A ConnectOS report has found that talent shortages are impacting business performance, while organisations increasingly focus on workforce capability, retention and integrated global teams.
Australian HR leaders are being asked to solve an urgent workforce challenge that extends well beyond recruitment, with new research revealing hiring delays are now affecting customer service, project delivery, business viability and the bottom line.
The ConnectOS State of Offshoring Report, found one in three employers experienced reduced service quality because they could not fill critical roles, while 32 per cent reported losing customers. Almost one-third missed project deadlines, 27 per cent lost or delayed contracts and 26 per cent were forced to decline new business because required skills could not be secured.
The findings suggest Australia’s ongoing skills shortage is no longer simply a recruitment issue but a workforce capability challenge requiring HR leaders to rethink how they attract, retain and develop talent.
Steve Evans, Founder and CEO of ConnectOS said, “HR leaders are under enormous pressure to help their organisations grow while operating in one of the tightest labour markets we’ve seen in years.
“When organisations can’t access the skills they need, the impact doesn’t stop with recruitment. It affects customers, revenue, employee wellbeing and ultimately business performance.”
The report found 60 per cent of employers took between 30 and 60 days to fill critical onshore positions before turning to offshore staffing, with skill shortages and wage inflation emerging as the two biggest drivers influencing workforce decisions, each cited by approximately 39 per cent of employers.
Importantly, the research indicates offshore teams are increasingly being used to complement Australian workforces rather than replace them, helping organisations access specialist capability, relieve pressure on existing employees, and maintain service delivery where recruitment has become increasingly difficult.
“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 also challenges long-held assumptions around offshore workforce engagement and retention. Among surveyed employees, 84 per cent said they were proud to work for their organisation, 86 per cent expected to remain with their employer for at least the next 12 months and nearly 73 per cent expected to stay for at least three years. Approximately three-quarters had already been with their employer for more than one year, while 69 per cent said they rarely thought about looking for another job.
Employee engagement was also strongly linked to organisational performance, with 93 per cent agreeing that happy employees deliver better customer outcomes and 84 per cent believing high morale contributes to stronger team performance.
“As recruitment becomes more difficult, retaining experienced employees becomes one of the most valuable advantages an organisation can have. Stable teams preserve organisational knowledge, reduce recruitment and training costs and allow people to build deeper expertise in the business. That’s becoming increasingly important as Australian organisations introduce AI, automation and more specialised roles,” he said.
The research also highlights the growing role HR leaders will play in preparing workforces for AI adoption. Two-thirds of employers reported they are already using AI tools, while 79 per cent said their offshore teams were adopting AI at the same pace as, or faster than, onshore employees. Despite this, only 29 per cent currently provide ongoing AI training to offshore employees, with 32 per cent delivering training on an ad hoc basis and 28 per cent providing no AI training.
“Technology alone won’t deliver productivity gains. Organisations also need to invest in developing people. HR leaders have a critical role to play in helping employees build the confidence and capability to work alongside AI while ensuring learning opportunities are available across both onshore and offshore teams,” he said.
The report found offshore work itself is becoming increasingly specialised. While customer support remains the most commonly offshored function, organisations are expanding offshore capability across technology, engineering, data and analytics, finance, cybersecurity, marketing and HR. Thirty-four per cent of employers said offshore work had become more specialised during the past three years, while 21 per cent reported it had become more strategic and knowledge-based.
Looking ahead, employers identified AI enablement, talent development and cultural alignment as the most important characteristics of successful offshore workforce partners, ahead of cost leadership.
For Australian HR leaders, the findings signal a shift in priorities. Attraction and retention will remain important, but long-term success will increasingly depend on building resilient workforce strategies that strengthen capability, improve retention, develop AI readiness and integrate onshore and offshore teams as one connected workforce.
As economic uncertainty, talent shortages and productivity pressures continue, HR leaders and organisations that take a broader, long-term approach to workforce planning will be best placed to maintain growth, protect customer outcomes and remain competitive.
About the research
The ConnectOS State of Offshoring Report is based on two surveys conducted in 2026. The employer survey included 214 organisations using or considering offshore arrangements.
Ninety-eight per cent of employer respondents were headquartered in Australia. The employee survey included 495 respondents from businesses using offshore workforce arrangements, representing offshore, hybrid and onshore teams.
About ConnectOS
ConnectOS is a people-first offshoring partner that connects organisations with high-performing offshore teams that deliver world-class outcomes, consistently, securely and at scale. They provide enterprise-grade security and compliance, end-to-end operational management, and a transparent business model that removes complexity and supports offshoring success.
Their people-first approach, attention to detail, and pursuit of excellence enable them to attract, retain, and empower top-tier talent to deliver high-quality results for organisations across the globe. As a certified employer of choice with industry-leading ratings and thousands of pre-screened candidates, ConnectOS creates environments where employees thrive and clients unlock sustainable growth and exceptional results.
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