Risks contractors face while on the job

November 20, 2018

Most people believe that contractors have it made. Most of the time, they wouldn’t be wrong.  Contractors do have it made, as they have flexible working hours, they earn more money, and they are their own boss.

Being a contractor, however, is not without its obstacles. Contractors may have more perks and make more money compared to regular employees, but they have more responsibilities, and they share the lion’s share of the risks that come with running a contracting business. Here are some of the risks contractors face while on the job.

Equipment damage and loss

A contractor’s ability to take jobs, provide excellent work, and deliver everything a client requires depends a great deal on the availability of his or her tools and equipment. So if they lose either or both while on the job to damage or theft, it would mean delays at best or a cancellation of the project at the worst. In a construction site, equipment getting damaged or stolen is not uncommon.

Work slowdown due to seasons

Winter is always the season for work slowdowns, especially if the contracting work needs to be done outdoors. Digging into frozen ground covered by a few feet of snow is a fool’s errand. It would also be foolish to think that any of your workers would be willing to work on, say, a roof in the middle of winter. Because of climate constraints, contractors experience a work slowdown that can hit their finances hard.

Then again, there is no guarantee of continuous projects even in places with warmer weather. Factors like economic downturns can also make finding contracting jobs difficult.

construction risks

Competitors offering services at bargain prices

Every industry has standard rates for its services. Some charge more than others for a variety of reasons. The game changes, however, when someone offers their services at low rates. Some may even bid for projects below cost for the simple reason of getting some cash flow for their company.

Contractors can charge rates commensurate to the work that they do, but all bets are off when other contractors offer the same services for roughly the same quality at a fraction of the price. Getting contracts would be an uphill climb if the competition takes a dive.

Negative cash flow

Many contractors have become bankrupt because of negative cash flow, which means they don’t have the funds to pay for whatever needs to be paid. The size or scope of the project doesn’t even matter, as even profitable ones experience being cash negative for long stretches of the project.

There are many reasons why a contractor suffers from negative cash flow. Some clients fail to pay contractors on time. In some cases, the negative cash flow is due to the contractor’s failure to invoice for completed work. There are also payment terms in contracts that are set up in such a way that the client only pays the contractor several months after incurring the costs.

Faulty finished product

Safety standards and buildings need to be followed to the letter. Contractors know this, and that’s why they make sure everything they do is up to code. Anything less and they stand the risk of being sued by the client for reimbursement and in some cases, damages, which spells trouble for their contracting company.

Missing deadlines

Contractors always hope that their projects get done in accordance with the agreed-upon timetable, but more often than not, delays happen for a variety of reasons. In some cases, damaged or malfunctioning equipment is to be blamed for the delay. A project could also be held up by a delay in the delivery of materials required.

Delays have consequences, and that’s why contractors make sure their communication lines with their clients are always open. Clients will always appreciate a heads-up about possible delays due to reasonable conditions, and can be convinced to change the deadline in the contract.

Worker and third-party injuries

Sometimes, accidents happen at a worksite. If someone gets hurt, someone has to be liable for it, and it’s always the contractor, regardless of whether he or she was on the job when the mishap took place.

It’s a good thing there’s such a thing as contractors insurance. If an accident on the worksite causes an injury to a third party or property damage, general liability coverage should be able to protect the contractor from any claim by the aggrieved party. If any of a contractor’s workers suffer an injury while on the job, there’s Workers’ Compensation Insurance to take care of them.

Being a contractor is quite rewarding, but it comes with its fair share of responsibilities and risks. If you really want to become a contractor, then you should be prepared to shoulder those responsibilities and take on all its attendant risks.

About The Author

Rachel Porter is the content specialist for Custom Contractors Insurance, LLC, an Arizona roofing and contractors insurance company. When not writing, she enjoys reading books and mountain biking with her friends.


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