Although the oil and gas industry is expected to add 600,000 jobs by 2020 based on a recent study by Citigroup, oil and gas companies are still faced with a severe workforce shortage. This shortage is the direct result of a skills gap known as the “Great Crew Change.” As older workers retire, fewer younger, mid-level professionals with the required skills are available to replace the retirees. Bridging this age and skills gap is still one of the greatest challenges facing the industry today.
Staffing firms entering the oil and gas industry need to identify a niche where the company can be competitive. Often, this means specializing in specific types of job roles such as software engineers or plant Operators. Successful firms must understand there are many different ways staffing providers are vetted and engaged including a competitive bidding process, via reverse auction, or through a vendor management system. Each of these can result in a different pricing model as well as other unique requirements to that process that must be satisfied, such as having proper industry insurance and client specific health & safety Programs in place.
Here are some specific challenges in staffing the industry:
Diversity of Personnel. The unique nature of operating environments in the oil and gas industry (onshore, offshore, pipeline, plant, and refinery) requires an equally diverse workforce to support it, and staffing providers cannot be a one size fits all, but rather need to build expertise in a specific area.
1099 Compliance. The industry relies heavily on the use of independent contractors (ICs). Staffing firms must ensure that all ICs they supply are compliant with state and federal requirements. A determination of misclassification can be costly to the client company, including fines, penalties, back tax assessments, interest and retroactive employee benefits. Staffing firms must develop expertise and a vetting process to mitigate such risk for its clients.
Health, Safety & Environment (HSE). A culture of safety within the industry is mandatory without exception, and is the responsibility of all parties, including operators, contractors and subcontractors. Staffing providers must verify that contractors have the safety training and certifications required based on their job role and work location. As an example, U.S. federal law requires contractors working in the Outer Continental Shelf to be compliant with a safety and environmental management system.
Capitalization. Serving the industry requires significant payroll funding. Market demand and ultra-specialization has dramatically driven up pay rates. It is not uncommon for a contractor to command pay of $900.00 to $1,500.00 per day. In addition, large oil and gas companies can have multiple buying channels within the same client, resulting in Days Sales Outstanding to be anywhere from 45 to 60 days.
Absent Job Catalog. There is a lack of standardization with respect to roles and job titles in the industry. Staffing firms must be able to recognize differences between client requirements across a common body of skills, competencies and experience.
Staffing firms that fully comprehend the nature of doing business within the oil and gas industry can be richly rewarded, if they can meet these challenges. Those that cannot meet the rigorous requirements on their own can still meet some level of success by partnering with firm(s) that can meet these requirements and are already serving the oil and gas industry.