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Navigating labor shortages in the energy sector: 4 strategies to mitigate risk

Navigating labor shortages in the energy sector: 4 strategies to mitigate risk

Boom and bust cycles have been the norm for decades in the energy sector, but the disruption caused by the COVID-19 pandemic is proving to be more than just a typical market fluctuation. Today, post-pandemic labor shortages are redefining the energy industry as oil and gas companies struggle to find experienced help. In this blog post, we’ll explore the factors prompting labor shortages in the oil and gas industries and share four strategies companies can implement to mitigate the risks associated with staffing shortages.

Layoffs, mandates, and culture shifts: understanding labor shortages in energy

Why is the energy sector short-staffed — and what’s prompting this ongoing disruption? On the one hand, work in these sectors tends to be physically demanding, even in the best conditions. Employees must work long hours, and many workers are looking for more flexibility in their schedules and the opportunity to spend more time at home. In the early days of the pandemic the energy sector laid off nearly 40 percent of its workers, which created a huge gap to fill once business started increasing again and former employees had already taken on new opportunities or relocated.

In the meantime, while labor is scarce, activity in the energy sector is on the rebound. The number of projects on the market is increasing, spurred by the recent signing of the Biden administration’s infrastructure bill. This means that many energy companies will feel the burden of labor shortages even more in the coming months, as they work to complete larger projects with less human capital.

The energy sector laid off nearly 40% of its workers in the early days of the pandemic. Many of those workers have grown tired of inconsistent work due to boom-and-bust cycles, and more recently influenced by the pandemic, or simply don’t want to comply with new testing and vaccine mandates.

Although companies with unfilled job openings may not be able to change the many factors impacting the labor market, they can anticipate and protect themselves from the risks associated with staffing shortages. Here are four ways energy leaders can control their risks, even when they’re short-staffed.

1. Reinforce safety programs to protect workers and appeal to stakeholders.

Problem: as market activity grows, stakeholders and owners are requiring energy companies to create and expand their safety programs to do business — particularly given the new risks introduced by the labor market. If companies don’t have a program in place, stakeholders and investors won’t be willing to take a risk and invest in them.

Solution: risk managers and safety directors in the energy sector need to keep a close eye on their safety program and culture and ensure they meet the needs of their operations. If companies don’t already have one, they should implement a safety accountability program to ensure workers follow best practices to avoid injuries. These programs are particularly important for new employees in their first month on the job, as they are three times more likely to be injured than their more experienced peers.

2. Train employees to help avoid injuries.

Problem: when companies lose experienced workers, they must hire and recruit new ones — and during a labor shortage, that often means signing on less experienced employees. However, energy already has high rates of workplace injury, and less skilled or experienced hires can exacerbate that risk. Additionally, in energy, lone workers often take on tasks in remote locations, where emergency medical help can be a long drive — or even a flight — away.

Solution: to mitigate the risk of injury on the job, companies need to reassess their existing preplanning practices and training protocols and ensure workers complete tasks safely. Safety training, job site assessment, and pretask planning can help alleviate the risks associated with a less experienced labor force. Safety plans should always include access to emergency medical response. To make sure you’re preparing for all contingencies, risk control consulting offered by an insurer or surety can help you identify and eliminate gaps in your preparation.

3. Offer mental health resources to support employee well-being.

Problem: energy workers aren’t only subject to physical injuries — they are also more likely to struggle with mental health issues than the general population. Workers who are younger, less experienced, and located at remote work sites face even greater risks of anxiety and depression, because they are often isolated from their friends and family. Mental health challenges can impact retention, work performance, and more. Additionally, remote work sites often have limited access to psychological and physical health resources, which can intensify this risk.

Solution: employee assistance programs (EAPs) with robust wellness offerings can help companies attract and retain their employees. Mental health and substance misuse support, career counseling, and more can improve the health and happiness of current employees and attract job seekers to your company. Companies can also partner with a telehealth provider to offer workers at remote sites access to counseling services and virtual checkups with experienced clinicians.

4. Mitigate the risk of driver fatigue with safety protocols.

Problem: one of the highest risk areas in the energy sector is driver and worker fatigue. It’s not uncommon for energy employees to work 60-hour weeks with only one day off. Additionally, travel time to and from work can be lengthy because work sites are often in remote areas, contributing to worker exhaustion. These factors increase the risk of accidents or injuries on the road or the project, impacting the employees themselves, their co-workers, and the general public. If an employee loses focus while operating heavy machinery or falls asleep behind the wheel, it can have deadly consequences — and leave the company at risk.

Employee assistance programs (EAPs) with robust wellness offerings can help companies attract and retain their employees. Mental health and substance misuse support, career counseling, and more can improve the health and happiness of current employees and attract job seekers to your company.

Solution: companies can help employees manage fatigue by providing training and materials on sleep deprivation and sleep disorders and offering resources to help them manage their fatigue. All employees should have stop work authority, even when it comes to fatigued driving. Additionally, companies should encourage employees to take breaks, preplan their workdays to include safe travel to and from the job site, and provide workers with accommodations or alternative transportation options if necessary. It’s important to remember that it’s not enough to simply instate these controls — company culture and adoption are the key to success.

Construction worker wearing a mask

The labor shortage is raising questions.

Today’s historic labor shortage means more than just a lag in hiring. Having overstrained, absent, or untrained workers carries insurance risks, from increased injuries and professional and product liabilities, to more auto accidents and damaged equipment.

Tackling the labor shortage takes talent — we can help.

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Attracting employees in a tight labor market

The pandemic exacerbated labor shortages in dozens of industries, largely because it prompted many workers to reconsider what they value in an employer. By supporting the mental and physical well-being of employees and designing robust safety protocols that protect workers and stakeholders, energy companies can stay competitive and withstand the tight labor market.

To learn more about how Liberty Mutual supports energy companies, go here.

This website is general in nature, and is provided as a courtesy to you. Information is accurate to the best of Liberty Mutual’s knowledge, but companies and individuals should not rely on it to prevent and mitigate all risks as an explanation of coverage or benefits under an insurance policy. Consult your professional advisor regarding your particular facts and circumstance. By citing external authorities or linking to other websites, Liberty Mutual is not endorsing them.