The August Employment Hero SME Index  has revealed that the pace of employee growth has slowed for most small to medium businesses month-on-month. This is mostly due to the current talent crisis which is hitting most key industries. The flow-on effect is that salaries and median hourly rates have slowly lifted as businesses make retaining and attracting talent their priority.

The Employment Hero SME Index  uses an accumulative dataset of more than 120,000 small and medium-sized businesses and over 1.1 million employees in Australia. Its created from the average number of employees per business relative to the average number in January 2019, for which the Index has been set to equal 100. The Index records trends and changes in business growth and declines across Australia, including a detailed analysis of business size, geographic location, and key industries.

Numbers still growing, but at a significantly slower rate

As of August 2022, the average number of employees among Australian small and medium business was 14.3 points more than in January 2019, but growth from July to August 2022 was marginal at 0.4 points. While year-on-year comparisons show small and medium businesses are still growing, the pace of growth continues to slow.

Small and medium businesses in all Australian states and territories experienced growth in employment numbers compared to a year ago. Still, in a uniform trend, employee growth since July 2022 has stagnated or marginally declined across all states and territories.

The talent crisis has hit small and medium businesses across Australia. Tasmania (-0.1 per cent) fell the most, while New South Wales, Victoria, and Queensland reported no change from July 2022. Businesses in South Australia and Western Australia (both +0.1 per cent) reported marginal growth, as did the Australian Capital Territory (+0.2 per cent). The Northern Territory (+0.7 per cent) reported the most significant monthly change from July 2022.

Smaller businesses  in stagnation

Similarly, smaller enterprises (1-19 employees) continue to struggle in August, showing a month-on-month stagnation. Employee size in smaller enterprises hasn’t grown since July 2022, while medium enterprises (20-199 employees) and larger enterprises (200+ employees) experienced only modest employee growth, at +0.7 per cent and +0.8 per cent, respectively.

Employee growth in the Construction and Trade services declined by -0.1 per cent in August, while the manufacturing, transport and logistics industries and the science, information and communication technology industries didn’t experience employee growth month on month. The retail, hospitality and tourism, and healthcare and community services industries have grown by +0.2 per cent since July 2022.

“What we continue to see play out in our August data is that while employment growth has been strong year on year, the pace of employee growth from July to August is stagnant for most SMEs,” says Ben Thompson, Founder and CEO of Employment Hero. “We’re witnessing talent shortages affecting key areas and industries, which in turn is slowly lifting salary growth with median hourly rates increasing as businesses prioritise retaining and attracting talent.”

Wages increased overall

Year-on-year median wages increased overall by 8.6 per cent in August 2022 and by 1.8 per cent over the last month. In August, the median hourly rate for employees working in Australian SMEs was $34.45.

Since August 2021, median wages grew by +5.7 per cent for the Under 18 demographic, +7.0 per cent for 18-24-year-olds, +8.9 per cent for employees aged 25-64, and +7.6 per cent among 65+ year-olds. The median hourly rate for employees was $16.15 for those Under 18, $28.88 for 18-24-year-olds, $37.56 for 24-64-year-olds, and $35.00 for 65+-year-olds. The median wages for employees Under 18 experienced the most considerable month-on-month growth (+2.9 per cent). In contrast, median wages for employees aged 65+ grew the least over the same period (+1.2 per cent).

“Interestingly, while wages are increasing for workers 65+, the median hourly rate is lower than those aged 25-64. Given one of the areas discussed at the recent Jobs and Skills Summit was getting older workers back into the workforce, this disparity may not encourage them to postpone retirement plans.” notes Thompson. “Wage growth was higher among younger age groups, with under 18’s seeing the most considerable growth. This could be put down to better-paid apprenticeships and start award rates for younger workers.”

Northern Territory saw significant wage growth

Month-on-month wage growth was modest across most states and territories. The Northern Territory was the only exception where median wages grew by a noticeable +6.5 per cent since July 2022. Wages in Tasmania and Victoria (both +1.3 per cent), Western Australia (+1.4 per cent), the ACT (+1.8 per cent), and Queensland (+1.9 per cent) saw modest growth, while median wages in New South Wales (+1.1 per cent) grew the least since July 2022. The median hourly rate for employees in August 2022 was $38.53 in the Northern Territory, $37.51 in the ACT, $35.43 in NSW, $35.00 in WA, $34.16 in Victoria, $33.62 in QLD, $33.45 in SA and $32.75 in Tasmania.

Wages of employees in smaller enterprises grew by +5.1 per cent since August 2021. The most significant growth was among employees in medium and larger enterprises (+6.2 per cent and +8.2 per cent, respectively). The median hourly rate for employees in small, medium, and large enterprises was $30.61, $37.17, and $36.35, respectively in August 2022.

Highest wage growth in healthcare and community services

The biggest growth in median wages since July 2022 was among employees in healthcare and community services (+2.6 per cent) and the smallest increase was seen in science, information and communication technology (+0.2 per cent). Meanwhile, manufacturing, transport and logistics grew +0.6 per cent, construction and trade services grew +1.5 per cent and retail, hospitality and tourism saw a +1.1 per cent growth compared to the previous month.

“Moving forward, Australia needs to get out of our own way. We won’t progress as an economy if we refuse to acknowledge where we need to go,” says Thompson. “We are dealing with a legacy employment landscape when we should be focused on what’s possible in a world of digital employment. The Jobs and Skills Summit undoubtedly covered an expansive list of employment topics and issues, but I wonder if the last person attendees were thinking about were the employers, especially those on the smaller end of town?”

The Employment Hero SME Index is available to download here.

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