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Shell turns the thumbscrews on contractors and ALL contractor labour suppliers

By John Donovan

The alarm bells signaling Shell’s intent to act ruthlessly towards contractors have been ringing for several months. It seems that the thumbscrews are also being applied to ALL contractor labour suppliers.

News of Shell’s plans to intensify cost-cutting in reaction to the ressession and falling oil prices was contained in a leaked Shell internal email from Shell executive Malcolm Brinded that we supplied to Reuters in January. Hence  the article: “Shell gets tough on costs as oil prices bite”.

In February Reuters published an article based on another leaked Shell internal email we supplied. It was circulated to Shell senior managers on behalf of Chris Haynes, Vice President Technical, EPT Projects. The email subject heading, which included the phrase “Cold Wind Rules”, set out Shell’s plans to “ruthlessly” review it’s use of contract staff.

On 3rd July, a contributor to the Shell Blog facility on our website posted the following comment:

A small but amusing turns of events in IT last week saw the entire contractor workforce (in Downstream anyway) receiving the same announcement via their agencies of an immediate 12% cut in rates. IT contract rates have softened during the downturn, so cuts are understandable. What’s unusual is that this was done at only a few days notice, across the board, and mid-contract. Some recipients of this broadcast had 6 months or more left on their current assignments (whose duration was specified by Shell to secure their availability and rate) while others where in their final weeks of handovers to offshored replacements. In both cases, this was eyebrow-raising: early termination of contracts is normally only for misconduct or non-performance.

Within a week, the smoke cleared. Contractors appear to have overwhelmingly said NO, ie most were prepared to stay for the full term or leave immediately, and nothing in between. The prospect losing large number of contractors on the same day sensibly prompted a rethink, and clarification emails were duly rushed out explaining that the cuts were … um, OPTIONAL (I’m summarising over 300 words in one here, so that’s approximate).

So that’s alright then. Not an earth-shattering event, but perhaps another small insight into declining standards within this great company ?

We now have a copy of  a recent Shell letter to contractor agents. Some information has been deleted for obvious reasons.

To xxxxxxxxxxxxxxxxxxxxxxxx and Third Party Contractors who are currently payrolled

Sent on behalf of Shell

Dear xxxxxxxxxxxxxxxxxxxx

Contract Labour Bill Rates of Personnel provided to
Shell Entities via Payrolling

This note is sent to advise of a strategic transition within Contract Labour. We are all aware that the world is in a significant economic downturn, and Shell is not insulated from this. Hence we too have to respond to these economic changes.

We will be initiating conversations immediately with all Contract Labour suppliers, with the view a to reducing the overall bill rates of all current work orders. We are seeking a 12% reduction on all pay rates and well as a 10% reduction on your markup. The reduction will be effective from 1 July 2009 onwards.

We hope that you as a pay rolling agency and the pay rolled suppliers & individuals will understand our position and decision, and that we will not lose personnel as a result of this decision key priority is to ensure business continuity and that we secure the necessary talent for Shell.

During this period, it is important that suppliers and individuals do not attempt to engage Shell-hiring managers In discussing the rates. All discussions around the rates must be made with the Shell commercial team.

Yours sincerely,
xxxxxxxxxxxxxxx

Procurement Specialist
CC Contract Holder

A copy of the above leaked Shell letter was sent on 4th July to Michiel Brandjes, Company Secretary & General Counsel Corporate, Royal Dutch Shell Plc.  Mr Brandjes has not taken up the invitation to deny the authenticity of the letter.  There has been no response.

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