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Brokers with SME clients need to be aware of their concerns regarding rising wage costs, according to ScotPac.
Small and medium-sized enterprise owners are increasingly concerned about payroll costs and employee intake due to the national wage increase, with many now looking to change their staffing approach, according to ScotPac.
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The non-bank lender’s latest SME Growth Index report found almost 70 per cent of SME owners plan to reduce their intake of new employees due to the cost pressures caused by the national wage increases introduced in July.
From 1 July 2023, the national minimum wage was increased by 8.65 per cent to $23.23 per hour and award rates rose 5.75 per cent.
ScotPac said as a result, wages growth has become the greatest concern for Australian small and medium-sized businesses across the past six months, with many looking to rein in growing costs.
Jon Sutton, chief executive of ScotPac stated: “Ensuring there are available funds to pay wages and other payroll commitments can be time-consuming and stressful for SME owners and operators, particularly with new award frameworks to implement.
“While wages pressure is a perennial concern for SME owners, the recent round of mandated increases may have tipped the scales and prompted many to act on costs.”
Mr Sutton added that with SMEs accounting for 97 per cent of all businesses in the country, if more than two-thirds (69 per cent) decided to hire fewer new employees to combat wage growth, as the report found, it could have a “flow-on effect for unemployment and underemployment rates in the coming months”.
The lender revealed that the primary strategies and reactions by SME owners and operators in the face of growing wage bills are:
- 64 per cent plan to reduce existing employee hours and headcount.
- 33 per cent believe the wage increases are negatively impacting their growth prospects.
- 17 per cent said they would increase reliance on contractors rather than employees.
- 4 per cent said wage pressures had pushed them over the edge and they were considering closing their business.
Mr Sutton encouraged SME owners to contact their brokers about possible working capital solutions before undertaking any major changes to staffing levels or structures.
He also called on brokers to reach out to their SME clients to see how they can help them in light of the report and the recent rate increase.
“With interest rates at a 12-year high following this week’s rate rise, now is a good time for brokers to initiate a lending health check with their clients,” Mr Sutton added.
[Related: Unpaid invoices mean SMEs face potential $22bn shortfall]
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