Workplace productivity in Australia has taken a sharp downturn, with only 47% of employees reporting feeling frequently productive—down from 68% in 2024—according to the latest Workplace Engagement Index released by Reward Gateway. The findings signal growing concerns among HR leaders as they navigate mounting economic pressures while addressing shifting employee priorities.

The study, which surveyed 500 HR managers and 1,008 employees across Australia, reveals a fundamental shift in the way employees perceive workplace engagement. While financial compensation remains a key factor, employees are now placing greater emphasis on factors that enhance their overall work experience—such as well-being, fair pay, manageable workloads, and recognition.

With Australia’s economy continuing to face headwinds, businesses are under increasing pressure to maintain efficiency and output. However, this has led to rising levels of stress and burnout among employees. According to the report, one in three employees now frequently feels overwhelmed (34%) or burnt out (34%).

These pressures are disproportionately affecting women, with 51% reporting high levels of stress compared to 37% of men. Similarly, burnout is more prevalent among women (41%) than men (29%). Younger employees—particularly Gen Z (44%) and early Millennials (36%)—are also struggling, as they navigate their careers in an increasingly competitive job market.

As a result, declining productivity and engagement are driving employees to reconsider their roles. The report highlights that 58% of employees have considered leaving their job in the last six months, reinforcing the urgency for employers to invest in retention strategies that go beyond traditional incentives.

The workplace is undergoing a transformation, with employees seeking more than just financial stability. In 2025—the ‘Year of the Self’—workers are prioritizing personal well-being, work-life balance, and meaningful recognition.

HR leaders are taking note, with 73% stating that employee mental well-being should be a top priority this year.Additionally, 60% believe reward and recognition from managers is key to improving engagement, while 59% emphasize financial well-being initiatives.

From the employees’ perspective, the top driver of workplace productivity is no longer just pay—43% cite reward and recognition as the leading factor, surpassing competitive compensation (38%). These findings suggest that feeling valued and appreciated is becoming just as important as financial remuneration in driving performance.

With recognition ranking as the top driver of productivity, managers are now in the spotlight. While peer recognition is valuable, the study confirms that manager-led recognition has the greatest impact on engagement and retention.

However, the challenge remains—only 67% of managers feel they received sufficient training when stepping into leadership roles. The issue is particularly pronounced among Gen X (71%) and late Millennials (65%), many of whom form the backbone of middle management.

“The role of middle managers has evolved dramatically over the past few years, and the pressures are mounting,” says Kylie Green, Managing Director, APAC at Reward Gateway. “With new generations entering the workforce, leaders are expected to develop stronger soft skills while managing the operational demands of their teams. Developing middle managers’ capabilities is a top priority for businesses today.”