Oil and gas services giant Wood Group is to cut contractors’ pay rates by 10 per cent from the start of next month, blaming “cost and resourcing challenges” in the North Sea.
The Aberdeen-based firm said its PSN division, which builds and operates facilities on behalf of oil and gas companies, had been forced to take action to control costs for its clients.
The move, which affects UK onshore contractors, comes into force from 1 June and follows a 15.5 per cent rise in the sector’s operating costs to a record $14.8 billion (£8.7bn) last year.
Wood Group PSN’s UK managing director, Dave Stewart, said: “A rate review showed us that, over the last five years, contractors’ rates have risen three times more than staff rates.
“Escalating contractors’ rates are driving industry costs up, which inhibits investment, growth and long-term sustainability. We need to control costs to help maximise economic recovery and to safeguard the future of the North Sea.”
PSN, which has offices in Aberdeen, Glasgow, Hull and Runcorn, employs about 12,000 people in the UK. It said some contractors may be able to transfer to staff positions.
According to a survey by recruitment website Oil and Gas People, average rates paid to contractors – who make up about 45 per cent of the workforce – have risen by 8 per cent in the past year to £79,488.
Its chief executive Kevin Forbes said a shortage of skilled workers has seen rates for specialist roles such as onshore project staff jump by 13 per cent.
He said: “Despite the move by Wood Group PSN, the pressure on wages and skilled staff does not look likely to end any time soon. But there is a solution. The government needs to step in and incentivise companies to invest more in people urgently.”