New Zealand small businesses are still hiring amid global uncertainty but the pay packets are barely growing, according to new payroll data from Employment Hero.
The Employment Hero Jobs Report for March, drawn from anonymised payroll data covering more than 10,000 businesses and 70,000 employees, shows SME employment grew 5.8 per cent year-on-year. Wage growth, however, has slumped to just 1.1 per cent, down from 4.2 per cent twelve months earlier. With inflation sitting at 3.1 per cent and forecast to climb higher, the purchasing power of take-home pay is shrinking for workers across the country.
The data – the first since the conflict began in the Middle East – reveals a labour market pulling in two directions. Employers are confident enough to hire – casuals in particular – but cautious about increasing pay. Beneath the headline figures, a surge in casual hiring, sharp regional divides and sector-level wage contractions paint a more complex picture for SME owners navigating workforce and budget decisions in the months ahead.
Casual Hiring Surges as SMEs Favour Flexibility
The most striking figure in the Jobs Report is the 18.3 per cent year-on-year increase in casual employment across New Zealand SMEs. Growth was particularly strong in the final quarter of last year. Growth in casual employment in March was up 0.7 per cent month-on-month.
This suggests many small businesses are responding to economic volatility by building flexibility into their workforce rather than committing to permanent headcount. There can be a trade-off, however, as high casual turnover carries its own expenses, from recruitment and training through to lost productivity and weaker team cohesion.
More broadly across all employment types, year-on-year growth sits at 5.8 per cent, but there’s been movement in recent months. Month-on-month growth in March was at 0.5 per cent, rebounding from a January low of -0.8 per cent.
Inflation Is Far Outpacing Wage Growth
The gap between wages and prices is widening, creating a challenging environment for both employers and staff. While the Reserve Bank held the Official Cash Rate at 2.25 per cent in April, it flagged that inflation could reach 4.2 per cent in the June quarter due to the Middle East conflict’s impact on fuel and global supply chains. For small business owners, this means freight and utilities will likely climb further, yet the ability to pass these costs to customers remains limited.
Just 12 months ago, wage growth of 4.2 per cent was broadly keeping pace with the cost of living; today, at just 1.1 per cent year-on-year, it represents a substantial real-term loss for the average worker.
Recent data hints at a fragile recovery, with wages finally bouncing back in March by 0.4 per cent month-on-month. This follows a poorer start to the year where Q1 was marred by negative growth of -0.4 per cent in January and -0.9 per cent in February. With the possibility of a further interest rate rise later this year adding another layer of uncertainty, SME owners may face retention issues as workers who are struggling to pay their bills consider switching jobs to achieve a higher salary.
Regional and Sector Divides Are Reshaping the Talent Map
The national averages mask significant variation across regions and industries.
The South Island is outpacing the North Island on both employment and wage growth, according to the Jobs Report. Jobs grew by 1.2 per cent in the south and 0.6 per cent in the north in March.
There was negative employment growth in the capital in March, down 0.3 per cent, while wages have fallen 1.3 per cent. Given Wellington’s concentration of government and professional services roles, the stagnation may reflect ongoing public sector belt-tightening. The only other region to lose jobs was Otago, slipping 2.5 per cent, with the decrease following a period of construction-fuelled jobs growth.
At a sector level, the disparities are stark. Accounting, HR and Legal saw employment surge 21 per cent year-on-year, while Engineering contracted 21.2 per cent. Sales, Marketing and Media wages dropped 6.2 per cent over the same period.
These trends matter for SME owners competing for talent. A business hiring in a growing sector or a strong region faces a fundamentally different labour market than one operating in a weaker space. Pay benchmarking that relies on national averages or outdated salary surveys risks being misleading in a market this fragmented.
