McLaren chairman Kevin Taylor
Construction group McLaren has asked all employees to take pay cuts of between 15% and 50%, in response to the coronavirus pandemic.
The cuts at senior level are among the deepest yet seen in the construction industry (see box below).
In a letter to employees from the main board, seen by CM, McLaren warned that output had fallen on live sites by between 30% and 100% due to materials and labour restrictions.
“These challenges have resulted in a potential reduction in turnover of 50% over the next two months, which has led to a corresponding re-evaluation of the business operating costs for this period,” the letter said.
As a result, McLaren has cut income for its employees from 1 April until 31 May.
The reductions run across five salary bands:
- Up to £25,000: 15% cut
- £25,000 to £50,000: 20% cut
- £50,000 to £100,000: 30% cut
- £100,000 to £150,000: 40% cut
- Above £150,000: 50% cut.
The original board members have agreed to a full salary reduction of 50%.
Staff are also being asked to use at least five days of their annual holiday allowance over the two-month period.
Additionally, McLaren has furloughed an unspecified number of staff.
Chairman Kevin Taylor told employees their health and wellbeing and financial wellbeing were McLaren’s two main priorities.
He said: “McLaren and our colleagues are well placed to weather this formidable storm. It may need compromise and adjustment in certain areas, but we will monitor the situation and implement measures accordingly.”
Pay cuts at other construction companies
Laing O’Rourke: pay cut for all staff by between 20% and 30%, with a 30% cut for its most senior staff.
Wates: furloughed around a quarter of its workforce, 35% pay cut for its board.
Kier: employee salaries cut by between 7.5% and 25%.
Costain: board and senior leadership team taking a 30% cut in salary and directors’ fees for up to three months.
Adam Nicholson, group pre-construction director for McLaren Construction, told CM the cuts were in line with action other contractors in the sector were taking.
He said: “We made it a progressive cut, rather than a blanket one, so we asked people in the main board to take more consideration than others. Banding it meant that you didn’t end up with those that were on the lowest pay losing the most in relative terms.”
Nicholson said McLaren was getting to grips with government guidelines and the Construction Leadership Council’s site operating procedures. “Sites are operating at varying levels of output depending on the materials coming from the supply chain and the way the projects are having to work through the social distancing requirements,” he explained.
“It has become clearer as to what we can and can’t do and we have been able to ease some of the restrictions we had on sites and release productivity.”
Privately owned McLaren, which specialises in new-build, refurbishment and fit-out projects in the UK and United Arab Emirates, recorded an annual turnover of £650.9m for the year to 31 July 2019, with a pre-tax profit of £3.3m. The firm has net assets of £32.4m.
