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New Business Terms For Workers

8th August 2016

We are working in unprecedented times, with contractor day rates dropping by a minimum of 20%, further operator staff cuts forecast and North Sea industrial action over a dispute in pay and conditions.

As businesses remain resolutely focused on cost saving beyond Q3 of this year, the cutbacks in contractor numbers have still not stabilised and it is our sense that there is scope for further rate reductions too.

This sentiment was echoed in the Aberdeen & Grampian Chamber of Commerce (AGCC) 24th Annual Oil and Gas Survey, published in May. The detailed market overview revealed that a continued slump in global demand coupled with a record low oil price has led to unprecedented levels of low confidence in UKCS with almost two thirds of contractor companies reducing their employment in the last twelve months and a "slowdown in the shedding of jobs does not appear to be materialising", with 30% of respondent firms anticipating employment numbers will decrease in the next 12 months.

Aside from the obvious rate cuts it is common for overtime to be paid at straight time rate, rather than time and a half, or double time. A limit on days or time worked and a total ban on overtime or shift work are also proving prevalent methods for reducing costs further.

Although day rate reductions have been on average around 20%, in some instances that has reached 50%. Whether the adjustment has been staged, or introduced in one hit, remuneration cuts have been a bitter pill to swallow for some of the most qualified and highly skilled workers in the sector.

So what are we to expect as the industry moves ever further down the path of standardisation and efficiency savings?

The AGCC survey reveals that firms are looking to retain competitiveness through collaboration, increased efficiency productivity and cost cutting in general, strategies which are likely to impact headcount and salaries in the long-term. Investment in people training is reportedly down 22%, which, combined with such drastic headcount reductions has foreboding implications for the local skills pipeline and future business expansion. This is compounded by findings in the Bank of Scotland oil and gas sector report "Re-evaluating Strategies" released in June citing 41% of young people will not see the sector as a viable career option.

The Bank of Scotland report also found that four in ten respondents don't expect the oil price to rebound until 2020 - this must go some way to dispel the negative perception around the challenges of retaining employees which are ex-oil and gas workers. The available talent creates invaluable hiring opportunities within other sectors and geographies as applicants become increasingly mobile. It is our experience that fast moving consumer good (FMCG) companies and the motor trade are particularly open to hiring job seekers with an oil and gas background.

Companies may be concerned that recruiting from oil and gas poses a retention risk and that candidates will want to return to the sector as soon as employment prospects recover. But candidates are being very realistic and have a genuine desire to forge careers in other industries. This shift is significantly impacting my team, as we now work on a much broader range of multi-sector technical roles.

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