Companies in Canada’s energy sector are evaluating a wide-range of pay and workforce options as a result of the continued decline in energy prices, a survey finds.
The Towers Watson Energy Industry Survey finds that 90% of organizations are either considering, planning or have already reduced salary increase budgets, frozen or reduced hiring, and/or reduced travel and entertainment budgets.
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On average, actual 2015 salary increase budgets for oil and gas companies decreased by 1.5% from the levels originally planned, while western-based utilities companies reduced salary budgets by an average of 1%. Close to 25% of respondents experienced an overall salary freeze in 2015 and more than 50% are forecasting a freeze for 2016.
“We’ve already seen widespread reductions in discretionary spending such as training, travel and entertainment, but continued low energy prices are forcing organizations to make broader cuts,” says Stephen Burke, director, executive compensation at Towers Watson. “While companies are currently planning or have already implemented reductions in salary and headcount, it appears that decisions to date have been weighted with an eye to the rebound.”
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The survey also finds that only 14% of organizations have implemented a salary reduction program, while close to 70% of organizations have reported some level of workforce reduction, affecting either all employee groups or select group of employees. Professional and technical/business support staff were most affected with an average 8% to 10% reduction in headcount.
Companies are carefully assessing the nature and extent of potential cost savings with an eye to maintaining their employer brand and staff engagement.
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“The elimination of some practices that tend to be specific to oil and gas companies, such as flex days, does not currently appear to be on the table. The current thinking is that the elimination of these kinds of practices will have a relatively low impact on the bottom line but are perceived as high value to employees,” Burke adds. “However, if low oil prices persist, it’s likely that these programs will also come under scrutiny.”
A total of 36 organizations participated in the study.