The SME Growth Index, released by non-bank business lender ScotPac, reveals that almost 70 per cent of SME owners plan to reduce their hiring of new employees due to cost pressures following national wage increases introduced in July.
On 1 July 2023, the national minimum wage rate was increased by 8.65 per cent to $23.23 per hour, while award rates jumped 5.75 per cent, with around three million Australian workers benefiting from the increase. ScotPac’s research notes that the wage increase has had a considerable impact on the business plans and growth projections of Australian SMEs. The research in particular, highlighted the following:
- 64 per cent plan to reduce existing employee hours and / or headcount.
- 33 per cent believe the wage increases are negatively impacting their growth prospects.
- 17 per cent said they would increase reliance on contractors rather than employees.
- four per cent said wage pressures had ‘pushed them over the edge’ and they were considering closing their business.
The results mirror similar concerns expressed in the previous SME Growth Index Report (Q1, 2023) in which more than 60 per cent of SME owners across the country listed wages growth as their leading cost concern.
The report shows that the average number of full-time equivalent employees in Australian SMEs has fallen in all 19 rounds of the SME Growth Index reports, from 88 in May 2014 to just 57 today.
ScotPac CEO Jon Sutton said that the latest feedback from SMEs may see an acceleration of this trend.
“Ensuring there are available funds to pay wages and other payroll commitments can be time consuming and stressful for SME owners and operators, particularly with new award frameworks to implement,” Sutton said. “While wages pressure is a perennial concern for SME owners, the recent round of mandated increases may have tipped the scales and prompted many to act on costs. With SMEs being such a crucial part of the national employment picture, this may have a flow-on effect for unemployment and underemployment rates in coming months.”
