Business Daily Media
Business Marketing

More than half of Australian businesses will make staff cuts, in the event of a recession


With CBA and HSBC recently placing odds of a recession at 50 per cent, many Australian businesses are on tenterhooks, wondering if they will need to revise their business spending. New data reveals that more than half (55%) of small to medium business will cut employee related expenses first in the event of a recession increasing unemployment and putting greater strain on the cost-of-living crisis for ordinary Australians.

These figures have been revealed in a new survey of an independent panel of 202 business owners and decision makers across the full SME spectrum by business loan comparison site Small Business Loans Australia.

Employees at medium-sized businesses are at most risk.

Nearly a quarter (23%) of medium-sized business owners would make immediate cuts to their staff in an event of a recession.

Four in five (77%) medium sized business owners would make cuts directly affecting their employees, this includes cutting both internal and outsourced staff, decreasing employee spend, pay cuts for senior leaders and cutting opportunities for business travel. Both medium and micro-sized businesses, would be the first to cut internal staff at 23 per cent and 21 per cent of businesses admitting doing so, respectively.  

Alon Rajic, Founder and Managing Director of Small Business Loans Australia, says: “Smaller businesses may be less likely to cut internal staff due to operating leaner teams, where everyone is vital to the day-to-day operations. They often also have stronger interpersonal ties between employees and managers, making it challenging for smaller business owners to consider laying off internal staff.”

 

Business owners are reluctant to make cuts to their salaries.

Interestingly, business owners admitted to prioritising their own salaries over the job security of their employees. Only 5 per cent of business owners would consider implementing pay cuts for senior leaders, including themselves, during a recession. By Contrast, a third (33%) would prioritise staff redundancies as a cost-saving measure.

Almost 3 in 4 South Australian businesses will make employee cuts.

South Australian businesses are most likely to make business cuts that will affect their employees (73%), compared to 51 per cent of Victorian SMEs, which is the state least likely to make employee cuts. With 955,861 SMEs in Australia[1], a significant proportion of the working population will be impacted by job cuts at a time that will hurt them the most, with cost of living hitting records highs.

“We know that more than three-quarters of SMEs expect their cash flow to be affected by the current economic climate[2]. When it comes to a recession, smaller businesses face similar risks as their larger counterparts, but their limited scale leaves them more vulnerable and increases the risk of failure in a downturn. It's important for business owners to start considering the potential risks now, and think about what actions they might take, considering the impact on their business as well as for their employees," shares Alon Rajic.

The full survey results, including breakdowns across business sizes and states, can be found here: https://smallbusinessloansaustralia.com/what-are-the-first-cuts-businesses-will-make-in-a-recession/


This article is intended to provide general information only, and not financial advice. Before acting on any information in this article, you should consider your individual and business circumstances, and seek independent and professional legal, financial, taxation or other advice to help you determine whether these actions are appropriate for your needs.    

Small Business Loans Australia (smallbusinessloansaustralia.com) is an Australian comparison website providing Australian small and medium business owners with information on the different types of financing options and loans offered by Australian lenders, and how alternative lenders differ from banks. Small Business Loan Australia works with more than 30 Australian lenders and provides loans from $5000 to $1 million. For more information, visit smallbusinessloansaustralia.com  

Popular

MyState Bank Announces Changes to Interest

MyState Bank has completed a review of its current interest rates following the Reserve Bank of Australia’s (RBA) first meeting of 2023, where it lifted the official cash rate by 25 basis points, taking it from 3.10 per cent to ...

5 Ways to Make the Most of Your Commute

The commute can be one of the most frustrating things about working. It's time you could be using to do things you want to be doing, not sitting in a traffic jam. What if you could make your commute much more efficient, ...

Australia’s world-first drone pilot exam

The industry-transforming effects of the Civil Aviation Safety Authority’s long-awaited new drone pilot exam are already being felt with enquiries at one training provider quadrupling since CASA’s announcement late last month...

Virtual Office