The past year has seen labor shortages across industry lines. According to a recent study from the Society for Human Resource Management, nearly 90% of businesses are having a hard time filling open positions. These shortages have resulted from various factors, many of which are related to individuals reevaluating their employment priorities due to the COVID-19 pandemic.
Such shortages can carry numerous consequences for businesses. Specifically, a depleted workforce increases the likelihood of current employees being overworked and employers having to hire inexperienced or less qualified workers to fill available positions. Together, these issues can cause employees to be prone to making mistakes or getting involved in accidents on the job—thus creating elevated business liability risks. With this in mind, it’s critical for employers to do what they can to mitigate labor shortages and related liability concerns.
Keep reading to better understand the factors contributing to the ongoing labor crisis, how employee shortages impact business liability exposures and steps employers can take to help minimize these workforce concerns.
Factors Contributing to the Labor Crisis
At the initial onset of the COVID-19 pandemic, a significant number of workers lost their jobs, resulting in record-high unemployment rates. As the economy reopened and job availability returned, however, many individuals reassessed their employment arrangements and opted to stay out of the workforce. In fact, the latest employment data revealed that the proportion of people who have been out of work for six months or longer is at its highest point in 60 years. Subsequently, there were nearly 11 million unfilled positions in the United States at the end of 2021.
Further, existing employees have begun quitting their jobs at elevated rates. According to the Bureau of Labor Statistics (BLS), over 4 million Americans voluntarily left their positions each month in the latter half of 2021. This trend, which has been termed “The Great Resignation,” has only compounded the labor crisis.
There are several reasons why individuals have opted to remain unemployed or quit their jobs over the past year, including the following:
Regardless of when the pandemic subsides, many individuals have permanently altered their job expectations and workplace priorities, placing new demands on employers. As such, many economists anticipate these labor shortages to continue throughout 2022 and beyond—impacting businesses for the foreseeable future and forcing them to adjust their current hiring and retention tactics.
How Labor Shortages Affect Liability Risks
Widespread labor shortages can create several liability exposures for businesses of all sectors. In particular, these shortages often force employers to schedule fewer staff members for each shift (leaving them overworked) and resort to hiring lesser-skilled employees to fill job openings.
This culmination of exhausted and underqualified workers can increase the risk of employees cutting safety corners or making careless errors during their daily tasks, potentially resulting in workplace accidents. These accidents could harm or injure both employees and customers, creating major liability issues. Overworked and inexperienced employees may also be more likely to miss important project deadlines and cause service delays, contributing to disgruntled customers and associated liability problems. Additionally, staff shortages can make it more difficult for employers to maintain adequate workplace security, making them more vulnerable to property and inventory losses—which could result in liability troubles.
Here’s a closer look at how labor shortages have created elevated liability risks within specific industries:
Steps Businesses Can Take
To combat labor shortages, employers should consider the following guidance:
To minimize potential liability risks caused by labor shortages, businesses should consider these measures:
For more risk management guidance, contact us today.