The first hurdle to accept here is that, though the parable appears to apply directly to that time after Christ's return when He is ruling the nations, the instruction also applies in principle to us. In other words, His children can never ignore this instruction. What sets this parable apart is that Jesus specifically focuses on works regarding our relationships with and services to our brethren.
Clearly, failure in this indicates sin. We need to grasp two major principles involved in sin: First, sin describes failure, the failure to live up to or meet God's standard. Second, sins can be acts of commission and/or omission. Sin is a direct act of evil against another or a failure to do something good, in this case, something God would expect.
How important are works even though they do not save us? Revelation 20:12-13 reveals that those who commit the unpardonable sin earn for themselves the punishment of being cast into the Lake of Fire. That is their “reward” for their evil works or no works.
On the other hand, Jesus declares in Matthew 16:25, 27:
For whoever desires to save his life will lose it, but whoever loses his life for My sake will find it. . . . For the Son of Man will come in the glory of His Father with His angels, and then He will reward each according to His works.
John W. Ritenbaugh
Ecclesiastes and Christian Living (Part Two): Works