before the project begins
  3. Draft a policy that outlines safety requirements
  4. Provide training to contractors that you may be working with for an extended period
  5. Create a formal contract that outlines the legal agreement between you and them


Seek Out Testimonials and Recommendations

First of all, any contractor that you are considering for some kind of work around your residence or business should be thoroughly vetted.

Completing a thorough background check and evaluating credentials can help ensure that you find a contractor who is reliable and trustworthy.

It’s especially important that you receive favorable recommendations from previous clients because that carries a lot more weight than any documentation or paperwork that might claim a contractor is reliable.

You might think this is a lot of trouble to go to for a small job within your property, but it only takes a few seconds for an injury to occur. If that happens to a contractor who is uninsured, you will probably end up footing the bill.

Require Alcohol and Drug Tests Before Work Commences

If you have a significant project in mind, you should consider asking a candidate contractor to undergo a drug and alcohol test.

This may sound like an extraordinary step to take, but many workplace accidents occur as a result of drug or alcohol abuse on the job.

A full 25% of Americans have admitted to drinking during the workday, and if you happen to employ a contractor who falls into this 25%, it will increase the likelihood of some kind of mistake being made on the job.

On the other hand, if you can count on your contractor coming to work each day with a clear head, chances are most accidents can be avoided.

Draft a Safety Policy

If you are a business person hiring a contractor to do some kind of work, it will be worth your while to draft a safety policy for contractors and ask them to abide by its terms.

While they may be reluctant to adhere to such policies, if you make it a condition of employment, they will probably be much more amenable to following the terms of the policy.

construction-worker-holding-hatThis may not eliminate every type of risk, but it should help to avoid many of the possible accidents that could occur on your property.

Contractors will not be aware of any of the training that you may have issued to your own employees with regard to workplace safety.

This is not to say the contractors don’t have any kind of safety training, but they are most likely unaware of the specific hazards of working in your industry or in your particular work area.

Provide Training

If you expect to be working with a particular contractor for an extended period of time, it will be worth your while to include them in the training sessions which you organize for your own employees.

If you have an online training program set up, that will make it even easier. When you have several contractors coming in to do work for you, you may want to establish a workshop that will cover all the important safety practices associated with your industry and your workplace.

Create a Formal Contract

Finally, one of the best things you can do to protect yourself when dealing with a contractor is to draw up a contract with very specific language. This helps to create an airtight agreement between both parties.

contractor-handshakeThis contract should detail exactly which party will be responsible should any accidents or injuries occur while on the job site.

It should also detail any penalties which would be imposed if the contractor makes errors in the work or fails to live up to any agreed-to obligations or responsibilities.

You may also want to include a section that outlines any negative incentives involved. For instance, imposing fines or lower payments because of failure to deliver anticipated results.

This can be a very effective way of ensuring good performance from a contractor and guaranteeing that they use safe practices in the conduct of their work.

The more specific you are when writing this contract, the less room for error there will be, and the safer you will be against any kind of risks associated with working with contractors.

Take Advantage of Cowell James Forge’s Risk Management Services!

At Cowell James Forge Insurance Group, not only do we offer several types of business insurance plans, but we also offer top-notch risk management services. Risk management plans do more than simply finding good contractors.

We can perform a full risk analysis of your business and determine what areas of your company need to improve or pose a threat to you or your team members.

Take a look at our comprehensive risk management services!