How the Tight Australian Labour Market is Hurting Businesses 

 July 24, 2021

By  social@bestshore.ai

Where most of the world is fighting unemployment and underemployment, the Australian labour market is facing one of its worst skill shortages in its history, and it is hurting businesses.

While the skill shortage situation was already prevailing in Australian cities, the COVID-19 pandemic and border closure have further deteriorated it. Lack of international students and a frozen immigration system is contributing to the ever-increasing labour shortage in the country.

Factors Affecting Ability To Find Quality Staff in Australia

According to Business Insider, one in four Australian businesses struggle to find skilled staff to fill the job vacancies. 

According to the latest National Skills Commission labour market insight, 20% of employers are expected to increase their workforce in the next three months, suggesting the labour shortage in Australia is only likely to intensify from here.

According to the Australian Industry Group, 60% of the regional businesses in New South Wales face skill shortages, 48% in Victoria, and 41% in Queensland.

Skills Priority List (SPL) identifies shortages & future demand for occupations across Australia. The most recent June 2021 SPL shows that white-collar jobs are facing a severe labour shortage.

Because of these terrifying stats, 64% of employers believe skill shortage in the Australian labour market will impact their operations. As a result, many businesses are starting to accelerate the move toward offshore staffing to fill the roles by qualified people scattered across the globe.

Here are some of the occupations in national shortage:

  • Accountants (General)
  • Management Accountants
  • External Auditors
  • ICT Project Managers
  • Developers & Programmers
  • Software Engineers
  • Urban and Regional Planners

And the list goes on.

The latest data shows there are 288,700 unfilled positions in the Australian labour market at the moment. You probably see many “Help Wanted” or “We Are Hiring” banners around as well.

So what’s the reason behind all this and how is it hurting business? More importantly, what are the strategies available to navigate through it successfully?

Let’s plunge into the “Australian Labour Market Shortage” and break it down.

Impact of Labour Shortages in Australia on Business

The shortage in the Australian labour market has reached an alarming level.

And you can probably guess what happens at the end of the supply chain when there are more jobs and fewer job seekers.

Skill Shortage ➤ Higher prices for consumers ➤ Increased living costs for Australians

Here are the major impacts of labour shortage in Australia:

Scarcity of Quality Applicants

Lack of Quality Applicants In Australia

ACS president Anthony Wong predicts that the ICT sector alone will create 81,000 jobs by 2022. On the contrary, Australia only produces 3,000 to 4,000 graduates a year. That is a big gap to fill in this sector alone!

Australia might have jobs, but the scarcity of quality applicants is the real problem here.

The cause? Companies are limited to the local talent pool at the moment due to the harsh border restrictions that are currently in place.

Yes, Australia does produce quality graduates and skilled individuals, but the gap between jobs vacancies to new entrants to the job market is significant.

It seems like Australia has reached the “full employment” stage. With fewer people out of work, there will be fewer people to fill the new job vacancies.

Another reason is that skilled workers are retiring, and the new ones lack the technical skills to fill those positions. According to a survey by ABS, 66% of the time applicants don’t have the required skills or qualifications to fill that position and the ability to bring talent into Australia from overseas is seriously limited at present.

IT, engineering, sales, finance, and other similar white-collar jobs lack the most qualified applicants. If there are not enough qualified applicants available, how can companies continue to operate smoothly?

Higher Attrition as Talent Seek Better Offers

Impact of High Attrition Rates On Australian Business

Staff attrition, in simple words, is a reduction in staff numbers that occurs when employees resign or retire, and the job vacancies are not filled. Some attrition is wanted, such as managing our a poor performer, but in many cases, especially in a tight labour market, attrition is unwanted and is very costly to business.

The current attrition rate in Australia is going through the roof. According to the Australian Information Industry Association’s (AIIA), the tech industry has observed a sharp increase in the staff attrition rate.

When employees leave your company, there’s a loss in productivity, reduction in workforce, increased workload, and a time impact on management to replace the staff member. Voluntary attrition, like a resignation for a new higher-paid job, also causes a lack of continuity and institutional knowledge and a lot of your IP walks out the door potentially to a competitor.

A short term solution is to increase wages to match a competing offer, but there will always be someone willing to pay more in such conditions as we have now in Australia.

Time Impact of Managing Recruitment

The Cost of Managing Recruitment Due to Attrition

Neil Perry, a renowned chef, is more worried about having enough staff to open his Double Bay restaurant in Sydney for seven days instead of having a constant supply of customers.

You see, in a situation like Neil’s, an employer will always be looking out for talent.

For this, one needs to put in lots of time and money in managing the whole recruitment process.

It takes 39.2 days on average to fill a vacant position in Australia. The time impact of managing recruitment is a serious burden on business. You need to advertise, screen, interview just to find the right candidate, then there is a matter of onboarding and training them to reach the level of the person who just left the business.

How can a business think about progress and growth if recruitment is always a concern? The answer - they can’t do this effectively.

Higher Cost in Wages

Higher Cost in Wages

Say John is a skilled ICT Project Manager working at Company A. Company A pays $100,000 annually with added benefits like health insurance and retirement plans.

Company B, which has seen exponential growth in the last few years, wants to win skilled talent.

They offer John $150,000 with added benefits like a laptop, a vehicle and work from home 2 days a week.

That’s what happens in a labour shortage economy. A company has to offer a premium package to win talent.

There has been a 60% increase in the number of businesses reporting that they cannot find new staff. When this happens, every business tries to steal staff from other firms and are prepared to pay a premium to make it happen.

 The impact? All parties suffer in terms of cost and loss of productivity and costs along the supply chain go up, leading to inflationary pressures and a high cost of living. It is a brutal cycle.

High Cost of Recruitment

Recruitment Costs Soaring Due To Australian Labour Shortage

Say in the example above; John leaves Company A for greener pastures at Company B.

The impact on the efficiency and productivity of operations at Company A will be drastic. They will have to fill in the vacancy quickly to minimise the losses.

For that, they need to float the job opening through digital means, in newspapers, etc.,

shortlist the candidates, interview them, and if required, behavioural assessments and whatnot.

And all this if they manage to find talent in the first place.

It costs an average of $18,982 to hire one employee in Australia! The figure can go up to $34,440 for more senior or executive roles.

How Offshoring Is A Solution?

Offshoring Solution to Australian Labour Shortage

According to a report by Dynamic Business, 43% of businesses expect to increase their headcount in 2021, with many companies looking for a combination of in-house full full-time hires, part-time employees, and outsourcing.

IT, accounts, sales, and operations are the most in-demand roles in Australia, but with so much competition for talent  in the local Australian labour market, offshoring is probably your best bet to make your business a success.


Offshore staffing means relocating a business process (or a part of it) from Australia to another country. The Offshore Staffing company or BPO finds the right talent for the job, deals with everything from recruitment to benefits, including sourcing, screening, onboarding, payroll, engagement and everything in between.

You have complete control of the projects or tasks, and you stay in the loop at all times. It’s just that all the operational management, payroll and HR functions will be the offshoring company’s responsibility. Think of it as managing your work from home team members, except they are based in a professional office overseas.

What’s not to love?

Let’s just jump into some more detail about why offshore staffing is a perfect solution to deal with the current labour shortage in Australia.

Access to Global Talent Pool

With offshore staffing, you get access to a global talent pool. If you previously had 1,000 IT professionals in your country, now you have access to 100,000 more.

And the best part? The offshore staff member is highly skilled and cost-efficient. In some cases, they perform better than in-house teams. Also, you don’t need extra funds for office space, equipment, utilities, employee benefits, and taxes in your home country. You will typically be provided an all inclusive price or rate with generous exit terms so you are not locked in long term.

You get access to talent in multiple regions like the Philippines, Malaysia, Vietnam, Pakistan etc. These countries are well-reputed for their highly skilled professionals, and they only cost you 30% to 50% of what you are paying to your in-house employees. You can pick the location that is the best fit for your business such as cultural alignment, timezone and English proficiency.

Another advantage is that your in-house staff can focus more on the priority tasks while the offshore staff takes care of the low-value ones.

To cap it all off, you have cultural diversity on board that itself helps you expand your venture in the right direction. Many offshore staff have experience with some of the world's largest organisations and most dynamic startups and they can bring a lot more to the table than just their day to day work.

Fully Managed Process

An offshore staffing company identifies your business’ KPIs and hires the required professionals. A solid reporting structure is maintained, and you are the one who’s taking all the important decisions. You can typically be involved as much or as little as you like. You can still be hands-on in day to day management or you can delegate that responsibility to the offshore staffing company as part of your commercial agreement.

Lower Operational Costs with No/Low Staff Replacement Expense

Deloitte 2020 Global Outsourcing Survey states that cost reduction is the primary reason firms go for offshore staffing and outsourcing.

And that’s completely true! You get the same quality of work from your offshore staff without having to worry about staff replacement, onboarding, and operational costs. You just pay a mutually agreed sum to the offshore staffing company every month, and they take care of the rest.

The talent and operational costs are far more cost-efficient in countries like the Philippines, India, Malaysia, Vietnam and Pakistan. This is the prime reason why Business Process Outsourcing (BPO) has become more commonplace as a business strategy in 2021.

Moreover, unlike in Australia, someone leaving the offshore staffing company won’t wreak havoc. There are no staff replacement costs, and even if there is, the offshore staffing agency will take care of it and will generally have a talent pool of qualified applicants on hand should it be needed.

What’s the benefit of all this?

You can save up to 50-70% of the total cost, having a material impact on your bottom line. These funds can be reinvested into the business to further support its growth.

BestShore specialised in helping Australian businesses set up high performance offshore teams to overcome the current labour shortage obstacles in Australia. With decades of experience across all aspects of Offshoring, BestShore is ideally placed to help make your Offshoring journey a successful one.

For a free consultation or to obtain indicative proposals for roles you would like to offshore, get in touch with us.

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