Canadian Natural Resources Ltd.'s move to slash salaries across the company by up to 10 per cent is likely to be followed this fall by other oil and gas firms that want to avoid layoffs – or more layoffs – in an era of low oil prices.
The Canadian oil patch is rife with stories of recent unemployment, including deep staffing cuts announced by ConocoPhillips Canada and Penn West Petroleum Ltd. last week. But Canadian Natural, the country's largest independent oil company, said it is hoping to avoid the pain of job losses by reducing all of its salaried workers' pay – with the highest-paid employees facing the deepest cuts.
Human resources professionals in the sector say salary reductions and other strategies – such as job sharing or unpaid leaves – are likely to become more common this fall as oil and gas firms try to make their 2016 budgets work in what many expect to be a longer period of lower oil prices.
Workers in Aberdeen, Calgary or at Canadian Natural's Horizon oil-sands operation north of Fort McMurray will all be affected as of Oct. 23. The company says the salary reduction for some executives is on top of a previously announced cut. The oil giant employs more than 7,600 people, however, the reduction applies only to Canadian Natural workers who earn a salary as opposed to an hourly wage (the company was unable to provide a breakdown).
In a statement, Canadian Natural said it is rolling back salaries on top of cutting capital spending and other moves to streamline operations.
"These measures were taken in order to help the company address the current challenges without reducing our workforce."
A number of oil-service companies in the energy sector – including Ensign Energy Services Inc. and Calfrac Well Services Ltd. have already announced pared-down pay for executives. At Trican Well Service Ltd., regular workers took the cut as well. Oil producers have also been affected. For instance, Painted Pony Petroleum Ltd. executive officers and senior managers took a voluntarily salary reduction earlier this year.
Carol Howes, vice-president of communications and petroleum labour market information at Enform – an upstream oil and gas group – said companies have learned from past downturns. Firing staff and then trying hire skilled workers once business ramps up again is a painful process, she said.
"This is something that companies are very aware of this time around," Ms. Howes said.
"Companies are trying to find creative ways to hold onto staff rather than letting them go."
For oil and gas workers able to avoid salary cuts, or being laid off, wage freezes are the new normal.
According to Mercer's 2015/2016 Canada Compensation Planning Survey – released by the human resources firm this week – the energy sector has the highest percentage of salary freezes so far in 2015, with 37 per cent of employers reporting a salary freeze for at least one employee group. That compares with 8 per cent of employers in all sectors across Canada.
Gordon Frost, a Mercer partner, said many companies are still deciding what to do this fall, and are considering a variety of options that would allow them to hang onto staff during the commodities downturn.
Many companies, Mr. Frost said, "are doing their very best to avoid outright layoffs."