Canadian oil and gas companies to continue to trim budgetsStaff writer ▼ | May 14, 2015
In the wake of declining oil prices, most oil and gas companies around the world will trim budgets and are planning or considering significant adjustments to their pay programs.
The survey across 80 countries Canadian oil and gas companies
The survey revealed that more than two thirds (66%) of the participants expect lower salary increases than originally planned and more than half (55%) are planning workforce reductions – the majority of which is expected to take place in North America.
The survey also revealed that despite substantial first quarter losses, 2014 was a good year for most companies in the sector and more than half say incentives payable for 2014 will likely be the same or even better than the prior year pay outs.
According to the survey, Canadian companies are bracing for a bigger hit to salary increase budgets. “In contrast to the U.S. forecasting, where budgets have been adjusted down by about 0.5%, Canadian respondents are predicting budget revisions of 1.5% to 2%,” said Julie Naismith, Director, Rewards, Talent and Communication in Towers Watson’s Calgary office.
“We’ve already seen a lot of reductions in discretionary spending such as training, travel and entertainment. However, while companies will have to act fast and be decisive about where to cut, they will need to ensure that additional reductions reflect the realities of today without jeopardizing the resources needed for a rebound.”
Brand and company reputation are key factors in an organization’s long-term ability to attract and retain the talent needed throughout the economic cycle. In fact, drawing on recent employee opinion survey results from over 160,000 employees in 29 natural resource organizations (including those in the oil and gas sector), company image was identified as the number one driver of employee engagement.
The survey also revealed that levels of engagement are lower across the natural resource sector when compared to other sectors - only 22% of employees in the natural resource sector say they are highly engaged and 34% say they are completely disengaged. This is not good news for oil and gas companies as they struggle to find a balance between managing their budgets and managing their workforce effectiveness.
Naismith added: “Managing budgets during lean times can be difficult for virtually everyone in the organization. However, managing the change with sensitivity and care can make a big difference in laying the groundwork for improved performance while protecting the company employment brand.”
The news is not all bad, however. There are some areas of opportunity. With unemployment figures creeping into the mid 5% range in Alberta, savvy employers have an opportunity to fill gaps in their talent pool that they may not have had during a tighter labour market. Changing workforce demographics may also present an opportunity.
Given that younger recruits are attracted to and motivated by different aspects of the employment deal, now may be an optimal time to review total rewards programs to ensure that money spent is providing value. ■