Small business held to ransom by staff shortages

Oct. 10, 2022 | 5 Min read
Starting or operating a small business is never easy, however since 2020, business owners have had to deal with truly unprecedented challenges, Tim Roberts writes.

Starting or operating a small business is never easy, however since 2020, business owners have had to deal with truly unprecedented challenges, Tim Roberts* writes.

Whilst the world has finally emerged from COVID-19 restrictions, the events of the past two years are still impacting the viability of small businesses across the country.

Small businesses are paying the price for poor management of governments and world leaders of the past. For example, the Morrison Government ushered out vital skilled workers when the pandemic struck, and understandably these workers are not rushing back to our shores.

In addition to this, the stimulus measures taken had to be rushed out and therefore the targeting of the stimulus payments resulted in only a modest proportion of the funds being received by those who needed them the most.

The National Farmers Federation (NFF) has estimated that the food supply chain industry needs an additional 172,000 workers. This is not only a business stress being managed by operators but also a key catalyst to the hike in food prices experienced across the country which included Coles increasing grocery items by 3.8%

The NFF submission to the summit included recommendations such as faster visa processing for migrants and lifting restrictions of employment on welfare recipients such as pensioners and NDIS participants.

In addition to labour shortages, owners are battling the Australian Tax Office chasing deferred debts, inflation impacting cost of sales, wage increases and difficulty in sourcing viable finance.

The loyalty many business owners provided to staff during COVID has not been returned, as many of the same staff are now leaving to take advantage of the record low unemployment.

Put simply, hardworking staff in labour intensive roles in the agricultural industry are opting to move into the vacancies in other industries that would not generally be trying to attract these same workers.

Now, there are opinion pieces being written with the counter view. One such piece is an article written by Ross Gittins (economics editor) and published in The Age. In it he says “my guess is that we’ll be hearing complaints about labour shortages for years to come. And I’m not sure that will be a bad thing.”

Whilst I understand this could be preferable to high rates of unemployment, this is not the point that we are striving for. Additionally, I would be surprised if anyone with this point of view had ever started, owned or operated a small business.

Furthermore, the argument that if you can’t attract staff, you should pay them more is nonsensical. Wages are a by-product of margins available within a business, farmers and key suppliers are generally operating on paper thin margins. A further material increase in wages in the current environment could result in many farmers throwing in the towel.

Most businesses in Australia strive for a 5% to 10% net profit margin – there are only so many slices in a cake.

If there was to be a canary in the coal mine, it would probably be the fact that large companies are now doing on the spot job interviews. This is not practical for small business owners, and more importantly, this is not an effective way to find the best person for the right position. It’s a temporary, band-aid solution likely to provide ramifications to both the business and employee in question (lack of required skills and experience) and the economy as a whole.

There are few small business owners in comparison to employees, so therefore, the popular vote will not always be to cater for the small business owners. However, everyone needs to understand that over 95% of the total businesses operating in Australia are defined as small businesses. Furthermore, these SMEs contribute over $420 billion to GDP annually.

The viability of small businesses in these times is critical and everyone loses if these operators are pushed too far.

*Tim Roberts is a Chartered Accountant who founded TR Consulting after leaving Ernst & Young. TR Consulting provides a range of professional services to small and medium sized enterprises operating across all industries. Its focus is providing small business with the financial information and tools required to be successful. Contact: tim@trconsulting.com.au Ph: 1300 054 552.

Categories Management