Poor compliance processes drive 39% of contractors away in key sectors

New data from TEAM, a compliance monitoring provider, indicates that 39% of contractors in the construction, energy, and healthcare sectors will avoid future work with companies that have disorganised or slow compliance processes. A survey of 600 US-based contractors revealed that 94% attribute delays in the clearance-to-work process to process failures rather than the requirements themselves. The findings highlight a significant brand risk, as contractors often view the compliance clearance process as their primary or only formal interaction with an organisation.

The survey highlights a stark disconnect in operational execution. While 83% of respondents stated that initial requirements were clearly communicated upfront, 83% also reported encountering additional requirements mid-process. Nearly half of the contractors said these unexpected additions occur often or very often. Every single respondent reported at least one out-of-pocket cost resulting from the compliance process, including travel expenses, lost wages, and fees for repeated appointments.

This administrative friction has tangible consequences for workforce availability. In the oil and gas sector, specialist contractor establishments now employ over two-thirds of the entire US extraction workforce, according to a Bureau of Labour Statistics (BLS) analysis. In healthcare, hospital contract labour expenses in the US surged 258% between 2019 and 2022 due to chronic staffing shortages. Meanwhile, in construction, 92% of firms report an inability to find enough qualified workers, making the contractor pool essential rather than supplementary.

Research from Deloitte and MIT Sloan Management Review documents a management gap, noting that only 16% of companies have established policies for managing their contingent workforce. Companies often keep contractors at arm's length to avoid worker misclassification liability, which creates a legal incentive structure that pushes towards distance. Consequently, the compliance process becomes the sole designed experience a contractor has with an organisation, excluding them from workforce planning and culture-building mechanisms used for employees.

The data suggests that improving this experience is a viable retention strategy. Seventy-nine percent of contractors said they would be more likely to accept future work with a company that made the compliance process easier. Conversely, the 39% who walked away did so after a single negative interaction, viewing the poor process as a reflection of the company’s brand. The findings underscore that while compliance requirements are often legitimate and federally mandated, the execution of these processes directly impacts an organisation’s ability to secure and retain specialist labour.