For those working as a sole trader or running their own trade company and looking to manage business risk, 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.
Subcontractor Background Checks & Vetting
To manage business risk 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 so they can manage business risk. 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 begin working on your behalf, inspect their work thoroughly and regularly. Check that the time spent and the quality of the job meet your expectations. Always keep a report on your subcontractor’s performance over time. Be sure to add details of any issues or concerns that arise. Our Risk Assessment Templates and Safety Form and Certificate Templates help ensure compliance and make performance monitoring easier. One priority in monitoring performance is checking whether your workers meet safety protocols and follow your compliance regulations. Also, confirm they follow best practices while working 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, set up weekly catch-ups and formal meetings to track project progress. Use these meetings to address issues early and make sure your entire team stays on the same page. When communicating, always document the conversation and any decisions made. If you agree on something verbally, follow up in writing to prevent problems later on.
Indemnity Clauses
As a business owner hiring subcontractors, you must set clear processes to protect your business if issues arise. Incorporating indemnity clauses in your subcontractor’s contracts will mitigate any liability from you caused by their own actions. You should always state that subcontractors are responsible for losses, legal fees, and damages resulting from their on-site work. Make sure both parties meet and review these contract clauses with a legal professional. This guarantees the terms are enforceable and agreed upon before any work begins.
Plan for Contingencies
Always prepare for things to go wrong. Never allow yourself or your business to suffer financially because you ignored issues caused by subcontractors working on your behalf. Always develop a contingency plan to protect your business if a subcontractor fails to meet their obligations. This plan should also cover cases where a subcontractor withdraws from the project unexpectedly. With this in mind, create a list of alternative subcontractors you can contact in an emergency. It’s also a smart move to budget for potential cost overruns or project delays linked to subcontractor problems. This ensures your project can still be completed on time, even when issues arise.
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 vetting subcontractors, producing reliable contracts, and staying vigilant throughout the partnership. By doing so, you can reduce the risk of damages, financial loss, and reputational harm to your established trade business. This approach also sets your company up for long-term success. As a leading trade business management software, we help thousands of tradies streamline operations and reduce admin tasks and stress. We take the pressure off boring admin tasks and time-consuming paperwork that slow you down. This gives you more time on the road, monitoring subcontractors and preparing risk management strategies. Following the steps in this guide will help you build strong, reliable subcontractor relationships. It also protects your business from legal issues and other potential liabilities.
