Australian employers lose work amid staffing shortages

ConnectOS research shows Australian employers are losing customers and turning away work because they cannot fill roles, driving more businesses to increase their use of offshore staffing.

The survey found 33% of employers had experienced reduced service quality because of hiring difficulties, while 32% had lost customers. Another 31% reported missed project deadlines, 27% said contracts had been lost or delayed, and 26% said they had declined new business because they could not secure the required talent.

The findings suggest labour shortages have become a commercial problem, not just a recruitment issue. Steve Evans, Founder and Chief Executive Officer of ConnectOS, said talent constraints were affecting revenue, customer experience and growth.

“Talent shortages have become a boardroom issue with measurable impacts on revenue, productivity, customer experience and long-term growth,” Evans said.

Before moving work offshore, many employers had struggled for weeks to hire locally. The survey found 60% said critical onshore roles had taken 30 to 60 days to fill before they turned to offshore staffing.

Skill shortages and wage inflation were each cited by about 39% of respondents as reasons for moving offshore. Compliance cost and risk followed at 37%, while 34% pointed to the time required to fill critical roles.

Evans said employers were using offshore teams to supplement domestic workforces rather than replace them.

“This isn't about replacing Australian workers. It's about Australian businesses struggling to access enough of the skills they need. Organisations are increasingly building integrated onshore and offshore teams to fill capability gaps, support local employees and create the capacity required to continue growing,” Evans said.

The report found that 62% of surveyed employers already had offshore arrangements in place, while 38% were considering them. Over the next 24 months, 16% said they expected to increase offshore investment significantly and 50% planned a slight increase. Another 31% expected no change and 3% planned to reduce spending.

Regional shift

South-East Asia was named by 56% of employers as the region likely to see the strongest offshore growth. The Philippines was the most common destination at 36%, followed by India at 26% and Eastern Europe at 24%.

The work being sent offshore is also changing. Some 34% of employers said offshore roles had become more specialised over the past three years, while 21% said the work had become more strategic or knowledge-based.

Customer support remains the most commonly offshored function, chosen by around half of employers. Employers also reported growing offshore hiring in IT and engineering at 32%, data and analytics at 32%, finance and accounting at 21%, cybersecurity and compliance at 21%, marketing and digital at 19%, and HR and recruitment at 15%.

“When Australian organisations cannot fill critical positions, the consequences extend well beyond recruitment. They affect customers, project delivery, existing employees and ultimately revenue. Australian businesses are losing work, delaying contracts and stretching their current teams because they cannot access the skills they need in the required timeframe,” Evans said.

AI adoption

The study also suggests offshore teams are keeping pace with broader workplace shifts in artificial intelligence. Two-thirds of employers said they were already using AI tools, and 79% said their offshore teams were adopting AI at the same pace as, or faster than, onshore staff.

Data Analyst was the AI-related role most frequently identified as growing, selected by 47% of employers. AI Engineer followed at 35% and Automation Specialist at 32%.

“AI is changing the nature of offshore work, not removing the need for offshore capability. Routine and rules-based activities will increasingly be automated, but organisations still need people who can interpret information, exercise judgement, understand customers and apply AI within a specific commercial context,” Evans said.

Retention and compliance

Employee responses challenged assumptions about turnover in offshore teams. Among surveyed workers, 84% said they felt proud to work for their organisation and 86% expected to remain with their employer for at least the next 12 months. Nearly 73% said they expected to stay for at least three years.

About three-quarters had already worked with their current employer for more than a year, and half had stayed for more than two years. Another 69% said they rarely thought about looking for another job.

At the same time, the report identified compliance as an area of concern for employers. Some 79% said offshore compliance expectations were higher than three years ago, yet only 25% said they were very confident in their current compliance position. About 29% said they were unsure which standards applied to their offshore operations.

Evans said workforce stability had practical value as roles became more technical and businesses introduced automation.

“A stable workforce preserves organisational knowledge, reduces repeated recruitment and training costs and gives employees time to build deeper expertise. That continuity becomes even more valuable as roles become more specialised and organisations introduce AI and automation,” Evans said.

The research was based on surveys of 214 organisations using or considering offshore arrangements and 495 employees from businesses with offshore workforce models. Almost all employer respondents were headquartered in Australia.

Asked what would define high-performing offshore partners in future, employers ranked AI enablement first at almost 50%, followed by talent development at 48% and cultural alignment at 43%. Cost leadership ranked fourth at 33%.

“The current tough economic climate is forcing Australian organisations to rethink how they build and deploy talent. For many Australian businesses, the question is no longer whether they can afford to invest in capability, but whether they can afford not to. The organisations that succeed over the next decade will be those that build resilient, highly skilled local and global workforces that enable them to innovate faster, serve customers better and continue growing despite ongoing economic uncertainty,” Evans said.