Australian SMBs turn cautious on hiring as casual employment hits 13-month low, says report

Australian small and medium-sized businesses are becoming more cautious about hiring, with casual employment falling to its weakest level in 13 months as employers face rising costs and pressure to improve productivity.

Casual employment fell 0.7% month-on-month in July 2026, while overall SMB headcount declined 0.1%, according to Employment Hero's latest Jobs Report. The data is based on payroll records from more than 23,000 SMBs and 1.7 million employees.

The figures point to a softer labour market, with businesses becoming more selective about adding workers as employment costs continue to rise.

Casual hiring records weakest result in 13 months

The 0.7% decline in casual employment was the weakest monthly result recorded over the report's 13-month period. Overall SMB headcount also recorded its weakest monthly movement during the same period.

Employment Hero chief executive and co-founder Ben Thompson said, "When businesses pull back on casual hiring, it's a clear sign they're being forced to scrutinise every dollar and ask harder questions about how they can stretch their resources further.”

"It's been a hard year for Australian businesses, but we're not seeing them lose their ambition. Our quarterly pulse check of business leaders found more than half remain positive about the next six months. The challenge is turning that confidence into capacity. I hear from businesses every day that are under pressure to lift productivity, reduce staff burnout and be more selective about where they add headcount."

South Australia leads employment growth

The slowdown was uneven across the states.

South Australia recorded the strongest employment growth, with employment increasing 0.7% month-on-month in July.

New South Wales recorded a 0.4% decline, making it the only state in the report to move into negative employment growth.

Queensland recorded the strongest monthly wage growth at 1.8%, while annual wage growth reached 4.5%. Average hourly wages stood at $46.80.

Tasmania recorded the strongest annual wage growth at 5.5%, although it continued to have the lowest average hourly wage at $42.90.

Nationally, wages increased 1.2% month-on-month in July. Annual wage growth, however, eased to 4.2%, the lowest level recorded in the 13-month reporting period.

Younger workers buck broader slowdown

Workers aged 18 to 24 recorded stronger employment growth than other age groups.

Employment among younger workers increased 0.9% month-on-month in July. Their wages also rose 1.7% during the month and 8 per cent year-on-year.

The cohort recorded the strongest employment and wage growth for the second consecutive month.

Payday Super adds to employer costs

The employment figures also coincide with the introduction of Payday Super on 1 July 2026.

Thompson said the transition had added to cash-flow pressures for some businesses, particularly during the period when employers were managing both quarterly and real-time superannuation payments.

"Casual labour is the immediate pressure valve for a business managing cost spikes, and July delivered a major one with the rollout of Payday Super," Thompson said.

"Many businesses faced a 'double super' cash outlay during the month – clearing their Q4 quarterly super obligations while simultaneously funding real-time super contributions under the new rules. When employment costs jump like that in a single month, flexible headcount is where operators trim first to absorb the hit."

Productivity becomes a bigger focus

Thompson said the employment slowdown also reflected a wider challenge around productivity.

"We are entering the era of 'productive growth'. For years, the default response to business expansion was adding headcount; today, it's about driving higher output per head," he said.

He said businesses were increasingly looking at automation and AI as ways to improve productivity rather than simply adding more employees.

"The real winners won't be the organisations using AI just to draft basic emails or internal memos. They will be the HR and business leaders who embed smart automation into their everyday workflows, eliminating red tape, streamlining payroll and compliance and freeing their people to focus on high-value, strategic work."

"Wage growth without matching productivity gains just guarantees the next round of hiring caution," he said. "As inflation stabilises and businesses gain relief from compliance friction, we expect hiring to pick up gradually, but the hires being made will be far more targeted."

Thompson expects hiring to remain targeted until productivity growth catches up with wage growth.