Mixed messages: Three quarters of Australian businesses plan to grow their workforce in 2023 despite recession fears

Despite increasing economic turbulence, the latest annual ELMO HR Industry Benchmark Report reveals that optimism has peaked in Australian businesses with three quarters (76%) planning to grow their workforce in 2023, up from 50% last year and the highest level since the study began in 2019.

Now in its fourth year, the HR Industry Benchmark Report is based on a survey of 700 Australian human resources professionals to provide a comprehensive insight into their top priorities, challenges and opportunities. It is the largest survey of its kind in Australia and a joint initiative between ELMO Software and the Australia Human Resources Institute (AHRI).

Of those HR professionals who are anticipating a change in the size of their workforce in 2023, almost half (48%) expect their workforce to grow by 11-25% while more than one third (34%) anticipated an increase of more than 25%. Only 7% of HR professionals expect their workforce numbers to decrease in 2023, while 15% expect to remain the same size.

Looking across Australia, HR professionals in Victoria were most optimistic with an expectation that their company’s workforce will increase by 26% on average in 2023. The findings mirror a strong economic outlook in Victoria, which in 2021-2022 saw the biggest annual growth in Gross State Product of any state in Australia.

The plans to grow headcount come despite recruitment remaining the number one issue for HR professionals across the board, with 17% choosing it as their top challenge in 2023 (the same ranking as last year).

Their recruitment woes are being compounded by a difficulty in holding onto new hires. The survey found the average turnover rate in Australia for new hires within their probation period is 13%, on par with last year, but almost twice as high as pre-pandemic levels in 2019 (7%).

Difficulty in retaining new recruits is also highlighted by the fact that HR managers now say that finding the right candidates (30%) is their company’s key recruitment challenge compared to skills shortage (26%) and competition for talent (25%), which were tied for first place in 2022’s report.

ELMO Software CEO and Co-Founder Danny Lessem says, “The overall level of optimism was surprising given the fear of a recession globally and domestically, as well as the ongoing labour shortage.

“But while job cuts in tech companies and professional services firms are in the spotlight right now, the overall surge in optimism when it comes to adding headcount is a good reminder that not all organisations will be impacted by economic uncertainty in the same way. While some sectors may be forced to downsize in 2023, either due to a potential recession, rising material prices and interest rates, others will outperform.

“The high new hire turnover rate seems to be an outcome of the “bums on seats” mentality of the last few years, without regard for the short or long-term costs. HR is now telling us that finding the right candidates is their biggest recruitment challenge and that suggests the focus has shifted from quantity to quality, in order to hire those who are truly right for the roles rather than choose someone without the necessary skills and experience.

“Given potential budget constraints this year and the need for high productivity as the economy slows, it makes commercial sense to hire well, rather than waste money churning through new staff. We anticipate that hiring throughout the rest of the year will be much more deliberate.”

This year’s study also highlighted a number of key trends:

• Companies taking a more preventative approach to employee wellbeing.

The number of organisations offering mental health days/programs has risen from 24% in 2021 to 43% this year, while the number offering no initiatives has fallen from 11% to 5%. There has also been a substantial decline in the use of employee assistance programs (EAPs) from 76% in 2021 to 42% in 2023. At the same time, employee wellbeing is a high priority for organisations in 2023, according to 54% of respondents.

• Data security: A new priority for HR leaders

Despite a string of high-profile cyber attacks on Australian companies in 2022, HR managers are still favouring manual methods when it comes to storing sensitive employee information. The research reveals that spreadsheets were the top choice of HR managers to manage employee data, with a third (33%) using this method, despite the significant risk of data integrity being compromised.

The findings are even more surprising given that 56% of HR professionals rated security of employee data a high priority in 2023 with a further 37% ranked it as medium priority.

However, in an encouraging sign of progress, the use of spreadsheets has declined in each of the last four years of the study, and is down almost 40% since 2019.

According to ELMO Software CEO and Co-Founder Danny Lessem, while it is encouraging to see the use of manual methods declining each year, it is alarming that such an outdated method remains a top choice for storing employee information.

“The use of manual methods, such as spreadsheets, to manage employee data is not only risky but inefficient. With the increasing threat of data breaches and cyber attacks, HR professionals need to prioritise data security and adopt modern HR software solutions that provide advanced security features and data encryption capabilities.”

Download your copy of the 2023 HR Industry Benchmark Report.

Media Enquiries

Fiona Portet | Portet Partners | +61 478 70 794 | fiona.portet@portetpartners.com

About the 2023 HR Industry Benchmark Report

The 2023 HR Industry Benchmark Report survey was conducted by Censuswide, among a sample of 700 HR Professionals in Australia. Respondents were of the middle management level and above, excluding sole traders, and were aged 18+. The data was collected over a 12-day period in November 2022.

About ELMO Software

Established in 2002, ELMO is a cloud-based HR, payroll, expense management and rostering / time & attendance software provider. The company offers customers across Australia, New Zealand and the UK a unified platform to help organisations streamline their people, process and pay. ELMO operates on a software-as-a-service (“SaaS”) business model based on recurrent subscription revenues. For more information, please visit elmosoftware.com.au