Should you pay up or resist compensation when a client is unhappy? Ciarán Harkin gives his opinion.

THE flooring sector is facing a period of stubbornly high price increases, with data from the Office of National Statistics showing carpets and other floorcoverings retail prices increased 9% in the 12 months to April 2023. With inflated prices in many cases being passed on to consumers, alongside supply chain issues leading to material shortages and delays, the potential for customer disputes to arise is significantly increased.

In fact, we recently found that 62% of homeowners have had a negative experience with home improvement works in the past. As this equates to some 15m households when viewed in the context of the wider UK population, it’s unsurprising most contractors are spending some of their time dealing with disputes – only 7% of contractors said they don’t.

With the current economic pressures showing limited signs of slowing down, it’s essential flooring contractors understand how to effectively de-escalate customer disputes and when compensation should play a role in resolution.

Compensation: when is it needed?
With contractors’ profit margins already being squeezed amid economic pressures, compensation isn’t the ideal approach to resolving customer disputes owing to its potential to negatively impact the financial performance of the business. However, if the issue in question has impeded the customer’s ability to carry out their usual daily tasks, it may be the most appropriate solution. For example, flooring fitted by the contractor may have created a hazardous environment or caused distress or inconvenience.

In some cases, compensation claims may also be successful when the damage has only become apparent years after the initial fitting.

Usually, the compensation figure should place the customer back in the financial position they would have been in had the flooring been fitted correctly. To reach an appropriate figure, the flooring contractor and customer should gain an understanding of how much money and time is required to fix the issue.

If any property damage has occurred owing to the incorrect fitting, an estimate must be obtained from a third-party provider. As a guide, compensation for loss of facilities can range between £5 to £25 per day, and any requirement to stay in temporary accommodation will consider the cost of the room rate.

However, by taking the time to understand why the customer isn’t satisfied with the quality of the labour and assessing which measures can be taken to rectify the problem, it’s often possible for flooring contractors to resolve customer disputes before compensation becomes mandatory.
By offering to repair any damage, replace the faulty flooring or remove it entirely, customers are unlikely to seek any further damages if positive communications are maintained.

Given the prospect for increased competition between contractors caused by factors such as rising inflation and the unpredictability of the supply chain, strong customer support is vital to build reputation as a reliable supplier.

Alternative dispute resolution
If an informal agreement or compensation figure cannot be reached, flooring contractors run the risk of the dispute ending up in court. Although court proceedings are a time-consuming and costly process that often fails to produce the desired outcome, 36% of contractors revealed that they have had an unhappy customer make a court claim against them.

To avoid this scenario, alternative dispute resolution (ADR) provides a range of methods for flooring contractors to resolve disputes quickly and away from the courtroom, including mediation and conciliation, arbitration and expert determination.

ADR can be an incredibly valuable tool for preserving client relationships owing to its recognised framework for catering to the needs of both parties. However, many contractors are still in the dark about the benefits of ADR, with 42% revealing they aren’t part of a scheme and 28% of contractors have no knowledge of ADR.

Additionally, as 75% of homeowners said they’d be more likely to use a contractor that was part of a scheme, ADR may be able to encourage a new pool of customers in the future.

Building a solid foundation
Fundamentally, flooring contractors should build a solid foundation, in order to protect themselves, before any work commences. This includes managing customers’ expectations relating to the length of time the project will take, quality, and cost, as well as keeping strong contractual and warranty paperwork to provide themselves with additional financial protection should a potential dispute begin to surface.

If these steps aren’t sufficient to prevent a disagreement, contractors should always attempt to enter an informal discussion with the customer to see whether a solution can be reached; if it can’t be, ADR should be viewed as the logical next step.

Its ability to create a quicker, cheaper, and discrete resolution minimises the likelihood of reputational damage and the loss of customers. Especially as the challenges facing the wider industry continue to cause disruption, flooring contractors should prioritise methods to protect their finances wherever possible.
www.dispute-assist.co.uk
Ciarán Harkin is managing director of Dispute Assist