CPA Australia surveyed 600 small businesses and 105 CPA accountants on a range of employment issues in February 2002.

Conducted by telephone, the survey focused to a large extent on small businesses' attitudes and perceptions about employment and the motivating factors behind small businesses' employment decisions.

The participants were selected at random across all states and territories and in both regional and metropolitan areas.

Summary of key findings

Impediments to hiring new staff

• Employee related factors are seen as the main impediment to hiring new staff with 25 per cent of small businesses citing lack of skilled applicants, 20 per cent claiming difficulties finding motivated and reliable staff, and 7 per cent are put off by the training requirements for new staff.
• Slowing economy and lack of work was also seen as an impediment by 24 per cent of small businesses.
• Wage costs were cited by 17 per cent of businesses as the main impediment to employment.
• Only 5 per cent of businesses considered unfair dismissal to be the main impediment to employment.
• Of the 23 per cent non-employing businesses, 57 per cent have made a deliberate decision not to employ staff.
• Other non-employing businesses would consider employing if they had more work (32 per cent) or if the paperwork associated with employment (25 per cent) were reduced.

Casual employees

• 35 per cent of small businesses employ casuals. This trend is growing at the expense of full time staff, with 24 per cent of them expecting to employ more casuals than permanents in the coming 12 months.
• The most common reasons for employing casuals include variable business income, work patterns and lack of work being mentioned by more than 60 per cent of businesses.
• Reducing costs (52 per cent) and the compliance burden (31 per cent) are also motivating factors.
• 30 per cent of businesses cited unfair dismissals as one of the reasons for the employing casuals.
• 31 per cent claimed employees prefer casual work.
• Half the small businesses and CPAs supported the view that full time employees cared more about the business than casuals.

Contractors

• 26 per cent of small businesses outsource some work to contractors.
• The majority of contractors have their own workers' compensation insurance (88 per cent) and bring their own equipment (76 per cent).
• Generally, small business operators (71 per cent) and their advisers (81 per cent) believe contractors require less supervision than employees do and are twice as likely to believe that contractors cost less than hiring employees.
• While 69 per cent of businesses pay contractors on completion of a job, 22 per cent pay contractors on a regular basis rather than on performance of the contract.

Unfair dismissals

• More than one third of small businesses (42 per cent) don't know how to comply with the unfair dismissal law. Of the 58 per cent of small business who said they were confident about dismissing staff under the federal unfair dismissal law, half of these indicated they were not overly confident they understood the law.
• 76 per cent of CPAs believe small business owners do not understand the law.
• Small business are polarised on their belief about whether employers always lose unfair dismissal cases with 30 per cent believing they do, and 35 per cent believing they do not.
• 28 per cent think they cannot dismiss staff even if their business is struggling and 27 per cent felt they can't dismiss staff even if they are stealing from the business.
• A majority of both businesses (62 per cent) and advisers (81 per cent) considered the process they have to follow to comply with the law to be complex.
• Small businesses were divided as to whether they considered counselling staff difficult, although 63 per cent of CPAs felt small businesses found it difficult.

Payroll tax

• 40 per cent of small businesses and 45 per cent of CPAs believe payroll tax is a barrier to employment.
• Of the small businesses that consider payroll tax a barrier, 80 per cent believe the rate is too high, 65 per cent believe the rate should be lowered and apply to all businesses and 77 per cent believe the cost is passed to consumers.
• Overall 46 per cent of small businesses would prefer to see payroll tax eliminated even if it means increases in other taxes, however businesses with 10-19 staff were twice as likely to hold this view than those with 1-2 staff.

Superannuation

• 38 per cent of businesses consider superannuation obligations to be a barrier to employment, primarily because of its cost.
• Other concerns with superannuation were too much paperwork (44 per cent), too complex (35 per cent) and employees not considering it part of their remuneration (44 per cent).

Workcover

• Workcover insurance was also seen as an impediment by small business but fewer businesses (25 per cent) were concerned about workcover than payroll tax or superannuation.
• Generally, workcover is considered too expensive (87 per cent); too complex (36 per cent), too difficult (32 per cent) and employees expect too much (28 per cent).

State differences

• Western Australia has:
  - an above average rate of non-employing businesses (35 per cent – to national average of 23 per cent)
  - more small businesses using contractors (36 per cent) than the national average (26 per cent)
  - more businesses seeing workcover as a barrier to employment (35 per cent – national average 25 per cent)
• Queensland small business has a greater than average expectation that it will employ more casual employees in the next year (33 per cent – national average 24 per cent)