Labour shortages starting to lift wages: Xero

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“Now, we’re finding people wanting to work with businesses where they feel more secure; people are happy to take a job now with us because we don’t just go and stand down staff,” Mr Simmons said.

Xero chief economist Louise Southall said the cloud accounting provider was seeing businesses having to increase wages to attract staff. “It’s very much a hot topic for them at the moment,” she said.

Reflecting strong labour force data showing an additional 115,000 people in work in May, Xero’s Small Business Index recorded a 5.5 per cent increase in jobs year-on-year, including a 3.3 per cent lift in hospitality.

Wages measured by average hourly earnings also grew 2.7 per cent.

“Sectors such as arts, retail and hospitality, which were really impacted the most by the lockdowns, are starting to see an uptick in jobs and salaries,” Xero Australia chief executive Trent Innes said.

The overall index, which is smoothed for turbulent 2020 swings, increased seven points to a record of 132 over the month, underpinned by strong job gains, increases in wages, and time to be paid hitting new lows.

Tracking four key indicators of small business success, the index is part of Xero’s Small Business Insight program available exclusively in the Financial Review each month.

Sales increased 6.3 per cent year-on-year with healthcare (12.8 per cent), retail (10.7 per cent) and hospitality (8 per cent) recording strong growth; however the result was down from 8 per cent in both March and April.

Time to be paid fell by half a day to 22.9 days in May, the second time the measure has fallen below 23 days since the index began in January 2017.

While Industry Beans has had success in attracting and retaining workers, it has not been an easy road and many businesses, including those in accommodation, hospitality and retail are struggling.

Jobs website Seek posted 220,000 new job ads in April – the highest in the online employment platform’s 23-year history – but applications per ad have fallen to almost a decade low, underlining a structural issue in the market.

Mr Simmons said his company usually had about seven job ads at any one time with two HR people dedicated to employing new staff and ensuring the company’s ads were refreshed and prominent.

Analysis of employment data by the Commonwealth Bank suggests while employment for Australian residents has returned to pre-COVID-19 levels, employment is still down 2.1 per cent through the March quarter when factoring in the absence of more than 280,000 non-resident workers.

“Vacancies have surged across a whole range of industries. Those industries that have a higher concentration of foreign workers, like hospitality, have an incredibly high number of vacancies,” said CBA economist Gareth Aird.

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