As we are looking ahead to 2026, a lot of business owners we speak to are asking the same questions:
- Is this year going to be tougher or easier than last year?
- Should we be hiring, holding steady, or tightening up?
- And how do we support our people when everything feels a bit uncertain?
But part of our role is helping businesses read what’s coming through the lens of people, work, and compliance. Looking ahead, this means understanding the forces shaping your workforce before they become problems.
Interest Rates: Still a Watch Point for Employees and Employers
Looking ahead to the rest of 2026, interest rates remain one of the biggest pressure points for both employees and employers. Interest rates are still front of mind for many households and that flows directly into workplaces.
The Reserve Bank held the cash rate at 3.60% in December 2025, and while there’s ongoing debate about whether rates might rise again or ease later in 2026, most commentary suggests uncertainty rather than a smooth downward path. In January, the ABC reported that some economists believe rate hikes are still “on the table” if inflation proves stubborn.
What does that mean for small business?
When household budgets are tight, employees feel it first. Mortgage stress, rent increases and cost-of-living pressure tend to show up as:
- requests for more hours or overtime
- increased stress and fatigue
- people becoming more open to changing jobs for small pay increases
From an HR perspective, this is where retention matters more than recruitment. Losing a good employee in a tight labour market is expensive, time-consuming, and disruptive.
What to be thinking about:
Are your pay arrangements clear and correct? Are workloads reasonable? Are your managers equipped to have real conversations when employees are under pressure?
The Labour Market Is Still Tight (Especially for Good People)
Looking ahead, Australia finished 2025 with unemployment at 4.1%, which is still low by historical standards. According to the ABS, job growth was strong at the end of the year, particularly among younger workers.
In practice, this means most small businesses are still operating in a competitive hiring market, even if demand has softened slightly in some sectors.
We’re seeing this play out in a few consistent ways:
- candidates have more choice
- hiring delays cost you good people
- employees are quicker to move if expectations aren’t met
For SMEs, the businesses that cope best aren’t necessarily paying the highest wages, they’re the ones with:
- clear roles
- realistic workloads
- decent onboarding
- managers who communicate well
What to be thinking about:
Is your recruitment process simple and fast? Do new starters know what “good” looks like in the first 90 days? Are managers supported to lead people, not just tasks?
Compliance Is Sharpening, Even for Small Business
Looking ahead to 2026, employment law continues to tighten, and this is not a year to be casual about HR basics.
The Fair Work Ombudsman continues to highlight changes under the Closing Loopholes legislation, including:
- criminal penalties for intentional wage underpayments (in effect from January 2025)
- the Right to Disconnect, which applies to small businesses from August 2025
These aren’t “big business only” issues. Small businesses are very much in scope and often more exposed because systems are leaner and managers wear multiple hats.
From our side, we’re seeing more employees:
- questioning after-hours contact
- raising concerns about unpaid time
- asking for clarity around expectations
What to be thinking about:
Do your policies match what actually happens day-to-day? Are managers clear on what they can and can’t ask staff to do outside hours? Are your time and wage records accurate?
Global Disruption Still Reaches Local Businesses
Even if you don’t import goods directly, global issues still land at your door.
In early February, The Guardian reported that international shipping disruptions and rising freight costs could again place upward pressure on prices for consumer goods. Ongoing global conflicts and trade tensions mean supply chains remain vulnerable to sudden shocks.
For small businesses, this often shows up as:
- delayed stock or materials
- sudden cost increases
- pressure on frontline staff dealing with customer frustration
When systems are stretched, people tend to absorb the pressure until they can’t.
What to be thinking about:
Do you have backup suppliers? Are your teams trained to handle customer complaints during disruptions? Are a small number of people carrying all the operational risk?
Growth Is Likely But Uneven
Most forecasts suggest Australia will see modest growth in 2026, but not all industries will feel it equally. Some sectors will pick up pace; others may remain flat.
For SMEs, that usually means doing more with what you already have which puts a spotlight on productivity, role clarity, and leadership capability.
From an HR perspective, this is where businesses can quietly drift into trouble: workloads creep up, roles blur, and performance conversations get avoided because everyone is “too busy”.
What to be thinking about:
Are roles still fit for purpose? Do managers have regular one-on-ones with their team? Are performance expectations clear and realistic?
Bringing It Back to People
Looking ahead, the common thread through all of this is people.
Economic uncertainty, global disruption, and regulatory change all land in the workplace eventually. Businesses that handle 2026 well won’t be the ones that predict every twist and turn they’ll be the ones with solid people systems, clear communication, and managers who know how to lead through change.
If there’s one takeaway for small business owners this year, it’s this:
You don’t need complex HR systems but you do need clear, compliant, and consistent ones.
That’s where good HR support makes the biggest difference.
If you’d like help reviewing your HR foundations, manager capability, or compliance risks as we move through 2026, Forge HR is here to support you.
Contact us for a free strategy session
