Cautious optimism prevails among SMEs

New employment data shows business confidence among small and medium businesses is optimistic despite ongoing economic and employment challenges.

Almost two thirds (64 percent) of companies surveyed expect business revenue to improve in the next 12 months according to The SME Employment and Employer Insights Report by human resources platform MyHR which analysed key employment data to understand the challenges SMEs are facing.

Almost half (48 percent) of companies surveyed expect business conditions to improve in the coming year, with 38 percent expecting them to remain the same. Salary wise, well over half (60 percent) said they expect to raise salaries in the next six months.  

“It paints a cautiously optimistic picture despite the bumpy ride many small and medium enterprises have had in the last financial year with rising inflation, living costs, wage expectations and significant weather events,” said MyHR CEO, Jason Ennor.

Five key trends emerged when businesses were asked about their biggest pain points in the past year: 

• Recruitment and retention.
• Cost management and financial pressures.
• Compliance.
• Employee productivity and wellbeing.
• Impact of external factors such as weather events.

“From rising costs right across the board and the struggle to recruit and retain staff, through to onerous compliance costs, there are many business challenges. With a general election also looming, it is little wonder businesses have been feeling uncertain. But now they are looking ahead for stability as they believe conditions will begin to improve,” said Ennor. 

Remuneration, recruitment, and retention challenges

Salaries across almost all industries included in the report had a year-on-year increase with 92 percent of respondents upping salaries or the hourly wage of their employees last year. Almost two thirds (60 percent) said they expect to raise salaries again in the next six months.  

“Employers are offering more money to attract and retain employees. Keeping hold of top talent and staff is a top business priority and many are being creative with remuneration packages to both entice and hold onto staff,” said Ennor.

While SME businesses may not be able to offer salaries comparable to larger corporates, Ennor said they can be more flexible when tailoring attractive benefits and packages.    

Examples of benefits employers are offering include:

• Flexible working arrangements (69.4 percent)
• Training and development (68.9 percent)
• Mobile phone or plan with full personal use (57.1 percent)
• Car parking – free, or subsidised (37.6 percent)
• Health and wellness allowance (31.8 percent)

The report found higher salaries are currently available in almost all regions meaning where a person lives is becoming less of a barrier to competitive pay.

“Inevitably Auckland and Christchurch top the salary averages but interestingly a region such as the West Coast was ahead of Wellington and Otago and Marlborough was almost on par with the capital.”

In general, recruitment in the last financial year remained stagnant. More than half of respondents (56 percent) said finding candidates with the right skills and experience for the role was the biggest recruitment challenge. While 92 percent of businesses had hired someone new in the last year, 39 percent said they found it hard to find the right person.

A fifth of respondents said finding enough staff to fill vacancies was their biggest challenge from a recruitment perspective.

Turnover remains high across all sectors

While employee turnover hit a four-year low of 46 percent compared to 58.8 percent in the previous financial year, having almost half a company’s employees leave in any given year presents a major challenge for any organisation, said Ennor.

The high turnover rates and pressures on employers to retain employees are reflected by the top three business concerns for those surveyed, which are:

• Keeping existing staff engaged and productive (22 percent)
• Retaining existing staff (19 percent)
• Employee wellbeing (19 percent)

More restructures on the horizon

Despite the challenging economic landscape, last financial year saw businesses holding off on significant headcount reductions with a decrease in restructuring among SME businesses compared to 2022.

However, May and June this year has seen a significant increase in restructure activity and requests, with 20 percent of survey respondents expressing their intention to restructure in the next six months.   

“Rather than a harbinger of darker days to come, this appears to be a short period or organic correction following year of economic uncertainty,” said Ennor.

The MyHR report was compiled using salary, recruitment, and turnover data collected from more than 1,200 businesses with over 29,000 employees. Additionally, over 400 business owners and managers were surveyed to gain insights into the challenges and trends that will impact their businesses in the current financial year.