Thousands of staff miss out on lucrative perk as contractor’s profit plunges from £61m to £26m.
Thousands of staff miss out on lucrative perk as contractor’s profit plunges from £61m to £26m
Laing O’Rourke has frozen its bonus payment scheme for thousands of directly employed staff in anticipation of a £35m fall in pre-tax profits.
Building understands that the privately owned firm has suffered from escalating steel prices in the Middle East, where it is undertaking the gigantic Dubai International airport project, and it has also experienced problems on its £100m Coventry city stadium job.
The firm is expected to report that although its turnover has increased to £2.2bn from £1.6bn for the year ending March 2005, pre-tax profit is to drop about 60% from £61m to about £26m.
A senior company source said the firm would now not pay any bonuses to staff across the group. He said: “There are set criteria for the payment of bonuses and due to the fall in profit these have not been met. As a result the bonus payments will not be made.”
The problems will be a blow to chief executive Ray O’Rourke’s plans to expand the firm into a £5bn turnover business after his audacious purchase of Laing Construction for £1 in 2002.
O’Rourke suffered on the Dubai airport project when steel prices soared globally. The contractor has had to set up and run its own steel factory, importing the raw materials from Turkey, to cope with the situation.
To make matters worse, an accident at the airport last October killed five people and injured 19.
The company source added that there had been communication problems in the UK over the issue of bonus payments. He said: “Some staff were told that they would be receiving a bonus, but that wasn’t right and has caused some disgruntlement.”
The source added that the usual system within Laing O’Rourke was to give one-third of profits to the shareholders – the O’Rourke family – to plough one-third back into the company, and one-third is given to the staff in the form of bonuses.
He said that this distribution was subject to the company as a whole meeting set profit targets. If these criteria were not met, the staff payments were not made.
It is understood that even if the criteria are met, Ray O’Rourke has installed a complex online system for the allocation of bonus payments. Under this system staff rank themselves against set performance targets in their individual jobs.
The result of this assessment is then compared against how individuals are ranked by their managers. This score is then set against yet more objectives devised by O’Rourke, including health and safety performance.
The source said: “O’Rourke wants world class performance, especially in health and safety, and this is what O’Rourke compares himself against.”
Laing O’Rourke declined to comment.