Labor shortages have become an increasing concern across all industry lines. A recent study from the Society for Human Resource Management (SHRM) reported that nearly 90% of businesses are experiencing difficulties filling open positions. Many experts are attributing these shortages to the pandemic as workers are reevaluating their employment priorities.

A depleted workforce can have numerous consequences on your business. An employment shortage may make current employees overworked and force you to hire inexperienced or underqualified workers to fill available positions. Combined, these issues can not only increase employee errors but also their likelihood of being involved in on-the-job accidents. As these risks increase your business’ liability, it is critical for your organization to mitigate labor shortages and related liability concerns.

Labor Crisis

The initial onset of the pandemic saw a record-high unemployment rate as a significant number of workers lost their jobs. While the economy eventually reopened and job availability returned, many individuals have reassessed their employment arrangements and elected to remain out of the workforce. Recent employment data has revealed that the proportion of people who have been out of work for six months or longer is at its highest in 60 years. In fact, at the end of 2021, nearly 11 million positions in the U.S. were unfilled.

Adding to the crisis, existing employees have begun resigning from their jobs at shocking rates. The U.S. Bureau of Labor Statistics (BLS) has reported that in the latter half of 2021, over 4 million Americans voluntarily left their positions. Termed “The Great Resignation,” this trend has only compounded the labor crisis.

Factors Contributing to Individuals Opting to Remain Unemployed or Resigning

Caregiving Responsibilities

The pandemic forced many adults to become primary caregivers for their loved ones (e.g., children, elderly relatives). In fact, BLS data confirmed over 3 million women have exited the workforce since the beginning of the pandemic. Individuals have found these additional responsibilities have made it increasingly difficult to return to their jobs. Adding to the mix, many daycare services are slow to recover with employment below pre-pandemic levels. Employees who have difficulty finding a childcare provider or care for an elderly relative continue to struggle.

Early Retirement

The pandemic motivated countless employees close to retirement age to end their careers earlier than previously planned. An analysis from the Federal Reserve Bank of St. Louis discovered that over 3 million workers retired earlier than planned during the pandemic. Some early retirees were influenced by an overall pandemic fatigue, significant market income gains and burnout. Overwhelmingly though, the report found these workers were primarily concerned with workplace health and safety as COVID-19 can lead to more severe illness for older individuals.

New Business Opportunities

Workers are leaving their careers to start new business ventures or begin a different career. Recent research found that 25% of employees have made a career change during the pandemic while new business applications jumped by nearly 27% between 2019 and 2020.

COVID-19 Apprehension

Some workers have remained out of the workforce based on ongoing health and safety concerns, especially as COVID-19 cases continue to fluctuate and new variants emerge. These apprehensions are especially prevalent among those who have careers that require close contact with others or work in enclosed spaces. The U.S. Bureau of Labor Statistics (BLS) reported in November 2021 that 1.2 million people refused to seek employment based directly on pandemic concerns. Influenced greatly by the OSHA emergency temporary standard (ETS) and as more businesses put requirements in effect, workers have resigned or remained out of work because of vaccine apprehensions.

Unsatisfactory Workplace

Prolonged burnout and minimal support have influenced employees to leave their jobs. Unfortunately, this causes additional stress for both remaining employees and employers as workers take on additional duties and companies struggle to fill positions. A significant number of employees have quit their roles citing inadequate pay, poor benefits and a lack of work flexibility (e.g., remote capabilities, adjustable scheduling).

Individuals have permanently altered their job expectations and workplace priorities. Economists anticipate these labor shortages to continue throughout 2022 and beyond. Businesses will be impacted for the foreseeable future and forced to adjust their current hiring and retention tactics.

How Labor Shortages Affect Liability Risk

Businesses in all sectors risk several liability exposures as a result of widespread labor shortages. Employers are often forced to schedule fewer staff members, overwork current employees and resort to hiring less skilled applicants. Exhausted and underqualified workers can increase the risk of workplace accidents as they’re more likely to cut safety corners or make careless errors during their daily tasks.

These incidents could lead to major liability concerns from harm or injuries to both employees and customers. Overworked and inexperienced employees are also more likely to miss important project deadlines and could cause service delays, contribute to disgruntled customers and increase associated liability problems. Additionally, staff shortages may influence your business’ capability to maintain adequate workplace security and result in liability vulnerabilities including property and inventory losses.

Industry Risks from Labor Shortages

Construction

The U.S. Chamber of Commerce’s Commercial Construction Index suggests 55% of contractors have reported a high level of difficulty in securing qualified workers. Although the Biden administration has proposed a $1 trillion infrastructure plan with numerous commercial construction project opportunities, an uncertainty of specific projects has challenged contractors to hire and retain workers. The sector is also facing staff shortages due to nearly half of construction workers being over the age of 45 and nearing retirement. Due to the construction industry’s nature, labor shortages pose substantial liability risks by way of elevated (and more severe) job site accidents, project delays and decreased workmanship.

Manufacturing

Experiencing a major labor crisis, the manufacturing sector, as reported by BLS, is currently facing over 800,000 job openings. Regardless of the Biden administration’s attempts to foster a new generation of manufacturing workers through allocated federal funding from several executive orders, staff shortages remain a pressing concern.

Manufacturers have also lowered job requirements relating to criminal history, legal marijuana usage and previous work experience to expand their candidate pool. This change in criteria can unfortunately lead to an underqualified workforce and influence an increase in job site accident occurrences and subsequent liability issues. Recent industry research indicates inexperienced manufacturing employees contribute to over one-third (35%) of worksite accidents and related insurance claims.

Reports have also discovered that 60% of manufacturing workers have recorded additional stress, muscular pain and discomfort from being overworked since the pandemic. This is causing industry concern as these incidences can create additional accident risks and related liability concerns.

Trucking

According to the American Trucking Associations (ATA), there is currently a driver shortage of more than 80,000 positions, largely fueled by an aging workforce, declining interest in the profession and certain industry barriers. Making matters worse, the ATA estimates 160,000 commercial driver positions could be unfilled by 2030. The driver shortage is so profound that the Biden administration’s infrastructure plan includes funding for an apprenticeship pilot program intended to encourage commercial driver’s license holders under the age of 21 to operate in interstate commerce.

Amid this shortage, many trucking employers have extended existing employees’ driving schedules and lowered their driver applicant standards. Such factors can make employees more likely to be involved in serious accidents on the road and influence various liability issues, including driver injuries and fatalities, damaged or lost inventory, and delivery delays.

Steps to Combat Labor Shortages

1. Enhance Recruiting Process

Recruitment efforts can significantly impact your organization’s labor shortage. Applicants will judge your company’s culture and effectiveness based on their hiring process experience. Recruiters must be creative to keep your organization forefront through the use of strategic social media and job board posts, among other strategies.

2. Increase Pay

Competitive wages can help you retain existing workers and attract top talent. Offering sign-on bonuses may also improve hiring capabilities.

3. Offer Additional Benefits

Employee benefits can also assist in maintaining an ample workforce. Flexible work schedules, remote work capabilities and paid time off show employees your commitment to their work-life balance. Tuition reimbursement programs can promote continued employee learning, and a 401(k) assists workers to plan for their futures. A generous childcare plan could also attract parents who are conflicted between childcare and work amid unpredictable school and daycare closures. The BLS found an estimated 8.1 million women are out of work, with many experts suggesting this is directly related to childcare issues.

4. Improved Work Environment

A toxic work environment is a common reason for employee complaints and resignations. A healthy workplace demonstrates your commitment to employee wellbeing and can make your organization stand out to applicants. Forbes reported that 89% of employees receiving workplace wellbeing initiatives are more likely to recommend their employer to others. As mental health, stress, burnout and social isolation continue to be major concerns, many candidates are prioritizing work-life balance. Employers must respond to and support their desire for this balance.

5. Reward Existing Employees

Employers can also use rewards and incentives to help retain current workers. These incentives may include monthly bonuses for top performers or extra discounts on business merchandise (if applicable). You can also encourage and offer opportunities for development and growth. Workers continue to value growth opportunities and leadership training. Experts suggest that employees who experience a career progression are 20% more likely to remain with their company.

A recent survey conducted by the Society for Human Resource Management (SHRM) found 47% of HR professionals recognize retention and turnover as their primary workforce challenge. Employee turnover goes beyond a temporary interruption as it can affect morale as employee workloads increase when their colleagues depart.

Retention strategies keep employees motivated, increase loyalty and affect overall productivity. Recommendations include providing mentorship programs, investing in your workforce’s career progression, focusing on management’s leadership skills, recognizing employee contributions and creating an overall positive workplace culture.

Measures to Minimize Potential Labor Shortage Liability Risks

Ensure Effective Onboarding Processes

Especially if labor shortages require you to hire inexperienced workers, it is critical to have proper onboarding protocols in place. These procedures can equip new employees with the knowledge and resources they need to succeed in their roles. You can also utilize our Onboarding Scorecard to assess whether your organization is doing enough to support new hires.

Provide Routine Training

Regardless of their experience, you should encourage all workers to engage in regular, job-specific safety training. This instruction will help promote a culture of safety, minimize the risk of workplace accidents and decrease related liability concerns.

You should also review and upgrade all new hire training processes as they are essential in retention. Collaborating with knowledgeable employees and utilizing regular training sessions will encourage new workers while they establish their skill sets. Retention rates are significantly higher for companies that provide recent hires with considerable training opportunities.

Schedule Regular Check-Ins

Maintaining an open line of communication with workers is vital. Keeping in touch will motivate your employees to share safety concerns or other work-related issues that may arise. This will allow you to remedy these problems before they cause liability incidents.

We’re Here to Help

No industry is safe from the effects of the current labor market. Employee shortages can influence multiple liabilities for your organization. Being proactive is the best step in protecting your organization. Connect with a member of our team for additional risk management guidance with your property & casualty insurance.