Small businesses are saying that despite recent tough conditions, they are looking forward to growth in the next 12 months, off the back of improved economic and political certainty, however many are reluctant to grow by hiring staff due to too many policies and procedures.
Although small businesses are matching the wider economy in growth terms, they are falling behind in increasing their employee headcount, with one third (31 per cent) of respondents employing fewer people today than 12 months ago, according to the latest Westpac Small Business Report in collaboration with Deloitte.
The most common hurdles to hiring are financial (38 per cent), only needing help occasionally (28 per cent), and wages and penalty rates (24 per cent) – suggesting more support is needed across industry and government to help businesses break down employment barriers.
Ganesh Chandrasekkar, General Manager of SME Banking at Westpac said many small businesses have faced tough conditions over the last six months with a slowing economy and tightening margin pressure, however there is some light at the end of the tunnel which can help boost employment.
“Given recent RBA interest rate cuts, a boost in infrastructure spending and a better-looking housing market, many small businesses say they are optimistic about the coming 12 months.”
“One way to boost confidence back into the market is to remove the complexities and challenges small businesses face when it comes to hiring. If every employing small business took on one additional staff member, that is 900,000 jobs. Even if we could create a fraction of that amount by removing employment barriers, it would make a big difference,” Chandrasekkar said.
To supplement household income, one third of small businesses have taken on a second job or ‘side hustle’, revealing their most common fear is having no financial security. This is particularly common amongst non-employing businesses (41 per cent), female small business owners (40 per cent compared to 25 per cent of males) and industries feeling more exposed in the current environment such as agriculture (52 per cent) and arts (45 per cent).
Many small businesses are taking advantage of the gig economy to embrace on-demand solutions that provide flexibility and easier access to casual employees, and it’s growing quickly – increasing 68 per cent in revenue terms in one year in NSW.
However, one in five (20 per cent) small business owners have no income outside their business and 15 per cent would lose equity in their home if their business were to fail. The average small business household gets two thirds (63 per cent) of income from the business.
“This places an extraordinary amount of pressure on business owners, their families and employees, for the business to perform. With over half of Australian small business owners using their personal savings to establish their business, this can have a deep impact on their mental and financial wellbeing.”