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SME suppliers paying lower wages while stats reveal delayed COVID impact

Lower Wages

For the first time since May 2023, SME wages have dipped month-on-month (MoM), according to Employment Hero’s latest SME Index.

The payment platform’s data  — which comes from 150,000 businesses and 1.5 million employees — reveals a 0.3 per cent decline in wages from October to November, following six months of stagnant wages.

Healthcare and community services were affected most severely (-0.7 per cent drop in wages), followed by science, information & communication technology (-0.5 per cent) and manufacturing, transport & logistics (-0.4 per cent). 

SMEs in construction, trade services and science, as well as those in information and communication technology, saw a decrease of -0.01 per cent in employee growth, while retail, hospitality and tourism increased the most at 0.2 per cent.

Across the country, South Australia (0.1 per cent), Victoria (0.2 per cent) and Tasmania (0.3 per cent) were the only states with an increased median hourly rate (MoM), while SMEs in the Northern Territory saw the biggest decline in employee growth at 0.2 per cent.

Victoria fared better with a 0.04 per cent rise, while Tasmania, New South Wales and West Australia experienced an increase of 0.1 per cent. SMEs in South Australia saw the largest monthly growth increase of 0.2%.

Workers aged between 25 and 64 saw a median wage decrease of 0.01 per cent, while 18 to 24-year-olds and workers under 18 saw increases of 0.3 per cent and 0.6 per cent, respectively. Workers over 65 saw no change in wages.

The median hourly rate for employees working in Australian SMEs is now $37.77, which is $0.19 less than the previous month.

Commenting on the findings, Ben Thompson, co-founder and CEO of Employment Hero, said: “After months of slowing, wages in Australia’s SME sector have decreased for the first time in six months. As the data shows wage growth is flattening to align with inflation, the RBA must consider halting interest rate increases for at least the near term.

He added: “This critical alignment of wage growth with inflation and an ongoing decline or slowing of average employee growth in SMEs marks a potential turning point in the nation’s economic trajectory. 

“Our data indicates that the economy will continue to cool off as we head into 2024 and it is likely mid-next year, we’ll see SMEs cutting back on hiring and growth plans as the economy potentially enters a small recession.”

Elsewhere, new ‘Series 3’ annual insolvency statistics from ASIC highlight the delayed impact of COVID-19 on SMEs.

Based on external administrators’ reports, SME insolvencies continued to dominate with an average of three to four causes leading to the collapse of each company.

The most common reported causes were inadequate cash flow or high cash use (52 per cent of reports), followed by ‘other’ (50 per cent) and trading losses (49 per cent).

Further analysis of the ‘other’ category showed 19 per cent of reports identified the pandemic as a contributing cause.

The construction industry was the hardest hit with 28 per cent of reports, followed by the accommodation and food services industry with 15 per cent.

New South Wales saw the most insolvencies in 2023 (41 per cent), followed by Victoria (27 per cent) and Queensland (18 per cent).

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