Employment Hero payroll data shows small businesses prioritising staff retention over pay rises as annual wage growth falls to 2.2 per cent
Small business hiring in Australia bounced back in September 2026, with headcount rising 0.8 per cent month-on-month, the strongest monthly gain since May, as employers chose to protect jobs rather than lift pay, according to the Employment Hero Jobs Report.
The hiring lift came alongside a sharp slowdown in pay. Annual wage growth among small and medium-sized businesses (SMBs) fell to 2.2 per cent year-on-year in September, down from 4.5 per cent in August, after the median hourly rate dropped 1.8 per cent in a single month.
Headcount grew in seven of eight states and territories and in 12 of 13 major industries, with the Northern Territory the only jurisdiction to go backwards. The result follows a July 2026 slump in casual employment among Australian SMBs, when casual headcount recorded its weakest month in more than a year.
The monthly report draws on aggregated, anonymised payroll data from more than 23,000 businesses and 1.7 million employees across Australia.
Why are small businesses choosing job security over wage growth?
James Keene, managing director, Asia-Pacific (APAC) at Employment Hero, said the figures point to a retention-first approach to workforce planning.
"When I speak with small business leaders across the country, the message is consistent: nobody wants to let good people go," Keene said.
He cautioned against reading too much into a single month. "In September, we saw a notable hiring gain of 0.8% month-on-month, a welcome lift after three months of virtually flat headcount. But looking at the bigger picture, one good month doesn't reverse the trend. The quarterly read shows that overall hiring momentum has been gently easing since March."
Keene linked the fall in pay growth directly to that retention strategy. "Holding onto those teams in a tight economic climate comes with clear trade-offs, which is why September saw such a drop-off in wage growth. This single sharp drop accelerates a gradual cooling pattern we've observed all year. Business owners are telling us that after months of absorbing higher overheads, something had to give, and right now, protecting job security is taking priority over pay increases."
The September figure sits well below the 3.2 per cent annual rise in the Australian Bureau of Statistics' Wage Price Index for the June quarter 2026, although the two measures use different methods and samples.
Keene said employers are leaning on technology to close the gap. "To navigate this, business leaders are relying more heavily on technology and AI to lift day-to-day productivity. It's helping existing teams accomplish more without forcing owners to choose between overextending on overheads or cutting staff."
Casual workers and young employees lead small business hiring
Casual employment drove much of the rebound, rising 1.0 per cent month-on-month and 9.7 per cent year-on-year, according to Employment Hero. The company said casual roles continue to give small businesses operational flexibility.
Western Australia led the states with monthly headcount growth of 1.0 per cent, followed by the Australian Capital Territory and New South Wales at 0.8 per cent each. By industry, Agriculture, Mining and Energy grew 2.2 per cent and Administration and Office Support 1.6 per cent.
Workers aged 18 to 24 recorded the largest monthly headcount increase of any age group at 1.3 per cent. The same cohort also posted the strongest annual wage growth, at 7.0 per cent year-on-year – well ahead of the 2.2 per cent average across all small business employees.
For HR leaders, the data suggests that small employers are holding on to staff while keeping a tight grip on payroll costs heading into the final quarter of 2026.
