Adding up the costs

European labour costs typically represent between 40% and 75% of a general cargo terminal’s operating costs and, even in the capital-intensive container handling industry, they can be as high as 50% of total operating costs, according to ‘Dock labour and port-related employment in the European seaport system’ a report recently written by Professor Theo Notteboom for the European Sea Ports Organisation.

This is an industry in which bonuses and wage supplements are widespread: “In quite a number of cases, the base or guaranteed wage of a dock worker is only a fraction of the monthly income he can generate by collecting a wide range of bonuses and miscellaneous compensations linked to the nature, complexity and timeframe of his task.”

However, the organisation of port labour and the associated dock labour systems varies considerably throughout Europe, says Prof Notteboom of the Institute of Transport and Maritime Management Antwerp (ITMMA). “Ports across Europe are different in the way the dock labour system tries to provide an answer to the market needs in terms of flexibility, productivity, quality and cost efficiency of dock workers. Ports can depend on a dock labour scheme based on a centrally managed pool of registered dock workers. The use of registered dockers through a pool can be mandatory or not. This obligation can be de facto or imposed by law.”

However, he highlights a general trend towards open and autonomous pool systems with back-up of temporary employment agencies and a general tendency from the employers’ side towards continuous working, flexible start times and variable shift lengths.

The use of agency workers can provide valuable flexibility but ports that rely heavily on this solution need to be ready for the impact of the European Agency Worker Directive.

In the UK, the new Agency Workers Regulations, based on the Directive, come into force this October. “These regulations will give agency workers the entitlement to the same basic employment and working conditions as if they had been recruited directly by the port, if and when they complete a qualifying period of 12 weeks in the same job,” says Ian Roots, managing director of Drake International, the parent group of Drake Ports Distribution Services.

“Imagine the scenario where a port employs 20 casual workers, probably not on comparable conditions to those in full-time employment; perhaps they are paying £30,000 to their permanent workers, but the casual workers don’t get that. The legislation is moving towards giving agency workers parity in more areas.”

However, Mr Roots emphasises, it is important to make the distinction between ‘agency’ and ‘outsourced’. DPDS is outside of these regulations because it employs the workers it provides on formal contracts.

“DPDS was set up in the UK in the early 90s to address the needs of some of our customers within the ports industry who wanted a viable alternative to directly employed, heavily unionised labour,” he says.

“DPDS does not operate as an ‘agency’ which would use traditional temporary staff or ‘casuals’, as they are better known in the ports industry, but employs all of its staff on contracts of employment with guaranteed weekly pay, holiday pay, sick pay, pensions, etc. We offer full employment contracts with associated benefits, plus we are responsible for their training, management, direction, control and supervision. We have a loyal, productive, well-trained and cost-effective workforce.”  

DPDS provides workforces to major ports in the UK and also in Ireland and the Middle East, and has ambitions to expand in Europe: “Some European ports have the same issues relating to highly unionised workforces and often the management simply cannot run the port because of these issues,” says Mr Roots.

The general principle of outsourcing is that it is ultimately more cost-effective, allowing ports to focus on their core activity, he says. “Ports’ core activity isn’t necessarily management of labour – and there is a huge amount of employment legislation, directives, etc., to consider. More and more ports are asking whether they really want to be involved in the intricacies of this, or do they really just want the labour. And outsourcing is much more flexible.”

DPDS has a fixed workforce, with employees guaranteed and paid for a 40-hour week but with flexibility built into their contracts. “So maybe they will work 30 hours in week one but we need them to do 50 in week two, within the constraints of health and safety and employment law.

Bristol Port Co directly employs all of its own staff in terms of handling operations, marine, office and engineering.

“We went down that track because we felt in terms of handling cargo, whether it is driving your own cranes or handling customers’ cargo, people who are employed every day have a much greater interest in ensuring the equipment is driven correctly from a safety and efficiency basis,” says chief executive Simon Bird.

“By employing our workforce, we are minimising damage to equipment and cargo, and maximising customer service. You can certainly motivate people by putting them on the payroll rather than picking them up one day and putting them down the next.”

This is an issue highlighted by Prof Notteboom, who says ‘hidden costs’ can take different forms. “Cargo damage incidents can generate high hidden costs and negatively affect the reputation of a terminal or port. A high incidence of damage cases might point to a lack of training or a low commitment of the dock worker – absence of a ‘we care’ attitude,” he says.

Bristol has four groups within its workforce: port operatives, who are highly skilled and can operate any piece of plant in the port; the car force team, less skilled in terms of variety but highly efficient in moving cars on and off ships and also able to drive mobile plant; the warehouse operations team; and the part-time car force. “In the past we did use agency labour to supplement [the car force] at peak times but we found that damage levels increased to a level we were not comfortable with,” says Mr Bird. “The part-time car force is on the books, so we have that control and they are motivated by being employed.”

The common theme at Bristol is that the port guarantees 39 hours’ work every seven-day period for all of its full-time operational workers. Again, flexibility is essential: “Shipping is variable and there can be extremely busy or quiet times,” he says. “We could find that the first three days of the week are very quiet and some staff are not required; then we get busy towards the end of the week. Our model provides efficiency in keeping costs under control and also giving vital flexibility at the same time as maintaining extremely high standards for the customer.”

The full-time car force has been on contracts for 13 years, but the arrangement is more recent for port operatives. “We recognised three years ago that we had to have greater flexibility on our labour arrangements. We talked to the union and negotiated a change to the employment contracts, which was recommended by the union. Given the downturn in 2009, it was a good decision.

“Sure, using agency labour will offer lower costs – perhaps in some respects no more than the minimum wage. But if you look at some of the accidents that have occurred at other ports, often it is the use of agency labour that has contributed to these incidents.”