Good news: Median wage growth in SMEs is generally keeping pace with the cost of living

The July Employment Hero SME Index shows an increase in median wages and growing employment numbers, which highlights the resiliency of the small and medium-sized employment sector.

In good news for anyone employed by small and medium business, the Employment Hero SME Index has shown that the median wage across Australia has increased overall by 7.5 per cent over the past year. This means that the wage workers are taking home has generally kept up with the growing cost of living.

“Small businesses play a vital part in the Australian landscape, they are the backbone of the Australian economy,” says Ben Thompson, Founder and CEO of Employment Hero. “It is a challenging environment but our July Employment Hero SME Index is encouraging and shows the resiliency of the small and medium-sized employment sector.”

The Index uses an accumulative dataset of more than 120,000 small and medium-sized businesses (SMEs) and over 1.1 million employees in Australia. The Index records trends and changes in business growth and decline across Australia, including detailed analysis of business size, geographic location, and key industries.

SME median wages growth is keeping up with the cost of living

Year-on-year median wages increased overall by 7.5 per cent in July 2022, and by 0.5 per cent over the last month. By comparison, the annual CPI inflation increased to 6.1 per cent in the June quarter this year.

“Wages growth has been strong overall, however, there has been some divergence between states and territories, as well as between SME sizes,” says Thompson.

Wages of employees in smaller enterprises (1-19 employees) were less promising but still positive, growing by four per cent since July 2021. The biggest growth was seen among employees in medium enterprises (20-199 employees) with +6.3 per cent growth. Wages in larger enterprises (200+ employees) were also up, showing an increase of+6.7 per cent.

In July 2022, the median hourly rate for employees working in Australian SMEs was $33.75. The median hourly rate for employees in medium enterprises was highest at $36.57. Small business paid a medium $30.00 hourly rate and large enterprise $35.14.

“Amongst the backdrop of rising costs of living, 72.2 per cent of business leaders stated they support recent wage increases in our June SME Economic Sentiment Survey,” notes Thompson. “Our latest figures on wage growth confirm this and demonstrate SMEs’ commitment to their employees and to their community.”

State-by-state median wages growth

Wages growth for SMEs in New South Wales (+8.1 per cent), Queensland (+8.2 per cent), Western Australia (+8.8 per cent) and the ACT (+9.1 per cent) was above average. The median hourly rate for employees in July 2022 was $35.00 in New South Wales, $32.59 in Queensland, $34.00 in Western Australia and $37.45 in the ACT.

That said, compared to July 2021, wages growth in the Northern Territory (+4.4 per cent), South Australia (+5 per cent), and Tasmania (+5.8 per cent) was below average. The median hourly rate for employees in July 2022 was $36.17 in the Northern Territory, $32.58 in South Australia and $31.74 in Tasmania.

Industry median wages growth

The biggest growth in median wages was seen among employees in Science, Information and Communication Technology, where the hourly rates grew by 2.8 per cent since June 2022.

In Manufacturing, Transport and Logistics and Construction and Trade services, wages marginally grew between June and July 2022 by 1.0 per cent and 1.2 per cent respectively.

Meanwhile, across Retail, Hospitality and Tourism, and the Healthcare and Community services, median wages did not grow since June.

In July 2022, the median hourly rate for employees in Science, Information and Communication Technology; Manufacturing, Transport and Logistics; Construction and Trade services; Retail, Hospitality and Tourism; and the Healthcare and Community services was $48.84, $32.89, $35.42, $28.00 and $38.23 respectively.

SMEs continue to grow, but the pace is slowing

As of July 2022, the average number of employees among Australian SMEs was 12.6 per cent points more than in January 2019.

“It is positive to see the average employee size increase and growth of the median wage since last year given that the JobKeeper program has ended and the intense economic pressures at play,” says Thompson. “I commend the small business community for their efforts in keeping millions of Australian workers in jobs and keeping wages growing, despite these challenges.”

However, the Index fell by -0.1 points between June and July 2022. While year-on-year comparisons show SMEs are still growing (the Index experienced 7.7 per cent point growth between July 2021 and July 2022), the pace of growth is slowing.

While SMEs in all Australian states and territories experienced a small growth in employment numbers compared to a year ago, a uniform trend shows employee growth since June 2022 marginally declined across all states and territories.

“Our latest data shows that while employment growth has been strong among SMEs over the past year, the pace of growth is slowing,” says Thompson. “This is most evident among smaller enterprises that have experienced a contraction in employee size over the past month.”

The decline in growth has particularly hit Construction and Trade services and the Retail, Hospitality and Tourism industries.

Talent management is especially critical right now

Thomson notes: “There’s also a second story here. We know that the last few years have made it tougher to find and keep skilled talent, so SMEs are also more likely to pay more for top performers to compete with the skills shortage.”

Thomson urges SMEs to focus on talent management during the current tough economic conditions. “Are you staying on top of wages and your employer brand? Are you exploring all options of employment – including remote hiring? Can new technology or processes help drive better efficiencies and returns for your business? Through upheaval, businesses who stay agile and continue to optimise will be best placed to make it through.”

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