Stormy weather: the challenges facing businesses this year
As we head into some rougher winter weather - the business climate also looks more unsettled. There are definite storm clouds on the horizon, with skills shortages, rising inflation, a dropping sharemarket and more demands from the government all threatening to make this year challenging for employers and their people.
According to Seek, job ads have risen to record heights, but job applications have dropped by 4 per cent. Interestingly, the number of full-time positions has increased, indicating that employers are looking for a more secure workforce. Unfortunately, post-pandemic, many people are opting for roles that offer flexibility and less stress.
Younger workers are also heading offshore as the borders open up. Combine this with the lack of skilled immigrants, and the pressures on the workplace are inevitable. Ironically the ability for many people to live in NZ but work remotely for overseas employers means we could lose good talent even though they still reside in NZ.
Inflation is at 6.9 % - a 30-year high and annual wage inflation has risen to 3%, its highest since March 2009. Higher costs for everything from building materials to groceries are pushing living costs to untenable levels.
The biggest threat to NZ businesses is the prospect of a looming recession. Share indices are already heading into bear market territory, and this could ripple out into the broader economy thanks to ongoing supply chain issues and belt-tightening from consumers. A recession could see the economy endure a period of stagflation - where inflation is high, but productivity and consumption are low. This may help ease the pressure on the job market but for all the wrong reasons.
Newly introduced legislation and policy changes from the government have the potential to add extra layers of compliance and cost to NZ businesses. These include:
Fair Pay Agreements
The Accredited Employer Work Visa
Minimum wage increase
Changes to the skilled worker immigration process will require companies to seek government accreditation and meet minimum pay thresholds before they can sponsor migrants into roles here in New Zealand. The changes are designed to temper immigration numbers and allow more NZ’ers to take on those roles. Unfortunately, for sectors like horticulture, teaching, nursing and hospitality - there aren’t enough Kiwis willing to take on the work, even with offers of higher pay.
There is some hope on the horizon. Borders will open in July for international students and skilled visa holders. This should help ease the workplace shortages in sectors such as tourism and hospitality. Inflation is expected to decline in 2023, and tourism should see a big boost as visitors return next summer. Initiatives to encourage more diversity in the workplace can help employers tap into a wider pool of talent, which can only be a good thing.
SMEs will face increased competition from large organisations that can offer more pay to lure prospective employees away to work for them. Smaller businesses will need to engage with their employees and look at non-financial benefits such as WFH options or flexible hours that will encourage them to stay.
Need help navigating the complexities of HR? Give us a call at Love Your Work NZ; we’d love to chat.