Managing a workforce in today’s inflationary and regulatory environment is taking its toll on small business employers in New Zealand, with a third (36%) saying that managing employee processes is negatively impacting their mental health.

The new findings in the Changing world of work report from Xero, the global small business platform shines a light on the workforce challenges faced by Kiwi small business owners and their employees and the critical role technology plays.

The New Zealand report was released today at Xerocon Sydney, where Xero unveiled its commitment to employing small businesses and showcased its suite of employee management tools, which for Kiwi businesses includes Xero Payroll, Xero Expenses and Xero Me (employee self-service app for submitting timesheets, requesting leave and claim expenses).

Anna Curzon, Chief Product Officer at Xero, said: “Employers are telling us that it’s stressful and confusing to manage employees in an ever changing regulatory environment. That’s why we are making it easier for employers to manage their employees, no matter where they are or how they work. Our suite of employee management tools gives small business owners the means to create a better experience for their teams, particularly in this tight labour market.”

Additionally, as part of its commitment to supporting the wellbeing of the small business economy in Aotearoa, Xero runs the Xero Assistance Programme, which offers free counselling to Xero subscribers, their employees, and their families.

Navigating high salary expectations in an increasingly tight labour and inflationary environment

The pandemic and long border closures have taken their toll with two thirds (66%) of employers believing that managing business disruptions caused by COVID-19 is one of their biggest challenges. Additionally, the impact of inflation on costs and services is one of the biggest concerns for 65 percent of employers, with NZ’s inflation rating hitting a 30 year high of 7.3 percent in July this year.

Inflation is compounding the issue of labour shortages which are being felt far and wide, with 43 percent of employers seeing talent shortages as their biggest challenge in securing and retaining talent. Employers are expecting to pay top dollar to attract employees, with the research showing a third of employers believe a rise in salary expectations (37%) and staffing costs (34%) will be among their biggest challenges.

When looking for a new role, compensation is the top factor for employees, with three quarters (72%) ranking pay and bonuses in their top three most important factors. Three in five (58%) employees rank competitive wages and bonus in the top three things they value from employers.

“While we’re seeing a trend around ‘silent quitting’, with employees most concerned about their personal wellbeing and work-life balance, compensation is still the top factor when choosing where to work,” said Bridget Snelling, Xero Country Manager, NZ. “In fact, employees admit that low pay was a top reason for leaving their past workplaces. With almost a third of employees planning to look for new opportunities in the next 12 months, employers will be under pressure to retain staff.”

Small business employers in NZ are planning to hire three staff members on average over the next 12 months. To attract and retain talent, almost a quarter of employers have recently invested or are planning to invest higher pay across all staff (23%) and empowering employees by improving the overall workplace technology experience (23%).

Employers turning to technology to improve workplace compliance and productivity

“In New Zealand, the payroll regulatory landscape is ever-changing. The Holiday Act 2003 (the Act) is a prime example. Many employers find themselves misunderstanding the entitlements or payment rules, with half (48%) finding the current regulatory environment confusing and stressful and a further 29 percent worried their staff will be paid incorrectly due to confusing payroll legislation,” said Snelling.

As a result, 28 percent of employers say a changing regulatory environment is a top driver to introduce technology over the next 12 months. Employers are also concerned about the productivity of their staff, with new employees taking up to about four months on average to get up to speed. This is backed by the OECD, which puts New Zealand below the OECD average in terms of productivity.

To combat this, 42 percent of employers are dedicating more time to upskill staff. However, employees believe the productivity problem can be traced back to poor processes, with 38 percent saying poor communication on employee-related matters hampers staff productivity, followed by slow approval processes (24%), lack of access to critical information (22%) and manual processes / too much paperwork (21%).

“Productivity in New Zealand is a topic we’ve researched extensively at Xero and discussed at length with industry leaders and the Government. Part of the issue, as revealed by our study, is that employees don’t feel empowered in their workplaces, with the majority of employees unable to work flexibly, manage their own expenses or swap shifts without managerial oversight,” adds Snelling.

These challenges were discussed at Xerocon Sydney, one of the world’s premier events for cloud accounting leaders. Accounting and bookkeeping partners and the Xero app community have gathered over two days in Sydney to hear the latest from industry leaders and gain expert insight into the newest Xero tools and features to save time, grow their business and impact their clients’ success.