Payroll, a key function of HR, should be a straight-forward process. However, payroll can soon grow into an overcomplicated and seemingly endless task, especially in the oil and gas industry.
In this article, we explore why payroll is causing disruption to HR departments in many oil and gas companies across the world. Can you relate?
Payroll in Oil & Gas
Payroll is the process by which employers pay salary to their employees and involves tasks such as balancing and reconciling payroll data, reporting and depositing taxes, taking care of wage reductions, calculating reimbursements, bonuses, overtime, and holiday pay.
In most industries, payroll is mostly comprised of full-time W2 employees. However, the oil and gas industry differs from most in that the employee landscape is inclusive of both contingent and permanent labor. From large oil & gas operators, to EPCs, to service companies, all rely heavily on a contingent workforce.
Bringing on contractors can be a complex task and a larger time commitment for HR departments in the oil and gas industry due to:
Volume and Variety
Many projects require multiple contractors, sometimes upwards of 100 from different disciplines and backgrounds, and so everything from managing risks and compliance issues to calculating taxes and pay rates becomes more of a challenge.
Oil and gas projects include multiple layers of involvement from an HR standpoint as every contract placement is situational dependent upon a number of variables. These include the project’s location and environment, the project’s type, the industry legislation, tax compliance, and insurance requirements.
Due to the nature of the project-driven industry, contractors are usually needed quickly. However, they still need to meet specific compliancy and safety requirements dependent upon the project, which can create a strain on the resources of the HR department.
These oil and gas payroll disruptions are easily caused by the cyclical and project-driven nature of the industry, requiring different needs for every contractor. What used to be a direct hire function with standard salary and limited variables has now turned into a multi-faceted, complex, and time-constrained process, quickly becoming overwhelming with large cost and time implications unmanageable by a small HR team.
Broadly speaking, the HR department’s primary aims are to hire new talent into the organisation and bring out the best in existing employees. Spending too long managing the payroll process detracts from these core goals and puts pressure on the department, and in some situations creates underperformance due to the imbalance in allocating resources to other tasks.
Can you relate to the challenges described above? Look out for our next blog post listing the top 5 ways HR departments can solve the payroll burden.
Can’t wait until the next post? Contact us today to discuss how we can help you with your contingent workforce payroll challenges.