I suspect many captains and crew will have succumbed to the embrace of this maxim – I know I have in my past.
Working long hours and having minimum sleep was often worn as a badge of honour, it demonstrated a grafter, someone who was willing to put in all the hours necessary to get the job done. But as research has now shown, sleep deprivation, whether acute or chronic, can have short term consequences – sometimes devastating – as well as long term physiological and/or mental health effects.
I was somewhat aware of the importance of sleep and things such as the circadian rhythm, but it was only recently after reading ‘Why We Sleep’ by Mathew Walker, who is currently Professor of Neuroscience and Psychology at the University of California, Berkeley, that I began to really appreciate why sleep deprivation can be so damaging to not just health, but also performance and safety.
The book details the reasons why we sleep, what happens during sleep, the benefits of sleep and the effects of disruption and/or deprivation. Like the air we breathe, the water we drink, and the food we eat, sleep is essential to our health. The Guinness Book of World Records happily records extreme activities such as a freefall from 41,422 metres and other events such as tight rope walking across the Grand Canyon without safety net or tether but does not recognise sleep deprivation records because of the danger to health!
What’s this got to do with yachting?
The World Maritime University (WMU) Report1 into the hours of work and rest (HOWR) in shipping also considers this subject and the effects of lack of rest, fatigue, safety and well-being of crew and these issues are equally applicable to yachting.
We know that the demands on crew have been increasing for many reasons and, in the main, there has not been any real change in the manning levels to meet that demand and on many yachts, it is likely that the quality and quantity of sleep is suffering as a result. Compounding the potential for sleep disruption are the variable work patterns that are an operational characteristic of yachting as the program and use changes e.g. guest-off, guest-on, daywork, watches, late finishes and early starts, even if crew are maintaining their HOWR.
Consider that the HOWR minimum rest period should not be less than 10 hours, but can divided into two periods, one of which not less than 6 hours. And that within that time there are factors such as eating, socialising, waking and preparing for work, that eat into sleep time. If working to the minimum regulations the longest period of sleep could be less than 5 hours – less than the amount research suggests is optimal.
I’m sure we all know how bad we can feel for days after a long-haul flight, yet crew are often expected to switch from working during the day to night at short intervals. Studies have shown it takes a day per hour of time zone difference for the body to acclimatise. It would take days for a crewmember assigned to work a night watch to properly adapt and perform at their best and they would likely be feeling the undesirable effects when they switched back to daywork at the end of the week – when they would have to go through the whole process again.
The working pattern and allowing sufficient time to acclimatise to the working hours is an important factor in helping with sleep and fatigue. I know in the past we used to rotate deckhands onto night watch once a week and stewardesses would frequently switch from late nights to early morning with the result their body clocks where probably always jet lagged. Having a schedule that allows acclimatisation to working hours is not an easy task given limited crew and variable demands but, where practical, it warrants a more considered approach.
Of course, it’s not just the work pattern that can disrupt sleep. The environment, such as noise and light, can affect the quality and quantity of sleep. Noise from being underway, picking up and dropping anchor, bow thruster operation, light from portholes or crew entering the cabin. And as we all know, the violent motion and noise of a yacht in rough weather also can severely disrupt sleep.
Crew accommodation and cabins are also a factor. Having somewhere free from noise and light pollution, with a comfortable ambient temperature, can be a challenge on some yachts, especially the smaller yachts where space is severely limited and often the crew mess and laundry are in the same space. Though, even on some larger yachts, the crew cabins can sometimes seem like an afterthought.
Minimising noise and light – beyond the minimum MLC standards – should be a priority such as: –
Black out blinds for portholes
Curtains around bunks that can also block light and afford some privacy
Low intensity lighting for crew corridors
Better sound insulation – especially crew corridors and where cabins back onto the crew mess or technical spaces
Improved isolation of equipment; resilient mounts, sound boxes.
Doors at corridor ends
Carpet with underlay in cabins and corridors
Some of the above could be applied to existing yachts.
For those who believe they can manage on minimum sleep, it is interesting to note, though not scientifically proven, that Ronald Reagan and Margaret Thatcher, two of the most well-known exponents of 4 – 5 hours of sleep, suffered in later years from Alzheimer’s. The point being, perhaps the cumulative effects of restricted sleep may be more profound than we might think.
Unlike shipping, our industry is not driven by commercial pressures but by more esoteric metrics such as pleasure, enjoyment, quality, safety, and security, all of which are heavily reliant on the crew. Yet often yachts are designed to comply with the minimum standards rather than the operational realities of delivering incomparable experiences to yacht owners and/or charter guests.
The ‘WHU Report’ and ‘Why We Sleep’ should be essential reading for anyone involved in the design and operation of a superyacht. They offer compelling reasons why better sleep can result in happier and healthier crew, better performance, safer yachts and why it deserves more attention in our indusrty.
I must admit to a bit of plagiarism here as the title, in part, comes from the World Maritime University (WMU) Report1 into the hours of work and rest (HOWR) in the shipping industry – link at the bottom. When I saw the title, read, then reflected on its contents, it became clear there were parallels with the superyacht industry.
That being said, it is important to recognise that in the superyacht industry the issues surrounding misrepresentation of HOWR are generally limited to the peak periods; those times when guests are onboard when, due to a combination of high demands and insufficient crew. To successfully navigate the obligations and intent of the legislation it is important to fully understand the regulations. The alternative is creative application of HOWR – something I am sure that most yacht captains and crew will have experienced.
In my early days on yachts, working long hours to deliver the guest experience was the norm and just part of yachting. “Harden-up” was often the refrain when someone spoke out on fatigue. It was like the measure of a job well done and validation that yachting was for you. Hours of work and fatigue were given very little attention and remained undocumented; unless you were crew you had no idea of the extent of the problem. Over subsequent years, regulations such as ISM and MLC were introduced to improve vessel safety and pollution prevention and the health and welfare of crew – less about yachting and about preventing the abuse of crew that was prevalent in some sectors of the shipping industry.
Unfortunately, as the WHU report suggests, despite the regulations and a greater appreciation of fatigue and its consequences, there is still a culture where work hours are, either under reported or adjusted to facilitate compliance. There are many reasons given, many of which are analogous to the superyacht industry:
Legacy – it’s part of the ‘can do’ attitude that is prevalent within yachting; the desire to deliver the best experience for the owner or guests.
Manning – having an appropriate manning level to meet the diverse demands of the operation; not just ‘minimum safe manning’ which is often the metric.
Contemporary Yacht Operations – yachting has evolved and so have the demands on crew, not only from owners who expect greater levels of service and experience, but also from the administrative burden that is a consequence of both regulation and management company reporting systems. Manning has failed to keep pace with this and something OnlyCaptains alluded to in this piece – Manning A More Considered Approach Required
Cost – crew are one of the highest costs of yacht ownership and so it is understandable that advisors and yacht owners are driven to reduce manning.
Financial Incentive – charter tips or bonus.
Employment Security – whether it be the Captain responsible for the yacht compliance, or an individual crew member not ‘towing the line’ there are concerns about the effect accurate reporting may have on employment prospects.
Management Pressure – either directly or indirectly they send signals that encourage the misrepresentation of HOWR.
Stakeholder Distance – the physical and psychological distance between the various shore-based stakeholders and the operational crew, means there is often a limited understanding of the work that crew do and what it takes to deliver an exceptional yachting experience, day after day.
Lack of Effective Controls – as proven, it is relatively easy to under report or adjust HOWR, even on some electronic systems, to ensure compliance. The fact that these are not identified by internal audits, Flag or PSC suggests the current inspection and enforcement mechanisms are not fit for purpose.
Also, in yachting due to the cyclical nature of demands ‘guest on vs. guest off’ there is also an attitude of:
What’s the big deal, the crew get plenty of time to rest when we are not onboard.
The reality is often very different; there is still plenty of work to be done that is critical to maintain and protect the value of the asset, safety considerations, and to ensure the yacht and crew are ready for the next visit.
Rest and Fatigue
This leads onto ‘Compensatory Rest’ as allowed by MLC, to mitigate or justify non-compliance; often the rule rather than the exception. Unfortunately, this is not always practical due to a yachts program e.g. short turnaround for next guests (back-to-back guests/charters) repositioning in rough sea, etc. And, unless the compensatory rest is both, timely and adequate, it will not prevent fatigue and its consequences.
There are numerous studies on fatigue; searching ‘fatigue and its effect on performance and safety’ in Google (other browsers are available!) produced 1.5 million hits – I would hazard a guess that none of the results would praise its health and performance benefits!
It is recognised there are three types of fatigue:
Transient fatigue this is acute fatigue as a result of sleep restriction or extended hours awake within 1 or 2 days
Cumulative or chronic fatigue brought on by repeated mild sleep restriction or extended hours awake across a series of days.
Circadian fatigue refers to the reduced performance during night-time hours, particularly during an individual’s “window of circadian low” (WOCL) -typically between 2:00 a.m. and 05:59 a.m.
Research has also shown that the accumulation of sleep deficit e.g. having an hour less of sleep for several consecutive days, needs a series of days with more-than-usual sleep for a person to fully recover from cumulative fatigue.
This suggests that, very quickly into a busy guest period, crew may already be affected by fatigue; their cognitive ability impaired, decision making and judgement clouded, and performance impacted. Many studies compare fatigue to the effects of alcohol consumption, the last thing anyone would want would be crew behaving as drunks due only to sleep deprivation.
Adding to the problem is that many crew cabins are cramped, poorly designed, and suffer from light and noise pollution, these factors, along with the yachts motion, even at anchor, can all affect the quality of sleep – another area worth consideration?
The shipping industry is aware of fatigue and has contributed to the canon of research on the subject, these include The SEAFARER FATIGUE: THE CARDIFF RESEARCH PROGRAMME, MCA MGN 505(M) and IMO GUIDELINES ON FATIGUE (MSC.1Circ.1598) and are all well worth reading.
Interestingly, in 2006 when the Cardiff Research Study was published, one conclusion was:
This study shows the current method for recording and auditing working hours is not effective and should therefore be reviewed.
Seems not much has changed.
As I discovered, honest reporting of HOWR comes with a cost, unless you have a supportive management company and yacht owner, so I fully appreciate why some captains might be reluctant. However, unless we report HOWR accurately we will remain part of the problem and there will be no incentive to change.
If you always operate at max, like an engine constantly run in the red zone, something will break sooner rather than later!
Ultimately the reason why there may be a need to under report or adjust of HOWR is that, in many cases, there is insufficient crew for guest periods. And, this is after all when a yacht owner, their family and friends or charter guests get to experience the enjoyment of yachting.
A Contempoarary Problem
Far from this being restricted to older yachts, this remains a contemporary issue, with some recent prominent examples shown not to have enough crew to deliver consistently the full range and standard of services demanded by yacht owners and charterer guests – this does beg the question; who is advising the owners and how did they assess the manning levels?
In response, I like to reflect on a comment from a respected designer Carlo Nuvolari, of Nuvolari Lenard, when he stated in an interview in Boat International – Nuvolari Lenard discuss the problem with yacht design 18 November 2015 by Stewart Campbell:
A Lot – Not All, But A Lot – Of Our Colleagues Don’t Go On Boats. I Can’t Understand It.
Perhaps ‘a bittongue in cheek here’ a solution would be for every designer or advisor, to spend at least one season working on a busy yacht in all departments, before they are allowed anywhere near a prospective yacht owner and/or its operation…just a thought!
And, whilst we can address the problem with more careful consideration of manning on new-builds, clearly, we cannot re-build each yacht and the demands will not decrease…so what can be done?
Searching for A pathway
Apart from accurate reporting, Captains will need to look at every aspect of their operation and work schedules to find efficiencies and/or time saving solutions e.g. use of a standing shore team that speeds up turnarounds. Yacht management working with their captains to improve SMS and operational reporting, using technology to make the systems more user friendly and efficient. And, where practicable, directing much of the administration back to shore management, freeing Captains and crew to be the operators, focused on ensuring the yacht owners, their guests and charterers are the priority.
Final thought. Would you fly on a long-haul flight if the captain (eyes darkened by fatigue) was trying to finish the plane’s budget, next maintenance schedule, organise his parking at the next airport and was on the phone interviewing a cabin attendant as you boarded? I think the answer is obvious, so why do we run our yachts this way?
When I was asked to write a piece on Minimum Safe Manning (MSM) and how it affects yacht operations for the Superyacht Report, I knew that, although an important factor, it was only one of a number of considerations used to determine the crew complement. However, what was also clear, is that many yachts do not have sufficient crew to meet the expectations and demands of their owners and guests. A point that was recently expressed in article from the International Superyacht Society (ISS) Captains Committee, where they raised concerns about fatigue and its dangers, and asked:
Why is it that manning levels that were appropriate years ago are still accepted as the norm today?
From my own experience I can empathise with this.
Some time ago I took command of a yacht owned by a lovely family with a large family residence serviced by what seemed like an inexhaustible number of staff. For them, they were used to having the most attentive service 24 hours a day and had the same expectation for the yacht. They built a beautiful yacht that could carry up to 22 passengers which, she often did, but unfortunately was manned with the same number of crew as an equivalent 12 passenger yacht. As might be expected, it created significant challenges!
Following that experience, I also had the opportunity to review three new build PYC yachts and their manning. My observation on all of them, was that there was insufficient crew, partly because PYC compared to LY3 required additional MSM numbers, which impacted on the hotel side, but also due to the number of guests carried and services expected. After delivery, two ended up building more crew cabins – imagine the expense – and one downgraded to LY3 because they could not meet the MSM requirements without negatively impacting on the interior service. Clearly, if it was so obvious to an experienced mariner, why was it not obvious to the broker, designers and the shipyard?
The suitable manning of yachts is not restricted to large yachts either; there has been numerous discussions and articles written about crew on various sizes of yacht having to be ‘creative’ with their hours of work and rest in order meet owner/guest demands and remain compliant.
I suspect that many readers who have worked on busy yachts will have all had the same experience, where the team spirit, professionalism and commitment of the officers and crew to deliver the very best experience, overrides concerns about fatigue and the effect on performance, welfare, mental health, safety and crew retention.
So how are manning levels determined and, how can they be better understood?
Along with the MSM (more of which below) there are other factors that normally determines the size and makeup of crew:
Finance is an important consideration as crew expenses are amongst the highest operational costs so obviously it makes sense to optimise manning
Manning levels on similar sized yachts are used as a comparable standard, especially applicable to production yachts
Given the high value of the yachts ‘real-estate’ owners, understandably, will want to maximise owner/guest accommodation – the luxury spaces
Technical, service, access and operational spaces also require a large volume
Additionally, some in the industry may be keen to gloss over crew numbers to help with a sale, they may fail to manage the owners expectations or, just do not possess the operational experience to understand the numbers needed for a particular owner and yachts operation.
Once the above factors are considered and the various spaces assigned, the crew accommodation is designed following the Maritime Labor Convention (MLC) guidelines and the number of cabins/berths can be defined. Interestingly, MLC may actually be having some unintended consequences; as one respondent – maybe controversially? – in the ISS article suggested:
What we need is more berths not more space!
Minimum Safe Manning
A commercial yacht will require a Flag state approved MSM – many private yachts, as with other regulations, may also choose to comply on a voluntary basis.
An owner/operator will make an MSM application based on Flag guidance and the IMO Principles of Safe Manning Resolution A.1047(27). Once approved, an Administration will issue an MSM certificate, however, this is only the minimum number of crew (those requiring STCW or equivalent qualifications). This is the captain, deck/engineering officers and ratings and, cook, depending on crew numbers and Flag requirements, necessary to safely operate a yacht when it proceeds to sea:
The ship named in this document is considered to be safely manned if, when it proceeds to sea, it carries no less than the numbers grades/capacities of personnel specified in the table
This does not include the hotel team; service, housekeeping, laundry and galley, or the additional deckhands necessary to launch tenders, run the water sports, etc., or other specialists required these days – these are all additional to the MSM.
Of note is that the A.1047(27) changed from previous resolutions as follows:
A.890(21) and amendment A.955(23)
1.1.1 maintain safe navigational, engineering and radio watches in accordance with regulation VIII/2 of the 1978 STCW Convention, as amended, and also maintain general surveillance of the ship;
1.1 maintain safe navigational, port, engineering and radio watches in accordance with regulation VIII/2 of the 1978 STCW Convention, as amended, and also maintain general surveillance of the ship;
As you can see, safe manning in port was added but, so far, I have not seen any yacht specific guidelines on ‘port’ safe manning – commercial ships are normally involved in cargo operations so they tend to be more fully manned in port. In-port-manning can be a difficult issue for captains; it is often left to them to determine and they have to strike a fine balance between safely manning the yacht and providing crew valuable shore leave but, given number of incidents and fires in port, perhaps it should be better regulated? Running drills with reduced crew will help identify what is a safe number.
Often the Manning Scales provided by an Administration will be used as the standard. However, they allow some latitude on numbers based on the strength of the application and, operators can also take advantage of manning reductions allowed due to ‘distance from safe haven’ – which, for yachts, seems contrary to their operational demands?
Once the MSM has been agreed the rest of the crew can be determined – if the total number of berths is 15 and the MSM is 8, that leaves 7 berths for the rest of the team.
Three Hundred and Sixty Degree Approach
As can be expected expect this approach produces mixed results – a bit like the ‘off-the-shelf’ budget that so often disappoints.
What is necessary a three hundred and sixty degree approach; an in-depth assessment of all the factors and how each unique owner wants to use their yacht. Only once armed with that information can you estimate the right manning levels and/or manage expectations by modelling the expected demands, peaks and crew work schedules.
The point of managing an owners expectations is key, especially in the case of production and semi-production yachts where crew accommodation/berths tend to be fixed. In these circumstances it is still important to make the assessment. This helps avoids frustration and disappointment by communicating any limitations that may surface, along with possible solutions, such as use of external laundry services, shore-based crew, or shadow boat, at the earliest stage to an owner.
Yes, the yacht can operate with these crew numbers but, the service onboard will be limited in these areas…is that what you want?
Making a proper assessment requires effort and collaboration; asking questions, getting to know an owner, how they expect to use the yacht and the style and depth of services that are important to them.
• Likes quiet time with wife and one or two guests
• Meal times, silver service and large and varied selection
• Rises late goes to bed early
• Has boat full of family and friends
• Likes to be in port as often as possible
• Likes to party and stay out late
• Eats very light diet and at strict times
• Loves to be at anchor
• Guests have to follow his rules
• Some guests rise early late, others rise late and bed late – no rules set for guests
• Wants very light touch and informal service
• Love water sports, all the toys setup and available
• Happy to help themselves
• Tender rides for sightseeing, shopping trips, etc.
• Doesn’t want fuss
• Wants a masseuse available
• Just love being on the yacht
• Expects crew to look after children
• Wants formal service at all times – loves the attention and show
• Will not help themselves and expects stewardess on call 24/7
• Often invites friends over for drinks/meals at short notice
On both (A) and (B) the normal crew complement was 19. The manning on (A) worked well, but on (B) we were unable to deliver and maintain the standards of service expected and without being non-compliant. Fortunately, the owner was understanding and pragmatic and, after detailing the issues and possible solutions, it was agreed that we would use two guest cabins for 4additional crew that allowed us to provide the level of service that was important to him. Later, the the yacht was modified and 2 additional crew cabins (4 berths) were added at considerable expense.
Understanding use and gathering information similar to the above example will help to determine the appropriate manning levels, especially during those important peak times in guest operation, and allow you to develop work schedules for all crew and each department. It may need several iterations and some finessing to get right but this is a crucial exercise as it provides the information necessary to have a meaningful discussion about manning with an owner.
Operational vs. Standby
Unlike a commercial ships where workload and manning is more easily determined and manage accordingly, yachts are a much more difficult and, not just because of different owners demands and expectations but also the seasonality and operational profile.
Many yachts, apart from shipyard periods, operate all year round, on standby for visits at the drop of a hat. These tend to be larger yachts and so full manning required can more easily be justified.
Smaller, or one season yachts, are a more complex situation. Whilst it might be essential to have 19 crew during the season, it may be difficult to justify that number sitting in port for the winter with no guest movements where a more appropriate number might be 12 i.e. sufficient to safely man and maintain the yacht in good order. And, if that choice was made, at least you have the berths necessary to increase crew for the season; though it should be noted it is easy to downsize a crew but, much more difficult to upscale again and expect the same quality of crew, personalisation, level of service, operation and safety standards.
Importantly, manning levels should be determined by the peak periods of operation; after all, that is when an owner or charter guest gets to experience the depth and quality of service.
In my time I have seen the whole industry evolve and so many positive changes have taken place.
Today, yachts are better built, more reliable, safer, officers and crew better qualified and trained, employment conditions improved, and there is now much better support available from yacht management and other shore-based service providers. At the same time, there has also been an incremental increase in owners expectations – some examples below: –
Yachts and guests now rely heavily on electrical/electronic and AV/IT systems
Beach clubs’ add another deck to be servced
SPA therapists, hairdressers, gym instructors, nurses, nannies, are now routinely carried – are they single or dual role? Whatever the case, it generally means service and housekeeping are stretched as they lose a member to other activities
Every night is ‘theme night’ with new table decorations and service expectations
Photograph/video guest experience and provide a personal record for guests to go home with
Flight crew, security and owners staff can add to numbers carried and place their own demands on crew
Tenders are bigger, requiring more crew to launch and operate
More toys carried like inflatable slides -heavy and labour intensive to setup/breakdown, especially when wet! – an ever-expanding list of toys, diving equipment, motorcycles, etc. – all require crew and maintenance
Diving, Pilates, jetski, sailing, windsurf, kite surf…an almost endless list of activities
Accommodation for river or ice pilots for yachts traveling further afield
These are further compounded by an increase in paperwork that is a fact of modern yachting e.g. budgets, purchase and approvals, crew HR functions, maintenance and refit planning, safety management systems, and management reporting – this generally falls on the shoulders of the captain and senior crew. One study on a 100m+ showed that the captain was spending 33% his time on their management companies demands which, along with their normal duties and responsibilities, was clearly unsustainable.
Whilst there has been some positive changes in the industry that should be celebrated, the evidence suggests that manning levels maybe one element that has not profited from the evolutionary process.
Perhaps yacht crew are partly to blame for this due to yachting culture, as already posited, where they will work all hours necessary to deliver the very best experience for owners and guests, and often do so without complaint or communicating the problem outside of the yachts team. And, apart from this cultural norm, there are also undeniable concerns about job security where captains and crew may be reluctant to speak-up and/or report their hours of work and rest accurately for fear of losing their job. However, it is important as proper reporting helps to educate owners and the wider industry. Furthermore, if there was an incident and an inquiry, if falsification of hours of work were discovered and fatigue the root cause or contributing factor, it could have serious consequences for the crew, especially the captain.
The quality of captain, officers and crew and, the onboard experience is, without doubt, key to the success of a superyacht and this can only be achieved with the right manning levels which, unfortunately, have not kept pace with the advances made in the rest of the industry.
As the ISS piece stated ‘for the love of yachting’ we need to have an honest conversation about manning that includes owners and all industry stakeholders, especially those with operational experience. Getting this right improves the health and well-being of the crew, their performance, retention, yacht safety and, ultimately, leads to a better ownership experience.
There can be no doubt that we have seen some significant improvements in employment of yacht crew over the last decade or so and, on the whole, they fare very well compared to many working on commercial ships. Unfortunately, disputes still do arise and, if it cannot be resolved amicably, legal action may be necessary.
With that in mind, a recent UK Employment Tribunal hearing raises some interesting questions for both owners and crew. The case involved a claim of unfair dismissal; however, the preliminary hearing was not to judge the merits of the case, but to ascertain whether the UK Employment Tribunal had jurisdiction over the claim.
The case involved a captain who was not a UK resident, working on a Cayman Islands flagged and owned yacht that spent time in UK waters, the captain was employed via a Guernsey employment company and the yacht was managed by a company based in France. His employment agreement also expressly stated that it was based on Guernsey law and that all parties would submit to Guernsey jurisdiction in matters relating to the agreement.
As per most maritime employment claims, a rather complex mix of parties and jurisdictions were involved. In this example, based on the submissions of the claimant and plaintiff, and case law, the decision was that it could be heard by a UK Employment Tribunal and, interestingly, despite the ownership structure, the judge also determined that the ‘effective owner’ was resident in the UK.
This raises some questions, such as; do the common employment practices provide the necessary protections for crew in the event of a dispute? And, is the protection often cited for owners, as robust as some would suggest?
In the past it was quite common for crew to be employed without employment contracts, I certainly never had one in the first 20 years of my time in the industry. But, with the growth in management companies and the introduction of the Maritime Labour Convention 2006 (MLC) Seafarers Employment Contracts (SEA) became the norm for Commercial yachts – with many Private yachts adopting the format of SEA for their crew.
Putting MLC to one side for the moment, one of the reasons why it was recommended that owners use an offshore employment company, was to distance the crew (Employee) from the owner (Employer) in order to limit the latter’s liabilities. With the introduction of MLC, an added advantage in using an offshore employment company in a sympathetic jurisdiction, was to minimise the number of social protections required by MLC – a minimum of 3 are required out of a total of 9 branches, which can be covered by insurance or National schemes – thereby, reducing liability and costs for an owner.
Under MLC there is a requirement for a connection between the Shipowner and the Employer; an SEA can only be signed by an Employer if they have authority from a Shipowner and there is evidence of that authority e.g. Power of Attorney – a ships Master can also sign. Those who are authorised should be noted in DMLC Part II. So, in the case of an MLC compliant yacht, there should always be a contractual link between Crew (Employee) and Shipowner.
Depending on the agreement, a management company who has taken on the responsibility for the management and operation of a yacht, could also be the ‘Shipowner’ under MLC – a similar definition as ‘Company’ as per STCW and the ISM Code.
As per Article II.4 of MLC, many flag States exclude pleasure yachts ‘not ordinarily engaged in commercial activity’
As per Article II.4 of MLC, many flag States exclude pleasure yachts ‘not ordinarily engaged in commercial activity’ (defined as Private throughout the rest of this article) from their enactment of MLC. Therefore, it is important to understand that SEA’s issued by Private yachts will not be MLC compliant unless a yacht has the necessary MLC certificates. And, if a yacht is not compliant, the SEA’s will probably fall outside the jurisdiction of flag State law. Even if a Private yacht is compliant, there are still questions about jurisdiction if they are expressly excluded from flag State legislation.
I believe some flag States are making progress towards making SEA’s compulsory for Private yachts, which will be a good thing however, they will also need to have a legal framework in place to provide the necessary oversight and enforcement powers. I wonder how easy that will be without upending the whole concept of Private yacht ‘voluntary compliance’ with MLC and other maritime codes and conventions?
In the meantime, perhaps Private yachts should rename their agreements simply as a Crew Employment Agreement (CEA) to avoid confusion and legitimacy with an MLC SEA?
Irrespective of whether yachts are Private or Commercial, where used, SEA’s have no doubt improved employment by the provision of a contract detailing the terms and conditions such as salary, leave, repatriation, notice period, working hours, sickness benefit, etc. – this has been a very positive advance. However, there is still a perception within the industry that crew feel there is little they can do in the event of an employment dispute.
Indeed, to illustrate this point, the Professional Yachting Association in a recent article stated:-
In reality, there is no job protection in yachting, and anyone can be fired at any time, without reason.” (PYA What to do when things go wrong – 27 Aug 2019).
It is likely that readers will have some knowledge of situations where owners, management companies and, yes, captains as well, have dismissed crew for a variety of reasons that would not withstand scrutiny under most domestic employment laws where there are better protections against such things as:-
Unfair dismissal – e.g. no reason given or, reason not one of those described within SEA or crew handbook.
Wrongful/constructive dismissal – e.g. forced to resign due to a breach of employment law or SEA, such as lack of due process, discrimination, sexual harassment, salary or leave disputes.
On many occasions crew are ‘persuaded’ to resign rather than being fired due to a belief it is better for their future employment prospects – this could be judged as constructive dismissal.
The latter point, along with the lack of clarity on the legal protections and jurisdiction, is probably why there may be a reluctance to make a claim; crew fear they may be labeled a ‘troublemaker’ and it might affect their career. This feeling is not limited to yachting, it also applies to shipping as highlighted in the EU report “Service contract regarding a study on the implementation of labour supplying responsibilities pursuant to the Maritime Labour Convention (MLC 2006) within and outside the European Union – Final Report October 21, 2015”. And, although ‘blacklisting’ is illegal, there is plenty of evidence to suggest it goes on within our industry.
It should be noted that most countries have time limits and qualifying periods of employment as prerequisites in employment disputes, particularly unfair dismissal However, if a case involves acts that are contrary to certain specified rights or civil liberties, e.g. discrimination, sexual harassment, etc. such time limits and qualifying periods may not apply, additionally, such cases may raise the possibility of criminal prosecution. It is therefore important to obtain the proper legal advice.
As alluded to previously, not helping matters is the confusion over the appropriate jurisdiction given the number of parties and administrations involved and their domestic, international and maritime laws: –
The Flag State (FS)
The Yacht Owning Company (YOC)
The ultimate beneficial owner (UBO)
Employment Company (EC)
Management Company (MC)
UNLCOS and UNCTAD state that a Flag State has “jurisdiction and control in administration, technical and social matters of ships flying its flags.
Although International conventions such as UNLCOS and UNCTAD state that a FS has “jurisdiction and control in administration, technical and social matters of ships flying its flags,” it is not always the case that they have the necessary motivation, resources or legal framework to provide an effective forum in the event of an employment dispute. And although we mainly use ‘white list’ high-quality flags within the yachting industry, some may have less favorable employment laws for seafarers – beyond that of MLC, if applicable – and crew may find them to be unsympathetic or lacking any enforcement power when it comes to employment disputes.
Employment companies, depending on their residency, and despite what may be stated in a SEA, may also not have the necessary laws in place to hear maritime employment disputes e.g. their employment laws may not apply to non-residents.
Given the above, it’s not surprising that there is a perception that crew feel that the odds seem stacked against them and there is little they can do.
This brings me back to the case mentioned at the beginning.
This case clearly demonstrates that, depending on the circumstances, motivated crew with the right legal advice and support can find a suitable forum and jurisdiction. In this case the UK Employment Tribunal, through domestic employment law and, EU REGULATION (EU) No 1215/2012 – on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, and the various submissions and precedent, judged that they can hear this case – this is good news for the captain.
It also demonstrated how owners might not be fully insulated from legal action, especially if there is a UK/EU connection and, irrespective of the ownership structure, an owners personal involvement with their captain, crew, yachts finances and operation, etc., may prove sufficient evidence to judge (as it was in this case) that they were the ‘effective owner’. Being identified in this way may be of some concern to some owners and their family offices as it raises questions about privacy and liability,
There have been similar cases in Europe where both yacht and commercial ships crew have taken advantage of EU legislation and domestic law to initiate an employment claim against an Employer and/or Shipowner irrespective of flag.
With respect to France, ‘concealed employment’ was introduced in 1997. Loosely, this description is given to an employment arrangment that helps an Employer avoid their obligations defined by the Labor Code and/or taxes or social insurance contributions. This is particularly relevant to those yachts that might be subject to French Social charges – I believe that some cases in France that started out as simple employment disputes became a more serious matter due to the fact ‘concealed employment’ was involved.
Returning to the questions raised earlier.
Yes, there are much better protections for yacht crew these days due to the widespread use of employment agreements and MLC, but, compared to domestic employment law, some protections may be less favorable. This is why crew may have to seek redress in domestic courts where, despite the perception and challenges involved, it is possible to find a jurisdiction who will hear their case. And, it appears that an ownership or employment structure may not always protect owners from being embroiled in employment disputes. It’s also worth remembering that, unlike arbitration, Employment Tribunals, as in this case, tend to be a matter of public record.
Finally, it is clear from my research, that most maritime employment disputes are not straight forward, they tend to be protracted and there can be significant hurdles involved. Depending on the circumstances of the case, the clear advice would be to try and find an amicable resolution before resorting to the courts.
Whenever I talk to owners and their teams, the subject of running costs and budget always comes up. I always advise, it is a fundamental tool for measuring the financial performance of the yacht but, like fine art, requires careful crafting and curation to be of value, and this always comes with a caveat – there is no ‘one size fits all’ model. That “10% of the value of the yacht” as often cited, can turn out to be a significant underestimation that can lead to financial shock and a negative ownership experience; with some owners withdrawing from the industry because of it.
There is no ‘one size fits all’ model
The cost of running a Superyacht is significant, with annual costs ranging from €2M for a 50 metre yacht, and up to €20M+ for some of todays Gigayachts. And, with such significant expenditure it is essential to have financial controls in place, and a well formulated, approved and monitored budget is one of the most valuable tools available.
A budget must; forecast the amount and timing of funds, measure performance and instill accountability and transparency into the fiscal management of the yacht.
A realistic budget takes time and effort to develop. The schedule of accounts must reflect the expenditure accurately and, as mentioned, this is unlikely to be achieved from ‘an off the shelf budget’ for an identical or similar sized yacht without adapting it to the owner and use.
The process of developing a budget requires proactive collaboration and consultation between the captain, the yachts team, and the owner, his family office, and/or management company. It will be important to understand how the yacht is to be used as this knowledge will help with the accuracy of the budget.
The process of developing a budget requires proactive collaboration
Knowing the cruising plans and use of the yacht e.g. one or two seasons, stand-by or scheduled use, crew employment terms and conditions, standard of maintenance, along with preferences for economy or speed, marina or anchorage, food and drink, etc., will help in creating a workable budget. There is also the question of private or charter, which although adds income to the yacht – not guaranteed and often over estimated – also has cost implications; extra hours on engines and systems, general wear and tear and crew issues.
The Head’s of Departments (HOD’s) – engineering, deck, interior and catering – should be involved in the development process and should have responsibility for managing their departmental budgets. This helps improve the accuracy of the budget, and serves as a motivational tool by giving senior crew ownership and accountability of their area of expertise.
As yachting is perhaps, the ultimate discretionary expense, and a big part of its appeal is the freedom and spontaneity it affords, one should understand that the budget is subject to many variances, some which can be significant depending on how plans change. In addition a yacht is made up of complex systems and equipment and operates in a hostile environment. This will inevitably result in breakdowns or incidents that cannot be readily modeled into the budget, other than trying to mitigate a potential shortfall by maintaining a contingency for unexpected events.
During the life of the yacht, the reality is that repair and maintenance costs will increase. A new yacht in its first year is covered by shipyard warranty, so associated repair costs tend to be low – although beware of the travel and subsistence costs that may be levied as these can be high if there is a large amount of work carried out remote from the shipyard – in later years, these costs will progressively increase as the operating hours take their toll on equipment, systems and machinery.
Future expenses that I would categorise as Periodic Maintenance, such as dry docking and shipyard periods should also be considered. A Private or Commercial Yacht 12 PAX or less, will require two dry-docks in a five year cycle for works such as – Class survey, antifouling paint, checking and maintenance of shafts, stabilisers, rudders, bowthruster, anchors and cables, hull and ships side valves. It is also likely that the hull and/or superstructure may need a repaint within that period, again a cost that should be budgeted for. The cost of servicing engines and generators – excluding the normal checks and oil/filter changes – is often something that is overlooked and is dependent on use and hours. As an example a service contract by one engine manufacturer for maintaining 2 x 300kW engines over 16,000 hours was around €450k, and 2 x 3600kW engines over 12,000 hours was in excess of €550k.
Periodic Maintenance costs are cyclical and spread over a number of years and there are a number of ways of accounting for these. An owner should decide if he wants he to spread these over a 5 or 10 year cycle, or whether he would prefer each year to be independent, with Periodic Maintenance added separately.
An owner should decide if he wants he to spread these over a 5 or 10 year cycle
Capital expenditure for new equipment and/or upgrades should also be accounted for as a separate category as it falls outside the normal operational expenses of the yacht.
Following good accounting practices there should be sufficient cost centres, sub-catagories and account codes – the metrics – to enable a thorough analysis of expenditure. For example with suitably defined crew costs, the budget could be used to highlight and identify the real cost of high crew turnover by spikes in recruitment fees, uniform, repatriation/travel costs, etc., and provide the financial imperative to resolve the situation. Lumping costs together limits transparency and value of the budget and should be avoided.
Inevitably the budget will go through a number of versions as it is developed, reviewed and finessed, before finally approved by an owner. And, once implemented, the budget will need to be effectively monitored to ensure the defined financial targets are being met and any variances are brought to the owner’s attention without delay.
The budget is an important aid but, is only part of the picture, it must also be backed up with other controls and procedures in order to effectively manage the yachts finances. These include such things as format and frequency of reporting and auditing, purchase order request and approval process, and setting expenditure limits and authority.
As many of the suppliers and service providers we rely on in the industry tend to be small businesses, the effect of delays in the payment cycle can be profound. And, for the yacht, it can create reputational damage – you end up being at the back of the queue or, ignored completely, for services and supplies which, in high season, can impact on the owner and guest experience. Having a budget that effectively forecasts cash flow can ensure funds are available to make prompt payments – although sometimes, unfortunately, slow payment is the policy of an owner or his financial team.
Finally, it should be understood that the budget is a dynamic document and will need to be continuously reviewed and improved upon over time, and changed as circumstances dictate. If crafted and curated well, the budget provides an owner with a valuable tool in understanding and controlling costs, minimising financial shock and, improving the ownership experience.