Recession fears forcing employers to consider decreasing staff levels

Contrary to some other recent coverage, a recent report found that over half of Aussie businesses plan to reduce staff headcounts if a recession hits.

Recently, HR Leader reported that research from Robert Half revealed that businesses are looking to ramp up their hiring in the latter half of 2023.

According to the report, 46 per cent of employers across the country have plans to hire for vacated positions in the next six months, up from 39 per cent six months ago.

Meanwhile, Robert Half’s research highlighted that just 8 per cent of Aussie employers foresee hiring freezes in the next six months, and just 3 per cent are expecting redundancies.

Recent data seems to disagree, with the What are the first cuts businesses will make in a recession? report from Small Business Loans Australia claiming that if a recession were to hit, employees would be the first to go.

The report revealed that 55 per cent of small to medium businesses (SMEs) would reduce headcounts if a recession were to happen.

Small Business Loans Australia said that CBA and HSBC put the likelihood of a recession affecting Australia at 50 per cent, making this issue quite likely to happen.

Employees working in medium-sized businesses (100 to 999 employees) are reportedly most at risk, with 23 per cent of medium-sized employers stating that they would make immediate staff cuts if a recession were to hit.

“We know that more than three-quarters of SMEs expect their cash flow to be affected by the current economic climate,” said founder and managing director of Small Business Loans Australia, Alon Rajic.

“When it comes to a recession, smaller businesses face similar risks as their larger counterparts, but their limited scale leaves them more vulnerable and increases the risk of failure in a downturn. It’s important for business owners to start considering the potential risks now and think about what actions they might take, considering the impact on their business as well as for their employees.”

Another 77 per cent said they’d make cuts directly affecting employees, including cutting both internal and outsourced staff, decreasing employee spending, pay cuts for senior leaders, and cutting opportunities for business travelling.

While reducing headcounts may be the natural reaction for many, reducing pay isn’t, with just 5 per cent of business owners considering pay cuts for senior leaders. Thirty-three per cent agree that redundancies are the most suitable cost-saving measure.

Medium businesses may be the most at risk. Mr Rajic said that small businesses can’t afford to make the same decisions as they’re more reliant on the staff they have.

“Smaller businesses may be less likely to cut internal staff due to operating leaner teams, where everyone is vital to the day-to-day operations. They often also have stronger interpersonal ties between employees and managers, making it challenging for smaller business owners to consider laying off internal staff,” Mr Rajic explained.