A FIFE-based manufacturing business is looking to radically overhaul its labour practices after receiving a funding package from the Scottish Government earlier this year.
AIM-listed fit-out specialist Havelock Europa, which received funding from governmental body Scottish Enterprise in February, has floated plans to move its 400-strong workforce to annualised hours contracts.
As opposed to normal shift patterns, annualised hours see employees work a fixed number of hours across the whole year, with the time split into short shifts or time off in quiet periods and longer shifts during busier times.
Read more: Jobs safe for now as Havelock Europa warns on profits
While Havelock Europa declined to comment on the move, a source suggested that the business is hoping to introduce the system as a means of driving “efficiencies” in the business.
It is one of a number of measures being put in place by chief executive Shaun Ormrod - the former boss of the Farnborough International Airshow – who was tasked with turning the firm around when he was parachuted in at the end of last year.
The push to bring costs under control comes after Mr Ormrod secured £8 million of funding in February, with £5m of the total understood to have come from an extension of the firm’s existing facilities with Bank of Scotland.
It is understood that the remainder was put forward by development agency Scottish Enterprise after an intervention from Keith Brown, the cabinet secretary for the economy, jobs and fair work. Havelock Europa has been given six years to repay the money to the Government.
It is thought that moving to annualised hours would give the firm greater certainty over staff costs as it would reduce the need to pay for over-time during busier periods.
Fluctuations in pay would also be ironed out because employees’ annual salaries would be split into equal monthly instalments regardless of the number of hours worked in each individual month.
It is understood that Havelock Europa is currently in discussions with union leaders over the proposed move and that staff are likely to be given a vote on whether they would be willing to accept the change.
Read more: Fife-based Havelock Europa lines up debt funding after tough year
It comes amid a challenging period for the firm, which is still trying to recover from the loss of a major client - thought to be Lloyds Banking Group – in 2015.
Having previously retained Havelock Europa for its branch refurbishment work, the bank pulled the plug on those contracts as part of a strategic shift that saw it place a greater emphasis on its online operations.
Havelock Europa’s accounts reveal how big a loss it was to the firm, with the one client contributing £21.1m of the firm’s £70.3m turnover in 2015 alone. After terminating the bulk of its contracts the client accounted for just £1.4m of Havelock Europa’s 2016 turnover of £60.8m.
In the wake of losing the client, Havelock Europa reduced its workforce by more than 100, with its headcount going from 522 in 2015 to 414 in 2016. This cut its annual wage bill from £16m to £12m.
The firm’s financial woes have been compounded by the deficit on its defined benefit pension scheme, which has been closed to new entrants and future accruals for a number of years, ballooning from £1.3m in the 2013 financial year to £9.4m in 2016. This led to the firm being liable for annual deficit reduction payments of £700,000, although the pension scheme’s trustees agreed for last year’s payment to be put on hold.
In February Havelock Europa said it had agreed “revised deficit reduction contributions payable to the pension scheme”, although it did not reveal what these were.
Read more: Havelock Europa unveils plan for hitting £100m turnover target
The firm will announce its results for the year to December 2017 on May 4. In September the firm warned that its profits for the year would “fall considerably below expectations”.
In 2016 the firm made a pre-tax profit of £183,000, which represented a turnaround from the previous year, when it made a loss of £2.7m.
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