Small businesses are struggling to keep up with financial pressures

New research has highlighted a concerning trend around Australians working longer hours for reduced wages, with small businesses bearing the brunt of the economic downturn.

As if the current financial climate couldn’t be tougher, a new study from Employment Hero’s SME Index has revealed an alarming trend of Aussies working longer hours for less pay.

Median hours worked increased by 1 per cent in the month of February and 2.3 per cent since the same time last year. Despite this, wages dropped by 1.3 per cent from the month before.

This decrease contrasts sharply with a 7.5 per cent annual growth, highlighting that median wages may be undergoing the early stages of market correction after a year of elevated operating costs that have placed strain on businesses.

This strain is having a damning effect on small businesses throughout Australia. The data around small businesses (between one and 19 employees) showed that they are seeing a slowed employee growth of 0.3 per cent each month and 5.6 per cent annually. This flails in comparison to medium businesses at 1 per cent and 15.3 per cent, as well as large businesses at 0.9 per cent and 18.4 per cent.

This is not the only obstacle that is hindering small businesses. The report also revealed that they are coping with economic pressure by reducing employee work hours.

Slowing employee growth among smaller businesses signals a potential crisis among a group of employers that form the backbone of the Australian economy.

Ben Thompson, chief executive and co-founder of Employment Hero, stated: “The latest index findings point out the dichotomy between overall employee growth and the challenges faced by small businesses. 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 per cent from 4.1 [per cent] to 3.7 per cent.”

“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.”

The issues that small businesses are dealing with are then trickling down to employees who are dealing with job instability and lower wages.

“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,” Thompson concluded.

“Small and medium businesses are the heartbeat of our economy, accounting for almost 70 per cent 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.”