BP will freeze salaries across the company this year in the latest move to cut costs by an oil major to address the impact of the plunge in the oil price in recent months.
The wage cap was announced by Bob Dudley, chief executive, in a message to staff on BP’s intranet on Monday.
He said the “tougher external environment” had forced the company to take “a number of measures” including “a general freeze to base pay for 2015 with only a few exceptions for specific circumstances around the world”, adding: “We will review salaries again in a normal way in 2016.”
In recent months, oil majors have started to slash billions of dollars from capital spending in a bid to protect dividend payouts as cash flows are squeezed.
The collapse in the oil price has hit the industry hard with Brent crude at just over $48 per barrel trading more than 50 per cent below its 2014 average of $99.
Wages account for a large part of operating expenses, with BP paying its 83,900 employees just under $14bn in wages and pension contributions in 2013, according to Reuters, which first reported the pay freeze.
A BP spokesman declined to comment directly on the internal message but confirmed that the decision had been taken to cap wages. “Together with the work we are doing to simplify and increase efficiency throughout BP, we see this as a prudent response to the currently challenging market environment in which BP operates,” the company said in a statement.
In December, BP said it expected to take a $1bn restructuring charge as it looked to cut thousands of jobs across its global operations.
Wood Mackenzie, the consultancy, estimated that oil companies, including state-owned groups, would need to cut overall costs by $170bn, or 37 per cent, to maintain net debt at last year’s levels, assuming a price of $60 a barrel for internationally traded Brent crude.