RESEARCH PAPER SERIES, 2015–16              2 DECEMBER 2015

Statistical snapshot: small business employment contribution and workplace arrangements

Geoff Gilfillan

Statistics and Mapping Section

Executive summary

•        4.7 million Australians were employed in small businesses at the end of June 2014.

•        Small business employment grew by 146,000 or 3.2 per cent in the 12 months to 30 June 2014.

•        Small businesses accounted for the largest share of total employment in Australia (by firm size) at 44.0 per cent at the end of June 2014—this compares with a 24.3 per cent share for medium sized businesses and 31.7 per cent share for large businesses.

•        The contribution of small business to total employment was higher in 2009–10 at 47.0 per cent.

•        The number of owner managers of incorporated enterprises (OMIEs) who operate small businesses fell by 109,000 or 27.4 per cent between May 2006 and May 2012. Subsequently their number increased by 29,000 or 10.0 per cent between May 2012 and May 2014.

•        Small businesses are much less likely to provide paid parental leave or flexible working arrangements to their employees than medium and large businesses.

Introduction

This statistical snapshot provides a brief summary of the contribution of small business to employment growth in Australia and the degree to which small businesses provide flexible working arrangements to their staff.

Definition of small business

The ABS defines a small business as a business employing fewer than 20 people. Categories of small businesses include:

•        Non-employing businesses (sole proprietorships and partnerships without employees)

•        Micro-businesses (businesses employing between 1 and 4 people including non-employing businesses)

•        Other small businesses (businesses that employ between 5 and 19 employees)

Medium sized businesses employ between 20 and 199 employees while large businesses employ 200 employees or more.

Small business contribution to total employment

Employment estimates by firm size are taken from the ABS publication Australian Industry (cat. no. 8155.0). The publications shows there were 10.7 million Australians employed at 30 June 2014. By comparison the monthly ABS Labour Force Survey (cat. no. 6202.0) showed 11.5 million people employed in Australia in trend terms in June 2014.

The estimates included in Australian Industry publication are produced at the end of each financial year using a combination of data collected directly from the annual Economic Activity Survey (EAS), conducted by the Australian Bureau of Statistics (ABS), and Business Activity Statement (BAS) data provided by businesses to the Australian Taxation Office (ATO).

In contrast the Labour Force Survey results are based on the responses of a survey sample equivalent to around 0.3 per cent of the population aged 15 years and over.

While small business makes a significant contribution to total employment in Australia its contribution had been falling slightly between 2010–11 and 2012–13 (Figure 1).

Figure 1: Share of total employment by firm size

Source: ABS, Australian Industry, Cat. No. 8155.0, Table 5.

Figure 2: Employment in small businesses

Source: ABS, Australian Industry, Cat. No. 8155.0, Table 5.

ABS data show:

•        In June 2014 there were 4.7 million people employed in small businesses which represented 44.0 per cent of total employment. At this time there were also 2.6 million people employed in medium size businesses (24.3 per cent of total employment) and 3.4 million people employed in large businesses (31.8 per cent of total employment).

•        The small business share of total employment fell marginally each year from 47.0 per cent in June 2010 to 43.0 per cent in June 2013 before increasing to 44.0 per cent in the 12 months to June 2014.

•        Small business employment increased by 146,000 or 3.2 per cent in the 12 months to June 2014. In contrast, employment in medium sized businesses fell by 71,000 (or 2.7 per cent) and employment in large firms increased by 13,000 (or 0.4 per cent).

Number of small business employees

The ABS also provides estimates for the number of employees working in small businesses. Employment estimates are higher than estimates for employees as they include employees (comprised of owner managers of incorporated enterprises and other employees), employers, own account workers (or owner managers of unincorporated enterprises) and contributing family workers. It has been estimated by the ABS that employees accounted for around 88 per cent of total employment in 2011[1].

Employee estimates provided in this statistical snapshot are taken from unpublished data from the ABS Employee Earnings and Hours publication (Cat. no. 6306.0) for 2006, 2012 and 2014. The results are based on responses of around 8,000 employers and information from payrolls for about 55,000 employees.

ABS unpublished data show:

•        In 2014 there were 9.9 million employees working in Australia, 2.5 million of whom worked in small businesses. Employees in small businesses accounted for 25.6 per cent of all employees in 2014—down from 28.1 per cent in 2006.

•        The number of small businesses employees grew by 82,500 or 3.4 per cent between 2012 and 2014—slightly higher than the growth rate for employees in medium and larger sized businesses combined (at 3.0 per cent). However, over the eight years to 2014 the growth rate of employees in medium and large businesses combined was almost three times the rate for growth in employees in small businesses (22.8 per cent versus 8.0 per cent).

•        Around 12.5 per cent of small business employees in 2014 were OMIEs. The number of OMIEs who manage small business operations fell by around 80,000 or 20.1 per cent between 2006 and 2014 to 317,000.

•        During the same interval the number of employees working for small businesses grew by 269,000 or 13.8 per cent to 2.2 million. More recently the number of OMIEs who have small businesses grew by 28,800 or 10.0 per cent in the two years to 2014. More research is necessary to explain the significant fall in the number of OMIEs between 2006 and 2012.

Table 1: Growth in the number of employees by firm size

Firm size

2006

2012

2014

2012 to 2014

2012 to 2014

2006 to 2014

2006 to 2014

No. of employees

No. of employees

No. of employees

Change (no.)

% change

Change (no.)

% change

Under 20 employees

2,346,868

2,453,145

2,535,632

82,487

3.4

188,764

8.0

20 employees or more

5,994,916

7,151,987

7,363,886

211,900

3.0

1,368,970

22.8

TOTAL

8,341,785

9,605,131

9,899,518

294,387

3.1

1,557,734

18.7

Source: ABS, Employee Earnings and Hours, Cat. No. 6306.0, unpublished data.

Table 2: Growth in number of OMIEs and other employees working in small businesses

Firm size

2006

2012

2014

2012 to 2014

2012 to 2014

2006 to 2014

2006 to 2014

Level

Level

Level

Level change

% change

Level change

% change

OMIEs

396,821

288,127

316,959

28,831

10.0

-79,863

-20.1

Other employees

1,950,047

2,165,017

2,218,673

53,656

2.5

268,626

13.8

TOTAL

2,346,868

2,453,145

2,535,632

82,487

3.4

188,764

8.0

Source: ABS, Employee Earnings and Hours, Cat. No. 6306.0, unpublished data.

Small business use of flexible working arrangements

Information on the provision of flexible working arrangements is available from the ABS publication Selected Characteristics of Australian Business (cat. no. 8167.0). The publication uses responses of around 6,500 businesses from the Business Characteristics Survey (BCS) carried out at the end of each financial year.

Small businesses tend to be more rigid in their workplace practices and have been slower than larger organisations to adopt more flexible working arrangements. A higher rate of adoption would allow employees of small businesses to better balance work and caring commitments as well as giving workers the capacity to choose shifts, rosters and alternative working arrangements that better suit their circumstances.

•        13.2 per cent of micro-businesses and 34.3 per cent of other small businesses provide flexible use of personal leave (for other purposes such as caring for other people) compared with 58.7 per cent of medium sized businesses and just over three quarters of large businesses.

•        Only 2.4 per cent of micro-businesses provide paid parental leave compared with 68.5 per cent of large businesses

The survey results do not provide any explanation or reasons for the relatively rigid work practices of small businesses. However, it is likely that smaller workforces provide less scope to allow workers to pick and choose shifts that suit their individual circumstances and small businesses may not have the financial resources to provide paid parental leave.

Note that the paid parental leave scheme was introduced in January 2011 to overcome deficiencies in coverage of paid parental leave in small and medium sized enterprises in particular. Only 6.6 per cent of all firms provided paid parental leave in June 2014 mainly due to the relatively low rate of provision by micro-businesses (2.4 per cent), other businesses (9.4 per cent) and medium sized businesses (24.1 per cent).

Table 3: Provision of flexible working arrangements by firm size—at June 2014

Employment size

Flexible work hours (e.g. to enable employees to deal with non-work issues)

Ability to buy extra annual leave, cash out annual leave or take leave without pay

Selection of own roster or shifts

Job sharing

Ability for staff to work from home

Paid parental leave

Flexible use of personal sick, unpaid or compassionate leave (e.g. to care for other people)

0–4 persons

43.8

7.5

16.5

5.7

16.6

2.4

13.2

5–19 persons

65.9

23.8

25.5

14.5

17.8

9.4

34.3

20–199 persons

73.9

40.8

26.4

17.1

27.9

24.1

58.7

200 or more persons

86.4

65.5

34.3

41.1

63.3

68.5

75.9

Total

53.4

15.6

20.2

9.6

18.1

6.6

23.7

Source: ABS, Selected Characteristics of Australian Business, 2012–13, Cat. No. 8167.0.

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[1].              ABS, Labour Force, Australia, Detailed - Electronic Delivery, May 2011 (cat. no. 6291.0.55.001) and Australian Labour Market Statistics, July 2011 (cat. no. 6105.0).