Payroll Challenges in the Oil & Gas Industry (and how to address them)
Here's what makes the payroll challenges in the oil & gas businesses extra challenging. And here’s how to overcome these challenges.
Rivka Abramson| Dec 26, 2023
- With both global and complex operations, the oil & gas industry faces its own unique set of payroll challenges.
- Market volatility, regulatory rigidity, and diverse workforces present unique challenges.
- By leveraging the right tech and expertise, companies in the space can transform their payroll operations.
The oil & gas (O&G) industry is one of the largest sectors globally. Even now, as the US job market continues to slow down, the O&G industry is booming in comparison.
With that said, due to the nature of its operations, the industry tends to face unique logistical, regulatory, and operational challenges.
That, in turn, leads to even more complex global payroll operations, encompassing everything from employee onboarding to payments. When not managed properly, this process can be incredibly daunting.
In this blog post, we highlight some of the significant payroll and payment challenges faced by the workforce management in the oil and gas industry, as well as strategies to overcome them.Geographical spread & Mobility
Oil and gas companies tend to have workforces spread all over the world – often in very different regions. ExxonMobil, one of the biggest players in the space, for example, has over 60 thousand employees worldwide, representing over 160 nationalities.
And when you’re operating in an industry as complex as O&G, with so many moving parts, you’re likely to hit all sorts of snags, making payroll that much more complicated, like:
- Project-based work involving both employees and contractors.
- Expansion into new territories, involving moving employees from one country to another.
- Adhering to various unique and ever-changing sets of compliance laws and requirements.
Market fluctuations require the ability to downscale and upscale operations efficiently – and quickly.
Your global payroll software of choice should be able to centralize workforce data across multiple countries. On top of that, it should be able to handle various worker classifications and enable quick updates to employment models.
Given the reactive nature of the space, companies should look for technology that can easily adjust to any changes they make, whether due to market fluctuations, or expansion/contraction plans.
Remember: each region has its own heavy regulations and employment laws you must adhere to. That means you’ll need a tool that can help you keep track of all these differences, automate your payroll processes, and find a solution that can enable you to access the best experts in every country you operate in.
Regulatory complexities & auditing and reporting needs
O&G companies face notoriously strict regulations, especially when it comes to employee safety compensation requirements. There are all sorts of considerations businesses in the field need to keep in mind. Some examples include:
- A unionized workforce adds additional layers of labor agreements.
- Rotational shifts and long worker hours (and laws concerning overtime.)
- Navigating safety, environmental, and employment laws across various jurisdictions.
With all these requirements, businesses also need to consider strict auditing and reporting needs – often pertaining to industry-specific factors, like correctly documenting workers’ roles and the hours they’ve worked, as well as relevant safety measures employed.
Industry-level employment laws and regulations are constantly changing. Without the right boots-on-the-ground experts, keeping constantly up to date regarding these changes can be virtually impossible.
Be sure to adopt a payroll strategy that leverages experts based in the countries you’re operating in. This will sharpen your insight into not only the most current regulatory requirements but also cultural and political considerations – the latter being especially relevant to the O&G industry and the demographic characteristics of its workforce.
Diverse work types & specialized skills, and pay structures
Project-based work, seasonal and cyclical demand, specialized roles, and worker safety all add incredible levels of complexity to the look and feel of the O&G workforce.
As an example, gas extraction is known to leave workers at risk of safety hazards compared to other industries, with vehicle collisions, explosions, and falls among the top reasons for injuries and fatalities listed by the US Department of Labor. This requires not only worker safety training but also, according to many jurisdictions, a pay structure to compensate workers for these risks.
With unique considerations like these, maintaining local compliance and standardizing the payment process on a global, cross-organizational scale becomes that much more difficult.
Your go-to solution should be able to handle a diversified workforce both in terms of classification and location. As a user, you should be able to make changes to contracts and employment models, as needed, and ensure complete compliance throughout the whole cycle – from hiring to payment.
For the latter point, relying on the right employment experts will ensure you’ll provide all your workers with the proper compensation based on skills and roles.
Economic and Market Volatility
With geopolitical influences, environmental awareness, technological advancement, and other factors, the O&G sector is subject to heavy boom-and-bust cycles with scalable significant workforce management implications.
Take the period between COVID-19 and now: in a span of two years, the oil and gas industry experienced a deep decline due to the pandemic, then a spike due to a bouncing economy, then another fall due to ripe inflation.
Turns of events like these mean businesses in the space must be able to adjust quickly to any fluctuations in the market – whether they’re related to employment, specific country operations, or others.
In terms of global workforce operations, it means having the ability to downscale and upscale your activity in line with these external factors – and being able to do so both efficiently and effectively, whether it means changing employees to contractors or the other way around, relocating workers across regions, and onboarding/offboarding a large number of workers swiftly, and in compliance with hiring and layoff regulations.
O&G companies need bullet-proof strategies to adjust their workforce operations to the shifting market. A major part of being able to do that depends on you’re the level of visibility and control decision-makers have over their global workforce in its entirety.
Getting a holistic view of all your global workforce data from all regions for all types of workers encompasses a significant piece of the puzzle. Another piece involves getting real-time insights and forecasts to allow for planning as much as possible as you shift, scale, reduce, and optimize your teams around the world.
Technological Integration and Data Management
As alluded to earlier, data is everything for building a smart and efficient workforce managment strategy. And that’s true for every company. For O&G businesses, though, the challenge of collecting data and getting past siloed data systems is extra challenging.
With disbursed workforces, complex compensation structures, and varied contracts and worker classifications to juggle, centralizing, streamlining, and standardizing payroll data can come with additional challenges and complexities.
Choosing a global payroll solution that allows for centralized data for your ENTIRE workforce is critical. Be sure to keep the number of different solutions you rely on to an absolute minimum to make streamlining and analyzing your data more attainable.
Your outsourcing strategy with Papaya Global
A proper payroll outsourcing strategy can be a game changer for an O&G company, whether it’s to do with leveraging end-to-end technology, end-to-end expertise, or, ideally, both.
But how do you choose who to outsource to?
Here’s the Papaya Global approach:
- Centralized technology that allows you to streamline all your operations from a single platform – whether it’s to do with employees, contractors, or EOR workers.
- Boots-on-the-ground experts in over 160 countries, guiding you through complex laws and regulations (including industry-specific).
- A dedicated, complaint workforce payment solution for your ENTIRE global workforce – land date guaranteed.
- Centralized data for all your workers with real-time insights for optimized payroll strategy.
Intrigued? Book a demo today.