Vol: 45 Issue: 3 | September 2022
Finally, shops and entertainment venues can open, houses can be built, elective surgeries are going ahead, and people can travel. There’s just one thing missing: the workers who make it all happen.
A record 85 per cent of Australian businesses reported staff shortages in February 2022: a reflection of the 3.4 per cent July unemployment rate — the lowest on record in the last 48 years.
Worker shortages are also a major issue in Singapore and Hong Kong, where the latest unemployment rates at the time of publication stand at 2.1 per cent and 4.3 per cent respectively.
‘Singapore is very dependent on immigrant labour for a number of industry segments,’ says Brendan Dunlea, ANZIIF Fellow and QBE regional property and engineering manager, Asia.
‘Given the restrictions on non-residents entering Singapore, getting key workers into the country has been a big challenge.’
In New Zealand, unemployment stands at 3.3 per cent for the June quarter, and the Building and Construction Industry Training Organisation estimates its sector is short more than 140,000 workers this year alone.
In March and April, some kiwifruit farmers were paying fruit pickers NZ$60 an hour, owing to the lack of seasonal workers.
APAC countries are also competing for workers — from working holiday travellers to healthcare professionals.
What’s unusual about the current labour situation is that there’s both a skills shortage and a labour shortage. So, impacted countries have too few cleaners, fruit pickers, nannies and factory workers, as well as too few IT professionals, doctors and engineers.
‘There’s a lot of industries impacted by just a simple lack of workforce, particularly where there is a large migrant population in that workforce,’ says Kristy Nicholson, national manager — safety, Mercer Marsh Benefits at Marsh Australia.
‘Agriculture, retail, travel and tourism, accommodation, food service, entertainment — they’re the types of industries that have those big shifts in workforce and they’ve just had a simple lack of people coming in.
‘The construction and trade industries have also been severely impacted, particularly when you’re talking about mining and large infrastructure projects. They have absorbed local resources, especially where they can’t access resources internationally, and that’s left other areas short.
‘Then, workforces in some industries are just burnt out. The healthcare, aged-care and education sectors have really borne the brunt of the COVID-19 pandemic and people are leaving those industries.
Our clients are telling us they just can’t get skilled people.’
Nicholson adds that many workers in the travel, tourism, food service and entertainment industries that were impacted by lockdowns over the past few years have been forced to reskill. Despite vacancies in their former professions now, they aren’t moving back into those roles.
Mental and physical risks
Chronic understaffing presents a range of risks for businesses and individuals.
‘Shortages have impacts on employee wellbeing, including burnout and mental and physical health challenges,’ says Rachel Pu, QBE’s Singapore country lead for workers compensation and motor.
‘Employees can also experience elevated stress levels when their organisation operates through workforce shortages, requiring employees to work longer hours and / or additional roles.
'Productivity under such circumstances is likely to suffer, as employees are stretched. Other considerations include human error and fatigue-related incidents.’
On the business side, multiple risks can stem from production delays and quality issues, including customer dissatisfaction, fewer referrals or renewals, and lower revenue.
QBE's Dunlea points to the Singapore construction industry to illustrate the impacts. ‘While construction sites faced delays during COVID, the renovation and maintenance segments were also faced with large cost increases,’ he says. ‘And if you had a leak or a power cut, it could take days, or a lot of money, to get things fixed.
‘Then, there are the issues of cost cutting, which can often mean lower-quality work. Particularly for the construction and energy industries, that lack of quality control could result in large losses due to collapse, explosion or other major accidents.
‘A number of construction sites are at a standstill. When workers eventually return to a site, often it’s not the same workers who had been performing the work to date, so there are problems ensuring the projects run smoothly. This can result in incidents where workers and property suffer.’
Skill shortages also exact an opportunity cost from understaffed businesses. Gallagher Bassett New Zealand’s national people and culture manager Gabrielle Cook explains: ‘There’s strong competition for talent out there and when there’s a shortage of people with key skills available, some organisations are going to miss out. There’s the real risk of business growth being stunted.’
Managing the fallout
Some insurers are already seeing the impact of overworked or inexperienced workers in different industries.
Says Pu: ‘In the first four months of 2022, Singapore saw 20 workplace fatalities, the highest number since 2016. There has also been an increase in job site accidents and medical claims from foreign workers at an industry level.’
In Australia, Nicholson says that, with the work-from-home / work-from-anywhere shift over the past couple of years, Marsh is seeing an increase in home-related incidents with clients that are classified as workplace injuries.
Supply chain risk is also a major concern. ‘One of our clients can’t find drivers to get their products out,’ says Nicholson.
‘They’re able to make a product, but can’t distribute it to their customers. The global connectedness of businesses means that a workforce shortage in one area can have a significant impact on so many other places. It’s not just the workforce within the organisation itself.’
In other instances, it can be tricky to link incidents strictly with workforce shortages, although they would appear to be a main contributor. ‘In power generation across Asia, we’ve seen what we believe to be a higher incidence of plant breakdowns over the past 18 months, but we can’t pinpoint exactly why,’ says Dunlea.
‘It could be due to not enough key technical workers getting to plants or maintenance and overhauls getting postponed, but it could also be due, in part, to employer and employee attitudes.
‘We are having to be thorough in our risk assessments, assessing the quality of contractors and maintenance staff. Do they have a full workforce? Do they have critical spares to avoid having to wait on overseas deliveries? Business interruption deductibles have increased.
'There is also the issue of inflation on sums insured. These need to be reviewed by insureds to ensure they are sufficiently covered in the event of a loss.’
Lastly, while Cook says many organisations — including Gallagher Bassett — stepped up their staff wellbeing programs and check-in processes, mental health continues to contribute to workforce shortages, absenteeism and insurance claims.
Perhaps surprisingly, people who lost their jobs in Australia over the past two years may actually have fared better in terms of mental health than workers who were kept on. Says Nicholson: ‘We did a study in Australia during COVID-19 looking at mental health and wellbeing risks.
What we found very early in the pandemic was that the decline in mental health was worse for the workers who were left in the workplace, rather than the workforce that was laid off.
‘Laid-off workers were being managed through the JobKeeper process. They had less stress. Meanwhile, it was the workforce that was left within the business to keep it running that had the worst mental health and wellbeing impacts.’
Close to home
The insurance industry is not exempt from workforce shortages. ‘Post-COVID, people are really looking at the company that they’re at and asking themselves if this is the place I want to be. An organisation’s reputation has become absolutely critical,’ says Rodney Hanratty, Australia / New Zealand head of people and culture at Zurich.
‘There isn’t an endless supply of underwriters or claims managers, so you have to draw on your business’s reputation and strengths.
‘Zurich has a reputation for its commitment to training, and we have a sophisticated approach to hybrid working.
'Each team has been asked to form a team agreement on work-from-home and office time that will meet customer needs, team needs and personal needs. If there’s a good thing to come out on the pandemic, it’s that rebalancing between those three elements.’
Craig Furness, CEO of Gallagher Bassett New Zealand, says the hybrid work model also presents challenges for the insurance industry and many other professional service areas.
‘Working from home impacts on issues such as how we train our people and how we develop our people,’ he says. ‘How do we build skills that are outside of technical skills: the ones you learn from interacting with key areas of the business? Those are skills that we’ve taught our people in the office in the past without even realising it.
‘As we move forward, businesses are going to need to change the way they interact with their people and develop skills, because we’re working in a different way.’
Pu points to a combination of employee benefits and continuous learning as the key components at QBE Singapore. ‘We offer a full suite of training and learning modules — from health and wellness programs to technical underwriting courses — for our people to upgrade and upskill to stay relevant in the new economy.’
While insurers are certainly still competing with each other for talent, Hanratty says that the industry may now have an edge with younger workers weighing up their options across professional sectors.
‘If anything, COVID has made insurance a more attractive option,’ he says. ‘It’s put the industry on people’s radar — particularly the younger generation that is looking at more purposeful work. Essentially, when you need help, insurers help you. It does fit with that meta-need if people are looking for a more purposeful career.’
Getting ahead of the curve
Insurers are working with their clients to help business leaders identify the risks they run if they find themselves short-staffed. Companies can then work out ways to mitigate certain risks and develop better employee retention mechanisms to hang on to some of the talent that they already have.
Hanratty says Zurich Resilience Services develops strategies to help larger organisations deal with staff shortfalls, to futureproof businesses as much as possible. For smaller businesses, the Zurich Risk Advisor app provides self-assessment for supply chain risk, as well as mental health and wellbeing at home, work-from-home examples, and so on.
Similarly, Marsh’s strategic risk team helps employers understand their holistic risk profile and identify and implement risk-mitigation strategies. ‘Organisations are often unprepared or underprepared,’ says Nicholson.
Furness points to the focus on mental health. ‘We’ve seen a lot of organisations very aware of the need to make sure that they look after the mental wellbeing of their people to a greater extent than they perhaps would have previously,’ he says.
In Singapore, QBE is conducting knowledge-sharing sessions with partners and customers to update them on product information, potential risks and government support available to them.
Says Pu: ‘Our duty of care to our insureds also sees us involved in national-level initiatives like bizSAFE, a nationally recognised capability building program designed to help companies build workplace safety and health capabilities. This ensures we are always up to date with best practices and can share this knowledge with our stakeholders.’
Critically, businesses can’t afford to lose the staff they have. ‘It’s a very expensive exercise to lose a skilled employee and have to replace them,’ says Nicholson, ‘so we’re working with employers to really help them ensure they attract the right employees and then retain them through employee benefits and health benefits, whether that be personal accident [cover], salary continuance or private health insurance-related programs.’
While most country borders are now open — with the important exception of China, Dunlea notes — it’s likely to take a couple of years for worker migration to normalise and talent pools to grow again.
What are the options in the meantime?
‘As a short-term measure to alleviate the tight workforce situation, the Singapore Government has recommended that companies fill their vacant positions by employing safe-distancing ambassadors (SDAs), who were officers that were previously employed by the government to enforce safe distancing in public areas during the pandemic,’ says Pu. ‘However, some of these SDAs may need to be retrained or reskilled to adapt to other roles.’
A longer-term solution might be to draw on the skills of the grey workforce. Says Cook: ‘New Zealand has an ageing workforce, and we’re seeing more and more workers who are 65 years and over. It brings a whole lot of diversity into the workforce, as well as a lot of intellectual property if workers have been with an organisation for a long time.
‘The flipside is that there is also the risk that people will retire at a moment’s notice, before you are able to transfer skills to other people in the business.’
Advances in technology may also plug certain workforce gaps. ‘Businesses are turning to technology to alleviate labour challenges, and we are seeing the use of robotics, including robotic dogs to survey construction sites and shelf-reading robots to scan labels on books,’ says Pu.
On the retention side, Cook stresses that it’s as much about holding on to your existing people as it is attracting new ones.
‘Make sure your people can see that you are genuinely making real efforts to look after them, and make sure they have opportunities for development and flexibility,’ she says. ‘If you get that right, and you’ve planned it well, you can offset some of the impacts that we’re seeing to a certain extent.’
Hanratty agrees. ‘You need to be a good employer and do the right thing by your employees. Whether you’re employing a chef, an underwriter or a nurse, it’s the same principle.’
Lastly, while workforce shortages need to be addressed and the risks mitigated, Furness says we need to avoid getting caught up in media hype around short staffing.
‘It’s an important factor that we don’t create workplace shortages and create gaps by talking about them too much. Instead, if we keep on talking about the positive things that can happen, that will have a positive impact itself.’