What are the Risks Involved in Using Contractors?

Managing a growing contractor workforce is a significant logistical challenge. You need to consider the legal and safety implications of having them on-site and weigh this against the value that they bring to your operations. Ultimately, you need to work closely with your contractors and industry regulators to ensure that your business processes remain above board at all times. The flip side, of course, is that, if you don’t manage the risks that contractors bring and put appropriate mitigation strategies, policies and procedures in place, your business could find itself in some trouble.

If your organisation is to avoid issues like poor project outcomes, budget blow-outs and safety incidents, you need to effectively manage your contractors. The key to achieving that, however, is in understanding the inherent risks in the first place.

What are the Different Types of Risk?

We all know contractors bring significant risk to our organisations. When it comes to the management of your contractors, there are four key areas of risk that should be considered:

1. Strategic Risk

One of the initial steps of contractor management is hiring contractors in the first place. If your contractor management program doesn't include an adequate procurement or prequalification process, then you may not achieve the results that you are expecting. If you find yourself with contractors that can’t fulfil your projects, you could be left with overrunning costs and delays.

2. Compliance Risk

Workplace compliance is a complicated undertaking. You need to make sure that your contractors are correctly classified, meet regulatory standards and have all of the necessary paperwork to back it up. If you get contractor classification wrong and claim an employee as a contractor. or if safety non-compliance leads to injury, there can be serious repercussions with substantial financial penalties. While compliance and classification should be managed at the prequalification stage, it should be an ongoing task if the risk is to be mitigated.

3. Safety Risk

Workplace health and safety is a huge responsibility, and contractors have a significant part to play. Contractors can increase the occurrence of existing hazards and introduce new ones; they don’t know your safety processes in the same way as your employees and are not as committed to your business. You have a responsibility under health and safety law to provide information, training and supervision to make sure your contractors are working safely and complying with regulations. The alternative is risking injury, illness, significant financial penalties and reputation damage.

4. Security Risk

In the same way as contractors not understanding your safety procedures increase the risk of injury, not understanding your security protocols increases the risk of breaches. Without following the correct processes, data and physical property can be exposed or damaged. Fraud, theft and human error can cause significant problems to your business, especially in a time where data protection is stringently regulated. Again, the risk can lead to financial loss and significant penalties.

The Importance of Risk Management

By putting a risk management process in place, you can reduce your liability, protect your people and assets and create a safe working environment for all of your workers. To achieve that, your risk management process will need to:

• Identify - you need to do your homework to understand all of the strategic, compliance, safety and security risks your contingent workforce may bring to your company. This will include understanding all of the necessary laws and regulations and how these differ for contractors compared to your employees.

• Assess - while contractors bring risk, they also bring considerable business benefits. You need to assess each risk, the likelihood of its occurrence and the extent of damage that could be caused. Prioritising risks will help you to know how best to manage them.

• Respond - some risks are too big to take, whereas others can be avoided or at least mitigated to reduce their likelihood or impact. This is the stage where insurances are considered to transfer the risk. And, while some level of risk may need to be accepted, this should never be done without careful consideration.

• Monitor - managing the risk of contractor management is an ongoing task that requires constant monitoring. You need to gather and verify insurances and licenses, deliver training and stay up to date with ever-changing legislation. Only by continually monitoring can you limit the level of risk that contractors bring.

How Outsourcing Contractor Management Can Help

By effectively managing contractors, you can leverage the benefits of a contingent workforce without putting your business at serious risk of financial and reputational damage. However, if you think that contractor management seems like a full-time job, then you’re not wrong. Specialist third-party companies can help you to prequalify and classify your contractors, collect and verify data, deliver training and communications and stay on top of changing rules and regulations. Ultimately, by outsourcing contractor management, you can focus on growing your business, easily scaling the number of contractors you engage in without worrying about the risks.

For over a decade, Conserve has helped organisations overcome contractor management challenges. We can help you develop a contractor management service that will be not only effective but will make your organisation safer, while minimising your overall risk. Request a demo now or visit the Conserve page for more great content.

For more information, call +61 2 8883 1501, visit www.conserve.com.au or email enquiries@conserve.com.au