As ABS data shows wages holding steady, Employment Hero’s CEO Ben Thompson unpacks what’s really happening with SME payrolls, median rates and the mounting pressure on employers.
What’s happening: The Wage Price Index rose 0.8% in the September quarter 2025, with annual wage growth holding at 3.4 per cent according to the Australian Bureau of Statistics.
Why this matters: The slowdown in wage growth signals businesses are managing labour costs more carefully after absorbing significant increases. Australian businesses face mounting pressure from compliance complexity and legislation costs, restricting their ability to offer competitive pay rises despite wanting to retain staff.
Australian wage growth is holding steady this quarter, but beneath the headline figures, businesses are managing pay rises with increasing caution as labour costs and compliance complexity create unprecedented challenges.
The Wage Price Index rose 0.8 per cent in the September quarter 2025, matching both the June quarter 2025 and September quarter 2024, according to data released by the Australian Bureau of Statistics. Annual wage growth remained at 3.4 per cent, slightly lower than the same time last year.
Michelle Marquardt, ABS head of prices statistics, noted that whilst quarterly growth remained consistent, the year on year trend shows moderation. Private sector wages grew 3.2 per cent over the year to September 2025, down from the 3.5 per cent growth recorded in the year to September 2024.
Ben Thompson, CEO and co founder of Employment Hero, says the data suggests the market is finding its balance after a period of rapid increases, but the picture is more nuanced than headline figures suggest.
“Wage growth holding steady this quarter suggests the market is finding its balance,” Thompson explains. “Employers have absorbed higher labour costs with the median total hourly rate hitting $45.20, and are now managing pay rises more carefully. Yet if we look at the year on year trend, wages are actually growing at a slower rate than they were this time last year.”
Finding balance
Employment Hero’s platform data, drawn from over 300,000 SMEs, reveals median pay was up 4.8 per cent year on year in October. Whilst that represents solid growth, it marks a notable dip from 2024 when wages were up five per cent.
“It’s a notable dip, but it’s by no fault of businesses,” Thompson says. “Employers are still doing what they can to stay competitive amid inflationary pressures, but layers of legislation and increasing cost of compliance mean it’s never been a more expensive or confusing time to be an employer.”
The ABS data shows that 47 per cent of private sector jobs saw a change in their wages in the September quarter, compared to 49 per cent in the same quarter last year. The average size of hourly wage change was also lower in September quarter 2025, at 3.6 per cent, compared to 3.9 per cent in the same period in 2024.
Public sector wage growth told a slightly different story, with annual growth at 3.8 per cent in the year to September quarter, marginally up from 3.7 per cent at the same time last year. State government pay rises contributed 82 per cent of public sector wage growth this quarter, according to Marquardt.
The compliance burden
The slowdown in private sector wage growth reflects businesses navigating an increasingly complex operating environment. Thompson argues the restriction isn’t about willingness to pay staff competitively, but about capacity to do so amid mounting costs.
“Businesses aren’t pulling back, but they are feeling restricted and doing what they can to keep their employees and their business above water,” he says.
Research on Australia’s labour market dynamics has consistently shown SMEs face particular challenges balancing wage growth with operational sustainability. The complexity of compliance, payroll legislation and award interpretation adds significant overhead that doesn’t directly contribute to productivity or competitiveness.
September quarter wage growth included the Fair Work Commission Annual Wage Review decision of a 3.5 per cent increase paid from 1 July 2025. This was lower than the 3.75 per cent awarded in 2024, reflecting broader moderation across the wage setting landscape.
Platform data tells deeper story
Employment Hero’s real time platform data provides granular insights into how SMEs are managing workforce costs. The median total hourly rate of $45.20 represents not just base wages but the full cost of employment, including superannuation, leave entitlements and other statutory obligations.
Thompson emphasises that whilst wage growth numbers might appear stable, the lived experience of business owners involves juggling multiple cost pressures simultaneously. Electricity, rent, insurance and supply chain costs have all risen, meaning wage bills represent an increasing proportion of total expenses for many businesses.
The quarterly consistency in the Wage Price Index, which has held at 0.8 per cent for three consecutive quarters, masks the cumulative impact of sustained increases. Businesses that managed four or five consecutive quarters of 0.8 per cent growth have seen material changes to their labour cost base, even if individual quarterly movements appear modest.
Managing restrictions carefully
Looking ahead, Thompson believes employers will continue prioritising staff retention and competitive remuneration, but within tighter constraints than previous years.
“Employers are still doing what they can to stay competitive amid inflationary pressures,” he notes. The challenge lies in maintaining that competitiveness whilst navigating an increasingly complex regulatory environment that adds cost without necessarily adding value to the employment relationship.
The data shows businesses are being thoughtful about when and how they adjust wages. Rather than blanket increases, many are targeting adjustments to specific roles or individuals where retention risk is highest, or where market rates have moved significantly.
This more strategic approach to wage management reflects broader maturity in how businesses are responding to labour market conditions. Rather than reactive responses to immediate pressures, employers are taking longer term views about sustainable wage trajectories that balance employee needs with business viability.
Thompson’s assessment points to a labour market that remains functional but stretched, where both employers and employees are navigating uncertainty about future economic conditions, inflation trajectories and the regulatory environment.
“It’s never been a more expensive or confusing time to be an employer,” Thompson concludes. The challenge for policymakers and business leaders alike is finding ways to support productive, sustainable employment relationships without adding further complexity or cost to an already stretched system.
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