Mixed messages: two thirds of Kiwi businesses plan to grow their workforce in 2023 despite recession fears

ELMO Software CEO and Co-Founder Danny Lessem

Mixed messages: two thirds of Kiwi businesses plan to grow their workforce in 2023 despite recession fears

• However, talent shortages remain acute with recruitment and upskilling, cross-skilling or reskilling employees the top HR challenges

• One in eight new hires leave during probation period as focus shifts to finding the right candidate rather than “bums on seats” mentality

Despite increasing economic turbulence, the latest annual ELMO HR Industry Benchmark Report reveals that optimism has increased in New Zealand businesses with two thirds (65%) planning to grow their workforce in 2023, up from 52% last year and the highest level since the study began in 2019. 

Of those HR professionals who are anticipating a change in the size of their workforce in 2023, more than half (56%) expect their workforce to grow by 11-25% while a fifth (20%) anticipated an increase of more than 25%. Another quarter (23%) of HR professionals expect their workforce numbers to remain the same size, while 11% are predicting a decrease in 2023.  

But there were stark differences between small business and the big end of town with enterprise-level companies (those with 2000 or more employees) expecting on average to grow their workforce by 24%, compared to small and medium size businesses with fewer than 180 employees predicting an increase in headcount of only 12%.  

The plans to grow headcount come despite continuing difficulties with how to address the talent shortage. Both recruitment and upskilling, cross-skilling or reskilling employees tied as the number one issue for HR professionals across the board, with 16% choosing them as their top challenges in 2023. 

Recruitment woes are being compounded by a difficulty in holding onto new hires. The survey found the average turnover rate in New Zealand for new hires within their probation period is 12%, marginally down from last year, but still twice as high as it was in 2019 and 2020.  

Now in its fourth year, the ELMO HR Industry Benchmark Study is the largest survey of its kind, with 500 New Zealand human resources professionals providing a comprehensive insight into their top priorities, challenges and opportunities.  

This year’s results also underline the impact of more than two years of closed borders in New Zealand. All of the three top recruitment challenges faced by HR teams relate to finding and competing for the talent and skills required to drive organisations out of the pandemic with skills shortage the top challenge (27%) followed by finding the right candidates (26%) and competition for talent (24%) coming in third.

ELMO Software CEO and Co-Founder Danny Lessem observed that, “The overall level of optimism was surprising given the fear of a recession globally and domestically, as well as the ongoing labour shortage.  

"But while job cuts in tech companies and professional services firms are in the spotlight right now, the overall surge in optimism when it comes to adding headcount is a good reminder that not all organisations will be impacted by economic uncertainty in the same way. While some sectors may be forced to downsize in 2023, either due to a potential recession, rising material prices and interest rates, others will outperform. 

“The high new hire turnover rate seems to be an outcome of the “bums on seats” mentality of the last few years, without regard for the short or long-term costs. HR is now telling us that finding the right candidates is one of their biggest recruitment challenges and that suggests the focus has shifted from quantity to quality, in order to hire those who are truly right for the roles rather than choose someone without the necessary skills and experience.  

“Given potential budget constraints this year and the need for high productivity as the economy slows, it makes commercial sense to hire well, rather than waste money churning through new staff. We anticipate that hiring throughout the rest of the year will be much more deliberate. 

“Recent immigration law changes may help to ease the skills shortage within certain industries. For example, several skilled professions have been added to the Straight to Residence and Work to Residence Green List Pathways, making it easier to attract new workers from overseas.’

This year’s study also highlighted a number of key trends:

●      Companies taking a more preventative approach to employee wellbeing 

The number of organisations offering mental health days/programs has risen from 18% in 2021 to 38% this year, while the number offering no initiatives has fallen from 10% to 3%. There has also been a substantial decline in the use of employee assistance programs (EAPs) from 76% in 2021 to 38% in 2023. At the same time, employee wellbeing is a high priority for organisations in 2023, according to 56% of respondents.

●      Data security: A new priority for HR leaders 

Despite a string of high-profile cyber attacks on New Zealand government organisations and companies in 2022, HR managers are still favouring manual methods when it comes to storing sensitive employee information. The research reveals that spreadsheets were the top choice of HR managers to manage employee data, with a third (32%) using this method, despite the significant risk of data integrity being compromised. 

The findings are even more surprising given that 56% of HR professionals rated security of employee data a high priority in 2023 with a further 34% ranking it as medium priority.  

However, in an encouraging sign of progress, the use of spreadsheets has declined in each of the last four years of the study, and is down almost 30% since 2021. Also encouraging is that the equal top method for managing employee data in the latest research is multiple HR and/or payroll systems, supported by integrations (31%), followed by stand-alone payroll systems (28%). 

According to ELMO Software CEO and Co-Founder Danny Lessem, while it is encouraging to see the use of manual methods declining each year, it is alarming that such an outdated method remains a top choice for storing employee information.

 “The use of manual methods, such as spreadsheets, to manage employee data is not only risky but also inefficient. With the increasing threat of data breaches and cyber attacks, HR professionals need to prioritise data security and adopt modern HR software solutions that provide advanced security features and data encryption capabilities.” 

ENDS