Shepherd dumps direct employees for subcontractors

26 November 2010

Shepherd Construction has said it will replace its directly employed workforce of 120 tradespeople with subcontractors, reports the Construction Enquirer website.

In a move that reflects the high cost of retaining direct employees in a weakened economy, the main contractor said workers would be laid off at both its East division, which covers Yorkshire to Cambridgeshire, and the West division, extending from Manchester and Liverpool in the north west to the Midlands.

In a statement to the York Press, Shepherd said trades employment will now ‘move to a complete subcontract basis, rather than maintain our own direct labour’, adding that the decision was made in spite of recent contract successes, ‘to ensure we remain competitive in response to the challenges presented by the economic climate and its impact on the UK construction marketplace.’

The practice of directly employing a large number of staff is now relatively unusual in construction, as it leaves companies more exposed to swings in demand that are typical of the UK building market.

In a related article on the Construction News website, David Jackson, MD of payroll provider Hudson Contract said reliance on employees rather than trades labourers helped precipitate Rok’s downfall. He also pointed to recent research showing that wages for labour-only subcontractor have fallen below those of employees.

Speaking to the Financial Times, Mark Howson, a construction analyst at RBS said: ‘The model of directly employing many of your own staff is a noble one, but you have to be prepared to take a greater hit in the tougher market because you have higher fixed costs.’

Laing O’Rourke is another well-known direct employer, which shed 17,000 of its 35,000-strong workforce last year after falling demand left it having to cut its costs.

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