Opinion: O’Rourke pays unfair price for PAYE workers

Grant Prior 14 years ago

Sympathy would have been in short supply at rival contractors around the country on hearing Laing O’Rourke’s latest results this week.

Britain’s biggest private construction company doesn’t go out of its way to make friends when it comes to doing business.

So rivals could be forgiven a wry smile when news broke of a 15% drop in turnover and more than 3,500 redundancies.

The falling figures signalled an end to years of spectacular growth.

But O’Rourke’s woes are bad news for the whole industry because every contractor experienced similar pain last year – albeit on a smaller scale.

And O’Rourke has also been unfairly punished for employing the vast majority of its workforce rather than hanging on to the self-employment model which the government has been trying to stamp-out for years.

A large directly employed workforce can be an advantage when order books are full.

But O’Rourke, and other firms like Rok who have a lot of PAYE site staff, have found it can be a millstone around your neck during lean times.

The brutal truth is that when work dries-up you either pay people to do nothing or let them go.

O’Rourke rightly received plaudits for its direct employment model. But public bodies still awarded work to contractors who subbed everything out.

The combination of little benefit in boom times and a huge disadvantage in a downturn will kill-off any future hopes of making direct employment the industry’s standard model.

O’Rourke flew the flag for direct employment and it has proved a massive financial problem for them resulting in mass redundancy pay-offs.

The firm invests a fortune in training which makes it even tougher to let well qualified staff go.

A lot of O’Rourke’s unpopularity is down to its success and driving ambition.

The latest bad results may have prompted a few smirks.

But what’s bad for the UK’s largest private contractor is bad for the industry at large and a death knell for changing construction’s working practices.

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