The 19th Aberdeen & Grampian Chamber of Commerce Oil and Gas Survey was published last week. It provides an authoritative view of what is happening in the sector and highlights employment trends, recruitment and retention challenges and skill shortages in this area. This article looks at the key employment findings, the importance of staff retention and top tips to retain staff.
The survey’s main conclusions in relation to employment were:
- 98% of contractors are looking to recruit staff in the current period
- 50% of operators and 73% of contractors anticipate an increase in total employment in 2014, focused towards permanent staff
- Recruitment difficulties are at their highest levels since 2007 and were reported by 75% of operators and 68% of contractors
- Half of all respondents have lost core staff in 2013; the most common reasons were retirement and staff moving to competitors or to other oil regions
- There is an increase in the expected use of training, rather than recruitment, to acquire skills
- 92% of firms increased pay last year and average pay rises were 6.5% for operators and 4.8% for contractors
It appears that employers in this sector are having to grapple with the joint challenges of an insufficient supply of skilled labour and an ageing workforce. When this is combined with high living costs in the Aberdeen area, it is not surprising that wages are rising above the rate of inflation.
The importance of staff retention in high skill industries
The oil and gas sector is highly skilled. Losing a valued employee means losing his knowledge, contacts and experience. Finding the right candidate can take some time and prove challenging, particularly where employers are all looking to recruit from the same pool of talent.
If an employee decides to move firms, the employer has to pay the cost of recruiting a replacement. This includes direct costs paid to recruitment consultants and indirect costs in terms of the management time spent reviewing CVs and shortlisting and interviewing candidates. There may also be an impact on customer satisfaction and level of sales.
This is combined with a loss of productivity, as it is not usually possible to recruit a replacement who can join before the departing employee leaves, which means that a handover cannot take place and there is a gap in the work being covered, which other staff will have to try and fill. In addition, the new recruit will need time to go through induction training and reach a point where he is able to work at the same rate as the previous employee. It can take up to six months for a new member of staff to be as efficient as the one he replaced.
If an organisation has a high staff turnover, this may become well-known in the marketplace and it can make it difficult to recruit staff.
Estimates of the true cost of replacing a senior employee vary from 50% to 200% of his annual salary. It therefore makes sense for employers in high skill industries to retain their existing staff. What steps can you take to do this?
Top tips for retaining staff
It is important to keep salary and bonus levels competitive with other similar employers and to ensure that benefits packages match or exceed those of competitors but employees rarely move just to earn more money so this will not solve the problem on its own.
In recent surveys, employees have indicated that they are more likely to join or stay with an employer who offers flexible working practices and you should consider whether you can offer flexible working, which might include part-time working, flexible start or end times or an element of home-working. Of course this will not be possible for all roles but it could make a difference if a key employee is considering leaving.
Improving employee engagement will reduce staff turnover and you should ensure that you are communicating openly and fully with staff, that you have an open door policy and there are regular meetings with staff, both in teams and individually.
You should have a clear career path and should aim to promote from within so that employees can see they have a future with the company. You should also develop staff and provide them with training and coaching so that they can reach their full potential.
Taking steps to improve morale will also help; to this end, staff surveys are a good way of finding out where the problems lie and what can be done about them. When an employee leaves, carry out an exit interview to find out the real reason and do something to address it. Ensure that you deal with under-performing members of staff so that the high performers do not become frustrated.
Two of the main reasons for staff leaving that were cited in the oil and gas survey were to become self-employed and to retire. If this is a problem in your organisation, there are steps you can take. For example, if an employee wants to become self-employed but to stay in the same field, you may be able to use them as a consultant in order to retain the benefit of their skills and experience. Where an employee wishes to retire, you could offer an incentive for him to stay on or offer phased retirement – where he semi-retires so works part-time but also starts to draw his pension – if this is feasible.
Lastly, research shows that employees tend to resign because of poor managers so consider whether you need to provide them with training on how to manage employees.
As noted in the survey, other firms in the same sector are the main source of new staff. If you operate in a high-skill area, your competitors are probably keen to try and entice your staff away. In order to protect your business, check that your contracts of employment contain adequate protection. Some of the areas to consider are whether you have sufficient notice periods, a garden leave clause, restrictive covenants, a confidentiality clause and protection of intellectual property rights.
Claire-Jane Nicol, Partner, Karen Plumbley-Jones, Practice Development Lawyer