Many North Sea oilfield service firms are being left in a “desperate situation” over whether to axe staff or pay mounting maintenance costs to keep them on furlough.
It is understood companies such as Bilfinger, Wood and Aker Solutions are currently facing a financial “conundrum” as they continue to haemorrhage hundreds of thousands of pounds in worker expenses with no guarantee of future work coming in.
According to experts, the current Covid-19 furlough scheme does not account for a number of incurred employment costs, which equate to about 8.5% of each individual worker’s annual salary.
The situation has left firms with high employee quotas paying out around £250,000 a month to furlough staff, with others paying close to half a million each month.
Fiona Herrell, an employment partner for Brodies law firm, said: “Employers who normally make pension contributions above the statutory minimum level will be funding the amounts that are not recoverable under the scheme themselves.
“They will also be incurring costs in respect of the benefit schemes they have contractually agreed to make available to their employees.
“Even if an employer has decided not to top up their employees’ pay while furloughed, annual leave taken during the furlough period must be paid at 100% of normal holiday pay and the additional amounts will not be reimbursed by HMRC.”
The issue has been blamed for a number of recent redundancy announcements by Bilfinger Salamis, Bilfinger UK and Wood.
Jake Molloy, regional organiser for RMT Union, described the situation as “unsustainable” while big North Sea operators refuse to share the cost of keeping workers on standby.
He said: “As far as operators are concerned, if they’re not being provided a service and the staff are not on their installations so they are not going to pay.
“This is the desperate situation that a lot of the contractors are in and it’s bleeding money out – we’re in a situation now where a decision has got to be taken.”
Mr Molloy claims workers have already begun to drift away from the sector, which will “only get worse as other sectors begin to ramp up”.
He claims the flexibility that operators want, in terms of the availability of workforce, is rapidly being lost.
Mr Molloy added: “The supply chain cannot sustain the furlough situation and will have to make people redundant, and that will only exacerbate the position for this year and perhaps next year.”
Oil and Gas UK workforce engagement manager, Alix Thom said that for companies with little prospect of work, the costs of maintaining employees on furlough “will eventually become prohibitive”.
She added: “Flexibility will be key in ensuring this industry has a range of tools to support the different needs of companies, however as our most recent report shows we do expect significant job losses.
“This is why we are focused on recovery and identifying opportunities to stimulate activity in the basin and improve competitiveness.”