Business Risk Management Essentials For Subcontractors

For those working as a sole trader or running their own trade company, you will understand that hiring subcontractors is a pretty common practice, especially in high-demand periods. However, some fail to conduct thorough risk management beforehand, as working with subcontractors can come with its own set of risks. For all small and established businesses in gas engineering, pest control, electrical, plumbing, or other fields, substantial and accurate risk management will be the deciding factor in your success when operating with subcontractors. Ensure your ongoing projects and business are protected from unforeseen circumstances with Powered Now's comprehensive guide on risk management essentials. 

Background Checks & Vetting

When hiring, request references from past employers and/or clients to establish if this candidate is fit to operate service to your expectations. This also helps confirm their qualifications and experience in the field of work. In addition to these references, you will need to conduct a background check to ensure the certificates they have obtained are correct, their criminal record is clear, and their licences are legally and factually accurate.

Insurance Coverage

The subcontractors you hire for the job will need to carry their own full-proof insurance covering workers’ compensation as well as general liability. When meeting with your potential candidates, always ask for a Certificate of Insurance (COI) and run checks to guarantee these insurances have sufficient coverage across the work they will be conducting for you. For peace of mind, you may wish to ask your successful candidates to add your business’s name to their insurance as an addition to their current policy. 

Clear Contracts

One of the most important things you can do as the employer is create and implement clear, concise and detailed contracts that outline areas, including payment terms, deadlines and work requirements for all individual subcontractors working with you. Please note that each subcontractor you hire will have a unique contract for their specific roles and expectations. Within these contracts, you should also include clauses specifying how disputes will be handled and the penalties that apply for delays or poor work. Finally, when producing these contracts, always outline that your subcontractors must comply with laws, regulations and safety standards and failing to do so will determine their employment with you. 

Compliance and Performance

Once your subcontractors have started performing work on your behalf, inspect the work they have conducted thoroughly, ensuring the time spent on the job and the quality of the job meets your expectations. Always keep a report on your subcontractor’s performance over time, adding details of any issues that arise. Our Risk Assessment Templates and our Safety Form and Certificate Templates are a great way to ensure compliance and monitor performance with ease. One of the priorities in monitoring this performance is seeing if your workers are meeting the safety protocols and compliance regulations you set out for them, as well as following the best practices when on client sites.

Manage Communication Effectively

You should always have ways in which you can quickly contact your subcontractors in case of updates and emergencies. Establish a clear line of communication, be it via phone or by sourcing trade business software with these features. From day one of working together, ensure you have implemented weekly catch-ups and formal meetings to discuss progress on projects, address issues should they arise and ensure everyone within your company is on the same page at all times. When communicating, ensure this is documented and that any agreements verbally agreed upon are also in writing to mitigate problems down the line.

Indemnity Clauses

As the owner of a business looking to take on subcontractors, you need to put processes in place to protect your business should issues arise. Incorporating indemnity clauses in your subcontractor’s contracts will mitigate any liability from you caused by their own actions. You should always specify that subcontractors working for you are responsible for the losses, legal fees and damages resulting from their work on-site. Both parties should meet and review these clauses with a professional to guarantee they are enforceable and agreed upon before any work takes place.

Plan for Contingencies

Always prepare for things to go wrong. Never allow yourself or your business to be financially hindered because you turned a blind eye to issues as a result of subcontractors working on your behalf. Develop a contingency plan that will cover you in case the subcontractor fails to meet their obligations or withdraws from the project, and with this in mind, develop a list of alternative subcontractors you can call on in an emergency. It’s also a sensible decision to budget for potential cost overruns or delays caused by subcontractor issues, ensuring your project can still be completed on time.

Effective risk management when working with subcontractors is essential to protect client projects and business operations. 

As the business decision maker, you are responsible for thoroughly vetting subcontractors, producing reliable contracts, and staying vigilant throughout your work partnership. In doing so, you can minimise the risk of damages, financial loss, and reputational hindrance to your established company and set yourself up for success. As a leading  trade business management software helping thousands of tradies like you streamline their operations, we can help take the pressure off of boring admin tasks and time-consuming paperwork, allowing you to spend more time on the road, monitoring your subcontractors and preparing your risk management strategies. Following the steps outlined in this guide will help you build strong, reliable relationships with subcontractors while protecting your business from potential liabilities.