Employees work more for less as businesses struggle – report

Small businesses are hard hit, with minimal employee growth compared to larger businesses

Employees work more for less as businesses struggle – report

Australians are increasingly working longer hours for lower pay, particularly in small businesses, which are struggling amid economic challenges.

This trend was revealed in the latest Employment Hero SME Index, analysing data from over 1.5 million employees and 150,000 small and medium enterprises (SMEs) in Australia.

The report indicates that despite a slight increase in the median hours worked monthly (1%) and annually (2.3%), wages fell by 1.3% in February. This decline is in stark contrast to an annual wage growth of 7.5%, suggesting that wages might be adjusting to market conditions after a period of heightened operating costs that have pressured businesses.

Small businesses, defined as those with one to 19 employees, are especially hard hit, showing minimal employee growth (0.3% monthly and 5.6% annually) compared to medium and large businesses.

This slowdown is coupled with an increase in business insolvencies to a nine-year high, as reported by the Australian Securities and Investments Commission (ASIC) last week, underscoring the potential crisis facing a critical segment of the Australian economy.

Wages are down across all Australian states, with the Northern Territory experiencing the sharpest drop (-2.4%) and Western Australia the least affected (-1%). Despite this, there was still moderate year-on-year wage growth in all states, led by the Australian Capital Territory and Queensland.

The technology sector, in particular, has seen significant cooling, with the lowest employee growth in the index and a notable decrease in median hourly wages (-4.8% monthly to $57.12) alongside a slight annual decrease.

Another key finding from the report is the generational divide in the workforce, with individuals aged 65 and over increasing their work hours by 10.4% monthly, likely due to economic pressures, while those under 18 saw a 5.1% decrease in hours worked annually.

“The latest index findings point out the dichotomy between overall employee growth and the challenges faced by small businesses,” said Ben Thompson (pictured), chief executive and co-founder of Employment Hero. “Just as our data has revealed, many businesses are experiencing overall employee growth, in line with February’s ABS unemployment rate, which dropped 0.4% from 4.1% to 3.7%.

“However, glaring issues remain for small businesses that are not only experiencing stagnant growth, but are at risk of insolvency and being forced to make hard decisions. As such, small business owners are looking to cut down on expenses and reduce workers’ hours, while their employees are having to navigate job instability, underemployment and consequential financial strain; making them likely to seek another job to make ends meet.

“Small and medium businesses are the heartbeat of our economy, accounting for almost 70% of employment in Australia. While larger businesses show signs of resilience and recovery, this report’s stark revelation shows small businesses are at a very real risk of going under. This demands immediate attention to safeguard these crucial contributors to our economy.”  

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