What if I told you that employee retention in Australia is at a record high… but so is disengagement?

That’s the puzzle uncovered in the Engagement Paradox Report (2024). On the surface, businesses might feel relieved that staff aren’t leaving. But dig a little deeper, and it’s clear: many employees are staying because they feel stuck — not because they’re engaged or thriving.

And that comes with a big hidden cost.

Retention Isn’t Always a Win

Almost half of Australian employees say they’re not looking to change roles in the next two years. Sounds good, right? Except three quarters admit they’ll move on as soon as the economic climate improves (Reward Gateway, 2024).

In other words: your team isn’t necessarily loyal. They’re waiting. Waiting for market conditions to shift. Waiting for a better offer. Waiting for a sign it’s safe to move.

For SMBs, this matters. You can’t afford “quiet quitters” who sit tight for a salary while disengaging from the work. Every role counts. Every person makes a visible impact.

The True Cost of Disengagement

It’s easy to underestimate how much low engagement drains a business. Over half of leaders believe disengagement costs them between $20–100k every single month (Reward Gateway, 2024). I know…. WOWSERS.

In big companies, that loss can be masked. In small and medium-sized businesses, it’s felt immediately: in delayed projects, customer service slip-ups, or burnt-out founders picking up the slack.

Imagine what your business could do with an extra $30,000 a month. That’s what’s on the line.

What’s Driving the Incline?

When employees were asked why they feel less engaged, the answers weren’t surprising, but they were sobering:

Burnout (56%)
Cost of living pressures (51%)
Lack of appreciation or recognition (45%)

(Source: Engagement Paradox Report, 2024)

Recognition consistently came up as a deal breaker. Employees who feel valued are more likely to stay and contribute. Those who don’t? They’re already eyeing the exit.

And for SMBs, where recognition can be simple, human, and woven into daily interactions, this is an area where you have a genuine advantage over larger corporates.

The Manager Squeeze

Middle managers are caught in the middle (literally). Eight in ten say they’re under more pressure than ever to deliver results while managing burnt-out teams (Reward Gateway, 2024).

In a small business, the “middle manager” is often a founder, GM, or someone who wears multiple hats. They’re leading, but they’re also doing the work. Without support, that pressure can tip into stress and overwhelm and culture takes the hit.

What Can Leaders Do?

You don’t need a big budget or a corporate HR department to shift the dial on engagement. Here are some practical, no-cost (or low-cost) actions that SMB leaders can start today:

Make recognition a habit.
Catch people doing things right and say it out loud. Publicly thank someone in a team meeting, send a quick “you nailed it” message, or share wins on a company communication channel. Small, frequent gestures add up.
Be transparent, even when the news isn’t great.
Share how the business is really going, what challenges you’re facing, and what the future could look like. People value honesty, it builds trust, even in tough times.
Protect balance.
Flexibility doesn’t need to mean unlimited WFH. It could be a later start for school drop-off, or finishing early once a week to recharge. In small businesses, tailoring flexibility to individual needs is often easier.
Back your managers (and yourself).
Leadership in an SMB can be isolating. Give your managers space to learn and vent. Encourage peer support groups, external coaching, or simply regular check-ins to share the load.
Create connection.
Teams don’t need flashy away days. Try informal catch-ups, shared lunches, or encouraging people to swap roles for a day. These small things build the sense that “we’re in it together.”

None of this requires massive investment, just intention, consistency, and a willingness to put people at the centre of how your business runs.

Turning the Paradox into an Opportunity

High retention isn’t always good news. If your people are staying but not engaged, your business could be quietly bleeding performance.

But here’s the opportunity: SMBs are uniquely placed to make culture changes quickly. You don’t need a committee or six layers of sign-off. You can start small, act fast, and see impact straight away.

Retention plus engagement is where the magic happens. And that’s what will set your business apart when the job market inevitably shifts again.

✨ If you’d like some practical tools to help boost engagement in your business, let’s chat. At The People Collab, we make people strategy simple — so your culture thrives without the corporate bloat.

Contact the People Collab | HR Consultant Gold Coast

Source: The Engagement Paradox Report (2024), Reward Gateway