Published: January 2026
Australian workers are heading into 2026 tired. More than half took sick days when they were not actually unwell. More than half searched for a new job. One in six employees is not fully proficient in their role. Yet employers are responding with record investment in training and development.
For small and medium business owners, these headline figures matter less than understanding where your business sits against genuine benchmarks. This analysis consolidates the latest data from the Australian HR Institute, the Australian Bureau of Statistics, and Employment Hero to provide actionable metrics for people management decisions in 2026.
Before diving into detail, here are the key HR metrics for Australian SMEs heading into 2026.
Turnover: The national average is 16 per cent, but SMEs run lower at 11 per cent for small businesses (2-19 employees) and 15 per cent for medium businesses (20-199 employees). Large organisations average 21 per cent. If your small business exceeds 11 per cent, investigate workload and development gaps first.
Absenteeism: Fifty-two per cent of workers took at least one sick day when not physically unwell. Forty-three per cent missed some annual leave. This signals engagement issues beyond what traditional metrics capture.
Job search activity: Fifty-four per cent of workers searched for a new job during 2025, but only 7.7 per cent actually changed employers. This gap indicates latent disengagement.
Skills proficiency: Sixteen per cent of employees are perceived as not fully proficient in their roles. This directly correlates with higher turnover.
Training investment: Fifty-eight per cent of employers plan to increase training investment, up from 37 per cent in early 2024. Eighty-two per cent are running upskilling initiatives.
Recruitment: Thirty per cent of employers are experiencing hiring difficulties, the lowest recorded. However, 60 per cent of job seekers say the process discouraged them from applying.
The national average of 16 per cent turnover masks significant variation by organisation size. Small businesses with 2 to 19 employees average 11 per cent. Medium businesses with 20 to 199 employees average 15 per cent. Large organisations with 200 or more employees average 21 per cent.
For SME owners, these size-specific benchmarks are more useful than the headline figure. If your small business is running at 15 per cent turnover, you are above average for your size bracket and should investigate causes, starting with workload. If your medium business is at 12 per cent, you are performing well.
For a deeper analysis of turnover patterns, causes, and costs, see our companion article on Australian Employee Turnover Statistics 2026.
Thirty-four per cent of Australian organisations now report turnover of 20 per cent or higher. This is the highest proportion since measurement began in mid-2023, when just 20 per cent of organisations were in this bracket.
The 20 per cent threshold matters because beyond this point, the costs compound. Each departure costs at least 50 per cent of salary. Skills gaps widen as new staff are constantly in learning mode. Remaining staff carry heavier workloads, driving further departures.
Industry context matters more than size when benchmarking turnover. Construction averages 21 per cent turnover. Distribution averages just 13 per cent.
Among organisations with turnover above 20 per cent, retail and hospitality leads at 40 per cent of businesses in that bracket. Production follows at 39 per cent and construction at 38 per cent. A retail business running 18 per cent turnover is performing better than most peers, while a professional services firm at the same rate should be concerned.
Traditional engagement surveys are expensive and infrequent. Absenteeism patterns provide a more immediate signal. In the past year, 52 per cent of Australian workers took at least one sick day when not physically unwell, and 34 per cent did this more than once.
Full-time workers were significantly more likely to take these days (58 per cent) compared to self-employed workers (23 per cent). This suggests the issue is particularly acute in traditional employment relationships.
For SMEs, this 52 per cent rate signals hidden productivity losses. If half your team is taking unplanned days off due to exhaustion rather than illness, the impact on output and team dynamics is substantial, even if it does not show up on a formal engagement survey.
The reasons reveal underlying workforce strain. Forty-eight per cent cited feeling mentally or emotionally burnt out. Thirty-five per cent said they were overwhelmed and needed a break. Twenty-seven per cent had caregiving or family responsibilities. Twenty-four per cent needed time for life administration. Just 10 per cent used the day for a social commitment.
Younger workers were nearly twice as likely as older generations to cite burnout as the reason. This aligns with other data showing early-career Australians under particular pressure.
Forty-three per cent of workers missed out on some of their annual leave. Among workers aged 18 to 24, this rises to 55 per cent. Workers who changed jobs during the year were also more affected, with 52 per cent missing leave during transitions.
The combination of high non-illness sick days and unused annual leave suggests systemic workload issues. Staff are taking unplanned days off because they are exhausted, while simultaneously not taking the planned leave they are entitled to.
During 2025, 54 per cent of Australian workers searched for a new job, 40 per cent applied for one, and 23 per cent started a new job or role. Yet only 7.7 per cent actually changed employers, down slightly from the previous year.
This gap between searching and moving indicates latent disengagement. With 54 per cent searching but only 7.7 per cent moving, SMEs face a quiet quitting risk where staff remain physically present but mentally checked out. Regular engagement pulse surveys can help detect this before it becomes turnover.
According to employer assessments, 16 per cent of employees are perceived as not fully proficient in their current roles. This is slightly improved from 19 per cent in earlier surveys, but still represents a significant productivity drag.
The rate is consistent between public sector (16 per cent) and private sector (16 per cent), suggesting this is an economy-wide issue rather than sector-specific.
The biggest cause is employees not being fully trained or experienced in their roles, cited by 36 per cent of employers. For SMEs, this points directly to onboarding and development as the primary lever. Addressing this 36 per cent through targeted onboarding can break the turnover cycle before it starts.
Staff reluctance to develop new skills accounts for 31 per cent, as do evolving business or strategic needs. Under-investment in training is cited by 25 per cent. Notably, 22 per cent cite high staff turnover itself as a cause of skills gaps, confirming the cyclical relationship.
Statistical analysis reveals a significant positive correlation between skills gaps and turnover. The Pearson coefficient of 0.500, significant at the 0.01 level, indicates that organisations with larger proportions of staff not fully proficient tend to experience higher turnover rates.
The mechanism is intuitive. Skills gaps mean heavier workloads for proficient staff. Heavy workloads drive burnout. Burnout drives turnover. High turnover means more inexperienced staff, widening skills gaps further.
Fifty-eight per cent of employers say training investment will increase at their organisation over the next 12 months. This is up significantly from 37 per cent in early 2024, suggesting employers are responding to skills and retention challenges with increased development spend.
Twenty-nine per cent report training investment will stay the same, while just 3 per cent expect it to decrease. Ninety-three per cent of organisations now have a dedicated training budget.
Technical and practical skills are the top priority, with 23 per cent of employers identifying this as their focus. Management and leadership skills follow at 15 per cent. Generative AI skills are prioritised by 11 per cent, digital literacy by 10 per cent, and interpersonal skills by 10 per cent.
There is variation between sectors. Private sector employers prioritise technical skills at 26 per cent, compared to 13 per cent in the public sector. For SMEs in the private sector, aligning training budgets with technical skills development offers the most direct return.
Eighty-two per cent of organisations report taking measures to upskill their workforce, up from 77 per cent in 2024. The most common initiatives are coaching and mentoring schemes (45 per cent), internships (36 per cent), graduate programs (33 per cent), work placements for adults (30 per cent), and apprenticeships (29 per cent).
Public sector organisations are particularly active, with higher rates of mentoring schemes, work placements for adults, and internships compared to the private sector.
AI has quietly become part of everyday work. Twenty-one per cent of workers use AI daily, and 46 per cent use it weekly. Among workers who started a new job in the past year, 61 per cent use AI at least weekly, suggesting newer workforce entrants are bringing AI habits with them.
There is a disconnect between usage and employer support. Only 44 per cent of workers say their employer actively encourages AI use. Forty-one per cent say their employer is indifferent.
This matters because workers believe digital and data skills (34 per cent) and human-centric capabilities like empathy and care (27 per cent) will be the most important skills for the future. Employers not actively supporting AI development may be falling behind workforce expectations.
To close this 44 per cent encouragement gap, SMEs can start with low-cost approaches like free AI tools training sessions or dedicated time for experimentation.
Thirty per cent of employers report experiencing recruitment difficulties, the lowest level recorded and well below the historical average. The rate is slightly lower in the private sector (28 per cent) than the public sector (35 per cent). Distribution (44 per cent) and retail and hospitality (37 per cent) remain challenging sectors.
But while employers find hiring easier, candidates find it frustrating. Twenty-six per cent of workers said securing their current role was difficult, rising to 36 per cent among those who moved to a new employer. The specific frustrations point to fixable problems.
Forty-three per cent cite no clarity on salary or conditions. Thirty-five per cent point to vague or jargon-heavy job advertisements. Thirty-five per cent note unrealistic skill expectations. Thirty per cent say algorithm-recommended roles do not match their abilities. Twenty-three per cent encounter ghost jobs that never seem to progress.
With difficulties at just 30 per cent, SMEs have more candidates available. Focusing on clear salary postings directly addresses the 43 per cent frustration rate and can differentiate your roles.
Three in five workers say the hiring process has discouraged them from applying for new roles. The top complaint is ghosting, with 56 per cent identifying never hearing back as the worst part of applying for jobs.
For SMEs competing for talent, basic responsiveness and clear communication can differentiate your business in a market where candidates have come to expect silence.
One in four new starters described their onboarding experience as bad. Part-time workers were 35 per cent more likely to report poor onboarding than full-time workers. Given that 36 per cent of employers cite employees not being fully trained as the main cause of skills gaps, onboarding quality has direct implications for capability and retention.
Seventy-three per cent of workers would prefer to work on-demand, selecting shifts or projects through digital platforms, if reliable work were available. Among workers aged 18 to 34, this rises to 87 per cent.
Four in ten workers say they would accept less pay in exchange for more flexibility. This 73 per cent on-demand preference aligns directly with the 36 per cent of employers using flexibility for retention. SMEs can test gig-style or project-based arrangements to tap into this preference.
Enhanced flexible working arrangements are used by 36 per cent of employers as a retention measure, equal with learning and development opportunities and wellbeing support as the most common approaches.
Interestingly, only 18 per cent of employers cite lack of flexible arrangements as a reason employees leave. This suggests flexibility operates more as a retention enabler than a departure driver. Workers may not leave because of inflexibility, but they stay longer when flexibility is available.
Australia has 14.7 million people employed as of late 2025, up 1.3 per cent year on year. The unemployment rate sits at 4.3 per cent, with youth unemployment at 10 per cent. The participation rate remains high at 66.8 per cent.
Part-time employment has grown, with part-time workers now representing 31.2 per cent of the workforce. Underemployment sits at 5.9-6.2 per cent, indicating a portion of workers would like more hours than they currently have.
Sixty-four per cent of organisations plan to recruit staff in early 2025, slightly down from 67 per cent the previous quarter. For SMEs, this means more competition for candidates. Leveraging your agility to offer part-time or flexible arrangements taps into the 31.2 per cent part-time share and differentiates against larger, less nimble competitors.
What are the most important HR metrics for Australian small businesses in 2026?
The most important metrics are employee turnover rate (benchmark 11 per cent for small business, 15 per cent for medium), absenteeism patterns including non-illness sick days (52 per cent national average), skills proficiency (16 per cent not fully proficient), and recruitment success rate (30 per cent experiencing difficulties).
What percentage of Australian workers take sick days when not actually sick?
Fifty-two per cent of Australian workers took at least one sick day despite not being physically unwell. Thirty-four per cent did this more than once. The main reason cited was burnout (48 per cent).
What percentage of employees are not fully proficient in their roles?
Sixteen per cent of employees across Australian organisations are perceived as not fully proficient in their current roles. The main cause cited by employers is employees not being fully trained or experienced (36 per cent).
How many Australian employers are increasing training investment in 2026?
Fifty-eight per cent of employers plan to increase training investment over the next 12 months, up from 37 per cent in early 2024. Ninety-three per cent of organisations have a dedicated training budget.
What percentage of Australian workers use AI at work?
Twenty-one per cent of Australian workers use AI daily and 46 per cent use it weekly. Among workers who started a new job in the past year, 61 per cent use AI at least weekly. However, only 44 per cent say their employer actively encourages AI use.
What is the current recruitment difficulty rate in Australia?
Thirty per cent of employers report experiencing recruitment difficulties, the lowest level recorded. The rate is slightly lower in the private sector (28 per cent) than the public sector (35 per cent).
What are the top hiring frustrations for job seekers in Australia?
The top frustrations are ghosting or never hearing back (56 per cent cite as worst part), no clarity on salary or conditions (43 per cent), vague job ads (35 per cent), unrealistic skill expectations (35 per cent), and mismatched algorithm recommendations (30 per cent).
How many Australian workers would prefer on-demand work?
Seventy-three per cent of workers would prefer on-demand work if reliable. Among workers aged 18 to 34, this rises to 87 per cent. Four in ten would accept less pay for more flexibility.
What retention strategies are most commonly used by Australian employers?
The three most common retention strategies, each used by 36 per cent of employers, are increased learning and development opportunities, enhanced flexible working arrangements, and improved support for employee wellbeing.
What is the link between skills gaps and employee turnover?
Statistical analysis shows a correlation coefficient of 0.500 between skills gaps and turnover, significant at the 0.01 level. High turnover is also cited by 22 per cent of employers as a cause of skills gaps, confirming the cyclical relationship.
What percentage of new employees have a poor onboarding experience?
One in four (25 per cent) new starters described their onboarding experience as bad. Part-time workers were 35 per cent more likely to report poor onboarding.
What are the top training priorities for Australian employers in 2026?
Technical and practical skills (23 per cent), management and leadership (15 per cent), generative AI (11 per cent), digital literacy (10 per cent), and interpersonal skills (10 per cent).
How can SMEs measure skills gaps in their team?
Run a simple self-assessment survey asking employees to rate their confidence across key role responsibilities on a 1-5 scale. Compare results to manager assessments of the same competencies to identify gaps.
Scale Suite delivers embedded finance and human resource services for ambitious Australian businesses.
Our Sydney-based team integrates with your daily operations through a shared platform, working like part of your internal staff but with senior-level expertise. From complete bookkeeping to strategic CFO insights, we deliver better outcomes than a single hire without the recruitment risk, training time, or full-time salary commitment.
Australian HR Institute, Quarterly Australian Work Outlook March Quarter 2025: https://www.ahri.com.au/wp-content/uploads/AHRI-WorkOutlook-Report-2025-Q1.pdf
Australian Bureau of Statistics, Job Mobility February 2025: https://www.abs.gov.au/statistics/labour/jobs/job-mobility/latest-release
Employment Hero, Employment Uncovered 2025: https://employmenthero.com/blog/employment-uncovered-australian-work-insights-2025
Australian Bureau of Statistics, Labour Force Australia November 2025: https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/latest-release
Scale Suite delivers embedded finance and human resource services for ambitious Australian businesses.Our Sydney-based team integrates with your daily operations through a shared platform, working like part of your internal staff but with senior-level expertise. From complete bookkeeping to strategic CFO insights, we deliver better outcomes than a single hire - without the recruitment risk, training time, or full-time salary commitment.
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