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SMEs experiencing salary freeze due to COVID-19

Credit: Jonathan Borba

SMEs expecting salaries to be frozen for the next 12 months

47 per cent of small to medium enterprises expect salary increases to be frozen for at least 12 months, according to a new study from ACA research.

It is positive to see that the proportion of SMEs reporting a decline in revenue has decreased from 78 per cent to 67 per cent last month. Consequently, 32% of SMEs are now at pre-COVID revenues compared to just 24% in mid-July. However, the study is showing that the sector is not out of hot water yet.

Managing Director of ACA Research, James Organ has said: “Sentiment remains negative with little confidence over the short term. However, there are a few green shoots in relation to recovering revenues and an underlying positivity in the retail sector, which should flow into other sectors such as production and distribution.

Related: “Effective planning for the new financial year”

Expectations for the short term are continuing to slide, with 28 per cent of SMEs expecting declining revenues over the next four weeks, compared to the 24 per cent reported from the beginning of August

The majority of SMEs expect the pandemic to have a long term impact on the global and Australian economies. As a result of this, 47 per cent of SMEs expect salary increases to be frozen for the next 12 months.

However, it is encouraging to note that wage increases in the retail sector are likely to resume earlier, underlining a level of confidence driven by increasing sales as people begin to return to stores.

Mr Organ is hopeful that the small business sector will be able to bounce back from the pandemic, and we will being to see recovery soon.

“As the number of new cases continues to fall in Victoria, these green shoots will develop, and we will start to see a more consistent recovery,” he says. “However, it won’t be easy, and therefore SMEs will need continued support from Government, Banks and importantly their employees.”

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Ellie Dudley

Ellie Dudley

Ellie Dudley is a journalist at Dynamic Business with a background in the startup space and current affairs reporting. She has a specific interest in foreign investment and the Australian economy.

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