Independent Review into 457 Programme Released

webster By Mark Webster
Thursday, 11 September 2014

The Department of Immigration yesterday released the long-awaited Independent Review into the Integrity in the Subclass 457 programme.

There were 22 recommendations overall - amongst the most important ones are as follows:

Special Note

Please be advised that no changes have been made to the legislation for 457 visas as yet - this article discusses the recommendations which have been made in the review. It remains to be seen which of the changes will be implemented and when these are likely to come into effect.

English Level for 457 visas

The report suggests that the English language requirement for 457 visas be relaxed, and in particular:
  • Accept an average score of 5 in IELTS, rather than a minimum score as is currently required
  • Accept other types of tests aside from IELTS and OET (eg TOEFL and Pearson)
  • Allow passport holders from more countries to be exempt from English language testing
  • Accept 5 cumulative years of education in English medium be accepted, rather than the current requirement that it be consecutive

Modification to requirements for ENS for 457 Visa Holders

The report suggests that 457 holders be given more concessions in applying for permanent residence through the Employer Nomination Scheme (ENS). Suggestions include:
  • Require 457 holders to have worked in Australia for 2 years, but only with the current employer for 12 months. Currently, 457 holders are only eligible for streamlined processing if they have been with the current employer for 2 years
  • Introduce more concessions for older 457 holders - currently, it is very difficult to qualify for ENS once the applicant turns 50
  • Allow dependent 457 holders (ie spouses of the main 457 holder) to apply for ENS once they have worked in Australia for 2 years
Apart from the age concession, these changes would largely go back to the system which existed prior to 1 July 2012 and are sensible.

Enhanced Compliance

The report points out that resources allocated to monitoring of 457 sponsors are inadequate. The report suggests that there be more funding allocated to monitoring and sanctions, as well as improving linkages with other agencies such as the Fair Work Ombudsman.

The report also notes that instances of employees paying businesses to sponsor them for a 457 visa or other sponsored visa are in the increase. We understand that some employees are paying $50,000 or more for this service. The report suggests that penalties be introduced to prevent this.

Training Requirement for 457 Sponsors

The current requirement for approval as a Standard Business Sponsor for 457 visas generally requires that either of the following training benchmarks be met:
  • Benchmark A: Payment of 2% of payroll to an Industry Training Fund
  • Benchmark B: Spending at least 1% of payroll on training of Australian permanent residents or citizens in the business
Benchmark A is open to abuse - "training funds" have emerged which pay up to 40% commission on referrals to migration agents referring employers.

Benchmark B is highly onerous - it requires employers to provide up to 3 years of evidence of training expenditure. Immigration generally requires invoices and in some cases receipts for training activities - this involves a huge amount of work, particularly for larger businesses.

The review recommends that employers pay an annual "training levy" for each sponsored 457 holder which depends on the size of the business as follows:

Business Size Amount
Small (less than 20 employees) $400
Medium (between 20 and 199 employees) $600
Large (200 or more employees) $800

Funds would be paid to the Department of Industry and go towards training of Australians.

This initiative would greatly simplify the approval process for sponsors using Training Benchmark A, and eliminate integrity concerns with Training Benchmark B. The main issue would be to efficiently create a system to invoice employers for the funds after the first year - it may be preferable to simply levy the training fee at the time of lodgement.

Streamlining 457 Sponsorship

The report suggests simplifying processing arrangements for sponsors.

The report recommends increasing validity period for Standard Business Sponsorships follows:

  • From the current 12 months to 18 months for recently established businesses trading for less than 12 months
  • From 3 years to 5 years for established businesses
This will reduced the amount of administration required to maintain sponsorship status significantly. Similar measures are suggested for Overseas Business Sponsors.

The Report recommends that streamlined processing arrangements for low risk sponsors be introduced. Factors considered in determining whether a sponsor is low risk include:

  • Turnover of business
  • Salary level of proposed employee
  • Occupation of employee - this may involve creation of different occupations lists based on risk level
  • How long the business has been approved as a sponsor
  • Whether any sanctions have been applied to the business
Three streams are envisaged by the report - the lower risk streams receive "light touch" processing, whereas the higher risk one would be scrutinised more heavily.

It is fairly clear that the Department of Immigration already applies an ad hoc risk streaming process for 457 applications - this applies to certain industries and occupations (eg cooks and restaurant managers in the hospitality sector). A properly thought out risk tiering system would be welcome.

Occupations List for 457

The report recommends that an Ministerial Advisory Council be set up which has research capacity to look into labour force requirements in certain occupations.

The approved list of occupations would still be based on the CSOL, but industries could submit a case for including other occupations which are required but are not included on ANZSCO. Occupations of concern could be reviewed and removed from the CSOL as appropriate.

Certain occupations on the CSOL have been over-used in the past and may be associated with non-genuine positions (eg Program or Project Administrator, Cafe or Restaurant Manager). Research capacity should be able to pick up the emergence of any such issues more quickly and come up with solutions to avoid any integrity concerns.

Salary Level for 457

The report recommends maintaining the TSMIT framework. The TSMIT is a minimum salary level which applies for any 457 holder and is currently $53,900.

Some refinements to TSMIT are suggested by the report:

  • Keep the TSMIT at its current level for the next 2 years - usually, TSMIT is increased on 1 July on each year
  • Allow some level of discretion to approve where the market rate is less than TSMIT but the 457 employee will be paid more than TSMIT
  • Allow for 457 employees to be paid up to 10% less than TSMIT, particularly if they are employed in regional areas
The report also recommends keeping the Market Rate Salary provisions, but to decrease the minimum salary for the market rate exemption from $250,000 to $180,000.

This is probably the weakest area of the report - the market rate salary provisions are really far too complicated. This makes it difficult for employers to meet, and for the Department of Immigration to police. The Committee should have considered a return to the MSL (Minimum Salary Level) system which applied prior to 2009 - different salary levels could be set depending on the occupation. A fixed MSL would reduce paperwork for employers, and also make monitoring compliance much more straightforward.

Labour Market Testing

The report indicates that the current labour market testing requirements are either ineffective or cumbersome for employers. The report suggests that the Ministerial Advisory Council come up with a more objective and transparent system for labour market testing

It is currently possible for an employer to meet the Labour Market Testing requirements by posting an advertisement for a single day, even on a site which does not require any fee for this.

It is highly likely that any system suggested by the Ministerial Advisory Council would be more onerous for employers and would have a tendency to delay processing of 457 visas significantly.


It remains to be seen how many of the report's suggestions will be adopted by Government. It will be difficult to implement certain of the recommendations, given that the Government does not have control of the Senate.

However, the Minister for Immigration has indicated that he is supportive of some of the proposed measures such as:

  • Reducing the minimum salary for the Market Rate exemption from $250,000 to $180,000
  • Risk tiering for sponsors
  • Extending the approval period for Standard Business Sponsors
  • Making it illegal for employees to pay businesses to sponsor them for 457s or other visas
  • Relaxing the English language requirement


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