Australian firms lose work amid skilled staff shortages

ConnectOS has published research showing Australian employers are losing customers and turning away work because they cannot hire enough skilled staff. The findings also point to broader use of offshore hiring among surveyed businesses.

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

The research was based on a survey of 214 organisations using or considering offshore arrangements, with 98% of respondents headquartered in Australia. A separate employee survey covered 495 respondents across offshore, hybrid and onshore teams.

Steve Evans, Founder and Chief Executive Officer of ConnectOS, said the issue had moved beyond recruitment.

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

The figures suggest employers are waiting weeks to fill roles before shifting work overseas. Six in 10 respondents said critical onshore positions had taken between 30 and 60 days to fill before they turned to offshore staffing.

Pressure on labour supply and wages featured strongly in employer responses. About 39% cited skill shortages and wage inflation as the main factors behind offshore decisions, while 37% pointed to compliance costs and risk and 34% cited the time needed to fill key roles.

Evans said companies were not using offshore teams simply to replace domestic workers.

"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," he 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, compared with 31% who expected no change and 3% who planned a reduction.

Changing role

The survey also pointed to a shift in the kind of work being moved offshore. Customer support remained the most common function, selected by about half of employers, but businesses also reported growing use of offshore teams in IT and engineering, data and analytics, finance and accounting, cybersecurity and compliance, marketing and digital, and human resources and recruitment.

Among employers, 34% said offshore roles had become more specialised over the previous three years, while 21% said the work had become more strategic or knowledge-based. South-East Asia was named by 56% of respondents as the region likely to see the strongest offshore growth. The Philippines remained the most common destination at 36%, followed by India at 26% and Eastern Europe at 24%.

Artificial intelligence was another key theme in the findings. Two-thirds of employers said they were already using AI tools, and 79% said offshore teams were adopting AI at the same pace as, or faster than, onshore staff. Data analyst was the AI-related role most often identified as growing, chosen by 47% of employers, followed by AI engineer 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

The employee survey challenged a common view that offshore teams have high churn. ConnectOS found that 84% of surveyed employees felt proud to work for their organisation, 86% expected to stay with their employer for at least the next 12 months, and nearly 73% expected to remain for at least three years.

It also found that about three-quarters had already worked with their current employer for more than one year, half had stayed for more than two years, and 69% said they rarely thought about looking for another job. In addition, 93% agreed that happy employees delivered better customer outcomes, while 84% said high morale led to stronger team performance.

"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.

Compliance emerged as a weak point for many employers. While 79% said compliance expectations for offshore operations were higher than three years ago, only 25% said they felt very confident in their current position. About 29% said they were unsure which standards applied to their offshore operations.

Employers also increasingly expected offshore partners to offer more than lower costs. When asked what would define high-performing offshore partners in future, respondents ranked AI enablement first at almost 50%, followed by talent development at 48% and cultural alignment at 43%. Cost leadership ranked fourth at 33%.

"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.