Over half of Australia’s small businesses (55 per cent) say they will cut jobs to manage ballooning costs and an imminent recession, according to new data from Small Business Loans Australia.

The figures come hot on the heels of the CBA and HSBC placing the odds of Australia going into recession at 50 per cent, despite the Reserve bank placing interest rates on hold for the second consecutive month. The survey results suggest Aussie workers will be in the firing line should economic conditions worsen.

Nearly a quarter (23 per cent) of medium-sized business owners confirmed they would make immediate cuts to their staff in the event of a recession. While over three quarters (77 per cent) of medium sized business owners said they would initiate cuts that would directly affect their employees. Cost-cutting measures would include reducing both the number of internal and outsourced staff, decreasing employee spend, pay cuts for senior leaders and cutting opportunities for business travel.

Key points

• 55 per cent of small businesses would make cuts directly affecting their employees
• Only 5 per cent of business owners would consider cutting the pay of senior leaders
• 23. Per cent of micro businesses have already made staff cuts

Staff cuts on the horizon

Both medium and micro-sized businesses would be the first to cut internal staff at 23 per cent and 21 per cent of businesses admitted already doing so.

Alon Rajic, Founder and Managing Director of Small Business Loans Australia, says small businesses were more likely to hold on to staff that are key to day-to-day operations but larger businesses may be less likely to do so.

“Smaller businesses may be less likely to cut internal staff due to operating leaner teams, where everyone is vital to 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,” Rajic said.

Business owners reluctant to slash their salaries

Interestingly, business owners admitted to prioritising their own salaries over the job security of their employees. Only 5 per cent of business owners would consider implementing pay cuts for senior leaders, including themselves, during a recession. By contrast, a third (33%) would prioritise staff redundancies as a cost-saving measure.

“We know that more than three-quarters of SMEs expect their cash flow to be affected by the current economic climate^[2]. 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,” Rajic concludes

Check out the full survey results.

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