Cautious SMEs Cut Casual Hiring In Cooler Conditions

Further signs of softening are emerging in Australia’s labour market as small and medium businesses cut back on casual hiring and owners ensure that every dollar counts.

Employment Hero’s July Jobs Report, drawn from data from more than 23,000 Australian businesses and 1.7 million employees, records a 0.7 per cent month-on-month drop in casual employment, along with a contraction in SME employment more broadly.

Small and medium employers appear to be pulling one of the few levers they have left as they continue to face a prolonged period of instability, with slow demand, high costs, and super-tight margins.

“It’s been a hard year for Australian businesses,” says Ben Thompson, Co-founder and CEO of Employment Hero. “When businesses pull back on casual hiring, it’s a clear sign they’re being forced to scrutinise every dollar and ask harder questions about how they can stretch their resources further.”

Employers Put The Brakes On Casual Hiring

The 0.7 per cent drop in casual employment is the weakest result in 13 months. It reverses a trend which has seen business owners this year relying on flexible labour rather than adding permanent headcount.

Across SMEs, employment growth has slipped 0.1 per cent month-on-month. This is one of the lowest figures recorded this year, and also appears to be part of a broader trend. Businesses appear to be using existing teams to do more as they await signs the instability that has shaped this year has passed.

Amid the caution, there are pockets of optimism. The 18-to-24 age group stands out among other demographics, recording 0.9 per cent month-on-month employment growth. The data stops short of identifying a reason for the spike but points to continued demand for entry-level roles. At the other end of the spectrum, the 55+ age group has had the sharpest monthly movement, with a 1.2 per cent drop in headcount.

Wage Growth Is Slowing But Remains Above Inflation

The preference for younger workers does not appear to be the sole result of cheaper wages. Small and medium employers are paying more to secure entry-level workers, with earnings in this age group up 1.7 per cent month-on-month and a healthy 8.0 per cent year-on-year.

Across the board, wage growth in July sits at 1.2 per cent. This is the second consecutive month of decent growth, on the back of a 0.7 per cent increase in June. However, as the labour market softens, wage growth appears to be waning. Annual growth now sits at 4.2 per cent, the lowest figure in more than a year and down from a peak of 5.6 per cent in February.

Growth remains fairly consistent across employment types. Full-time wages are up 4.3 per cent year-on-year, with a median hourly rate of $52.10. The annual increase is 4.9 per cent for part-time employees ($41.60 median hourly rate) and 4.8 per cent for casuals ($40.80).

This data suggests the wage pressures of the past 18 months are gradually softening, and offers market context for small and medium businesses focusing on retention at a time when margins are tight.

South Australia Defies National Hiring Slowdown

The national employment picture is not uniform. South Australia is holding its own against the broader hiring slowdown, recording 0.7 per cent employment growth for July, the strongest result nationally. New South Wales has slipped into negative territory, down 0.4 per cent.

Results are also patchy when it comes to wages. Tasmania has the strongest annual wage growth in the country at 5.5 per cent. However, it is playing catch up, since the median hourly rate of $42.90 is currently the lowest in the country.

Queensland has the strongest monthly wage growth with a 1.8 per cent pay boost, and above-average year-on-year growth of 4.5 per cent. Median hourly wages in the Sunshine State now sit at $46.80, further closing the gap on New South Wales, where SME employees take home an average $47.20 per hour.

Some sectors are performing better than others when it comes to both employment and wage growth. Design and Architecture has seen the biggest increase in recruiting activity in July, up 4.8 per cent, while there is 2.0 per cent growth in Banking, Finance and Insurance and Administration and Office Support. Employment growth has contracted in Science and Technology (-4.3 per cent) and Engineering (-1.7 per cent).

Productivity Offers Best Hope Amid Uncertainty

Ben Thompson points out that while economic conditions demand caution from small and medium business owners, there is still room for optimism. “We’re not seeing them lose their ambition,” he observes. “Our quarterly pulse check of business leaders found more than half remain positive about the next six months.”

Thompson adds that the challenge is turning that confidence into capacity. “I hear from businesses every day that are under pressure to lift productivity, reduce staff burnout and be more selective about where they add headcount. That’s creating the slower hiring market we’re seeing, but it doesn’t necessarily mean a weaker one.”

He highlights productivity as the key to doing more with less in small and medium businesses, but notes owners remain overburdened by red tape and admin. “We’re standing on the edge of a once-in-a-generation opportunity, where AI and technology can fundamentally change how productive Australian businesses can be,” he says. “The question is whether we make it easier for entrepreneurs to seize that opportunity, or keep burying them in complexity.”