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Times Of Change In Oil & Gas: A Spotlight On UK Employment, Immigration And Pension Requirements

Times Of Change In Oil & Gas: A Spotlight On UK Employment, Immigration And Pension Requirements

The oil and gas sector is facing challenging times.  Initiatives were being put in place to respond to concerns regarding a rising cost base and associated unit cost of production in the UK Continental Shelf when oil was trading at over $100 per barrel.  Given the rapid and substantial decline in the commodity price, the urgency to address cost reduction and to protect businesses is now a high imperative for every aspect of the sector and its supply chain.

Many employers are facing difficult decisions regarding restructuring processes, redundancies and changes to terms and conditions of employment/working practices.  Changes such as these can give rise to complex employment, immigration and pensions issues. Here is a reminder of some of the key issues to bear in mind in each of these strands.

Employment

  • Changes to offshore working schedules must be considered carefully. There is a widespread industry view that offshore working schedules should revert to traditional “equal time” (e.g. 21/21 as opposed to 14/21).  Such proposals are emotive for workers and trade unions, particularly if not accompanied by associated wage increases or possibly with salary reduction. Even prior to employers making such proposals, trade unions have intimated that balloting for industrial action is the likely response. The overall cost saving to the industry is however substantial. Employers and trade unions must carefully navigate complex statutory and contractual arrangements to successfully implement such proposals. Communication and consultation strategies must be carefully planned.
  • A further layer of complexity is the Working Time Regulations and their impact on maximum working hours, leave and pay during leave.  Employers should  scrutinise their paid leave arrangements in light of recent case law and a general move towards European paid leave (four weeks) being paid at rates when employees would be normally working.  Given the current pressure to contain costs, employers should take the opportunity when reviewing any changes to terms and conditions of employment/working arrangements to ensure compliance with paid annual leave arrangements but on a cost neutral basis.

Immigration

A significant portion of the UK’s oil and gas workforce are non-EEA nationals, many of whom are sponsored under the Points Based System. Compliance with immigration requirements is vital in the industry, where employers must maintain good relations with the Home Office and the ability to employ non-EEA workers. The immigration implications of restructuring processes, redundancy exercises and changes to terms and conditions of employment/working practices are often overlooked. Issues to keep in mind when such exercises involve non-EEA nationals include:

  • Does TUPE apply to a transfer of your employees? A sponsored worker’s leave to remain is only protected on a change of employer in certain circumstances.
  • Sponsor licences are not transferrable. TUPE transfers (including intra-group transfers) will trigger specific reporting obligations (for both the transferor and the transferee) and may require fresh licence applications or amendments to licences.
  • Employers must conduct right to work checks on all new employees, including those acquired on a TUPE transfer. There are specific provisions applicable to intra-group transfers.
  • Share sales, which do not involve a TUPE transfer, can also trigger reporting obligations and may require a fresh licence application.
  • Dismissal by redundancy or redeployment to a new role will trigger sponsor reporting obligations. The latter will also require careful consideration of the parameters of an individual’s sponsorship.
  • Simple changes to terms and conditions of employment (e.g. pay arrangements, place of work or change of duties) need to be carefully considered to ensure all necessary reports are made and that the change is permitted by the limitations of a particular individual’s sponsorship.

Pensions

Redundancy, restructuring, and changes to terms and conditions can also have a significant impact on pensions. Some key pointers are:

  • Any changes to pensions terms and conditions (following restructuring or otherwise) require careful consideration in terms of the pension scheme rules, and contractual promises.
  • Compliance with the pensions consultation regulations for pension changes is required if they apply to the specific circumstances. Time should be built in to deal with this.
  • Depending on the type of pension scheme involved, pension loss on redundancy can form a significant part of the compensation package.  This should be considered in advance.
  • Under certain pension schemes, employees can be entitled to unreduced pensions on redundancy. The cost of this (which can be significant) needs to be met by the employer.
  • Care must also be taken that debts are not inadvertently triggered under final salary pension schemes on the termination of employment of all members of that scheme.
  • There are specific regulations governing what happens on a TUPE transfer in terms of pensions, and pensions should form part of the TUPE consultation where changes are proposed from transfer.
  • In the current climate, employers will also want to (and may need to) explore cost cutting measures in terms of pensions.

Although it can be hard to get away from pension obligations, there are steps that employers can take to reduce their pension costs which should be considered (e.g. harmonisation of pension benefits, merging/rationalising pension schemes or offering new defined contribution flexibilities).

The Burness Paull Employment Team, with its deep sector knowledge, is well placed to assist all employers in navigating through these difficult challenges and dealing with trade union negotiation/threatened industrial action.

Sean Saluja
Partner, Employment

Joanne Hennessy
Senior Associate, Immigration & Employment

Caroline Strathdee
Director, Pensions

LChalmers