Explore how UK's energy and natural resources organizations are managing costs and competing for talent.
Environment-related commitments and initiatives have picked up steam in the past few years, with the United Kingdom being looked to as a pioneer toward decarbonization. Energy and natural resources (ENR) organizations are feeling the pressure from a UK government pledge to achieve net zero by 2050, increased scrutiny from stakeholders, and environmental, social and governance (ESG) initiatives serving as a key differentiator for job seekers.
Overall, global energy demand is projected to rise by 15% by 2050, accelerating growth in electrification and renewable energy sources. Electricity generation could increase 70% by 2050, with declines in coal being offset by expansions in natural gas, solar, wind and nuclear power.
However, 2021 saw one of the largest annual increases in CO2 emissions as post-pandemic economies rebounded, and in September 2023 UK Prime Minister Rishi Sunak announced a plan to delay UK's decarbonization plans. All of this equates to significant decarbonization efforts for the energy system.
As ENR firms manage current headwinds and plan for an increase in demand for solutions, organizations in this dynamic industry must balance what they have today with future business shifts and inevitable talent demands. Naturally, this will call for adaptable pay programs that ensure ENR organizations are competitive.
In WTW's most recent Energy and Natural Resources Compensation Report, 126 organizations, approximately half of which have headquarters in the UK, provided more than 175,000 data points. Participants in the latest survey span diverse ENR sub-sectors, led by energy, technology and consulting firms.
Additionally, strong participation growth among renewables and alternative-energy organizations reflects a critical focus on and interest in pay trends and strategies in the industry. An analysis of the data provides insights into what ENR organizations can expect in 2024.
Workforce distribution
In the UK, 13% of staff are in the technical/skilled trades and engineering roles, representing the largest functional categories among ENR organizations. Engineering also accounts for the greatest share of base compensation costs at 15%, surpassing technical fields and project/program management. These structural patterns align closely with prior survey findings.
Regarding base pay movement from 2021 to 2023, lower job grades showed negligible increases year over year, except a 2021 spike for survey grade 17. But 2023 indicated a positive pay trend across grades, suggesting some salary growth recovery beyond pandemic impacts.
Regional competitiveness
ENR talent in the UK is relatively well-dispersed across the region. Scotland, London and the South East have the largest incumbent shares at 13%. The North West and West Midlands also represent sizable footprints, at 12% and 9%, respectively. Northern Ireland has the smallest presence with less than 1% of measured workers.
While talent is well-dispersed, significant regional pay differences have emerged. Central London leads with total guaranteed compensation (TGC) of 10% over the national media, followed closely by surrounding areas. East Anglia is exceeding typical pay by 2%, and Northern Ireland is lagging the furthest at 10% under median.
The broader South, North and Midlands also sit slightly below median pay levels. So, while London represents a clear high-pay market, other areas are seeing relatively aligned medians and moderate dispersions in either direction.
WTW's 2023 UK energy competitiveness index reflects encouraging signs for the recovering Aberdeen market. After past declines amid major North Sea project cancellations and workforce reductions, investment resurgence has helped restabilize this critical hub. Though some companies recently downsized their Aberdeen footprints, new entrants are reshaping the operating profile.
This shift has lifted average salaries beyond 2021 levels, just slightly behind the high-pay Central London Market. Aberdeen now leads the national median by 4% in base salaries, reduced from 14% above last year. For total rewards value, Aberdeen pays 7% over typical levels versus 20% in our latest report. This shows an emerging steady climb toward historical premiums, suggesting this global energy capital may reclaim pay leadership longer term.
Subsector variations
UK's oil and gas subsector consistently leads energy pay medians for base pay, incentives and total compensation. At 132% above overall sector-wide rewards, the positive gap remains in line with prior years. Conversely, UK's utilities and water subsectors continue lagging medians substantially, especially in incentive pay. Utilities pay 12% below the broader sector median total pay, while water's median compensation sits 30% lower.
Drilling into pay differences by role reinforces these themes. Oil and gas pays engineers 25% above average, and utilities pay 13% higher for engineering roles compared to lower medians for engineers in renewables and consulting. However, renewables lead for skilled trade roles, with water companies again significantly below average technical pay.
Clearly, distinct regional and subsector pay variances persist, causing workforce shifts as industry movement accelerates. Maintaining compensation competitiveness will hinge on tracking these segmentation trends.
Key takeaways for adapting rewards to the energy transition
Our analysis reveals significant opportunities for the UK's ENR organizations to adapt their compensation strategies amid the accelerating clean energy shift. As the pace of change accelerates across the ENR landscape, rewards programs must keep pace.
In the near term, we recommend three areas of focus:
- Workforce segmentation: Pinpoint talent groups requiring priority action based on transition exposure, such as renewables technicians or digital specialists.
- Understand employee needs: Listen closely to emerging workforce concerns and priorities via surveys and focus groups. Organizations should look to tailor rewards accordingly.
- Pay transparency readiness: Immediately prepare for looming regulations mandating pay data disclosures to employees, and leverage analytics to explain equity and prevent perception issues.
Longer term rewards considerations are equally critical:
- Flexible work philosophy: Finalize official guidelines on remote and hybrid policies given post-pandemic employee expectations and recruiting demands.
- Geographic pay structures: Evaluate if current pay bands across locations remain aligned to market practices and support talent access needs.
- Equal pay foundations: Use data diagnostics to identify and address lingering internal pay disparities ahead of rising governance scrutiny.
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