Government to Reform 457 Visa Program

webster By Mark Webster
Tuesday, 05 March 2013

Changes to the 457 Employer Sponsored visa have been announced by The Minister for Immigration and Citizenship , Brendan O'Connor, and will come into effect on 1 July 2013.

The changes have resulted from recommendations by the Ministerial Advisory Council on Skilled Migration (MACSM). The MACSM is a group composed of trade unions, employer groups and the state and territory governments.

The main concerns seem to be as follows:

  • The growth in use of the 457 visa program is out of step with skills shortages
  • There is a perception that local workers are being "discriminated against" through the excessive use of 457 visas by some employers
  • There are many temporary visa holders (eg working holiday makers and students) applying for 457 visas. The government is concerned that the 457 visa program is being used to extend stay in Australia rather than meet skills shortages

Whilst the details remain to be seen, it appears that the proposed changes to the 457 system will make it more difficult to sponsor employees. In particular:

  • Expect more employees to be asked for English language testing
  • Employers relying on borderline occupations such as Program or Project Administrator are likely to be targeted
  • Recently established businesses are likely to be scrutinised more carefully, particularly in relation to the training requirement
  • Establishing a market rate salary may in some cases involve referral to external bodies such as unions
  • Employer sanctions and monitoring may be strengthened further, though exact details are difficult to determine
  • On-hire arrangements under the 457 program will be further restricted
We will try to explain the rationale for the changes, as well as the likely impact on employers.

Genuine Shortages

Employers must demonstrate that they are not nominating positions where a genuine shortage does not exist.

The main areas of concern here seem to be situations where a position has been "dressed up" to fit within an occupation which is approved for 457 sponsorship. The most common example is the use of the occupation of Program or Project Administrator which has in the past been used for various administrative positions.

The change is likely to be in the form of a "genuineness" discretion for Department of Immigration officers processing 457 visa applications. If the position does not fit within the scope of the business, the nomination may be refused.

English Language Requirement

For most occupations, English language testing is not a requirement for 457 visas. However, for trade occupations, an English test is required unless the salary is over $92,000 or the person has a passport from the UK, Ireland, USA, Canada or NZ.

The English language requirements for certain occupations will be raised under the new proposal. At this stage, it is not clear which occupations will be affected - it's likely however that this will be a selection of lower skill occupations (eg those requiring a Diploma, Certificate IV or lower qualification) will be added to the list of occupations requiring English language testing.

Training Requirements

Unless a business has been established for less than a year, the business will need to provide evidence of training Australians to be approved as a business sponsor. Sponsors are also required to continue their training programs during the life of the sponsorship or face sanctions such as cancellation of their sponsorship approval.

The recent press releases indicate that enforceability of existing training requirements for businesses will be strengthened. It seems that the training requirement is likely to be extended to recently established businesses, though the exact measures are at this stage unclear.

Training is probably the most troublesome factor for businesses seeking to sponsor for 457 visas - only certain training activities can be counted towards the training requirement, and sponsors must ensure that training expenditure meets the required training benchmark for each financial year.

Market Rate Salaries

Employers must ensure that sponsored employees are paid at the market rate. This is determined by checking whether there is an Australian in an equivalent position. If so, the sponsored employee must be paid the same or more than the local employee. If not, reference is made to ABS statistics or other research about the appropriate market rate.

Press releases mention that stakeholders will be consulted to ensure market rate provisions more effectively protect local employment. Presumably, this would involve consulting unions where there is doubt about the salary being offered to 457 employees. This is expected to make the 457 processing timeframe longer in such cases.

Market Salary Exemption

High salary earners are exempt from the market rate salary requirement. The threshold for this exemption will rise from $180,000 to $250,000.

The intention is to ensure that higher paid salary workers are not able to be undercut through the employment of overseas labour at a cheaper rate.

On-Hire Arrangements

Under the current regulations, workers cannot be on-hired to an unrelated entity unless they are sponsored by a labour agreement. Under an on-hire arrangement, the employee works at premises other than those of the sponsor, and the sponsor has little involvement in the day-to-day management of the employee. This is as opposed to a contract for services, which is a contract for the sponsor to provide services to a third party. The employee may work off-site, but they are still receive direction from the sponsor.

Press releases mention that on-hire arrangements of 457 visa workers will be restricted - at this stage it is not clear exactly how this will be different to the current situation.

Since the changes to the 457 program in 2009, the practice of informal labour hire activities has increased. This is because prior to 2009, employers were given a specific number of sponsorship "slots" they could use for 457 sponsorship. Once these were used, the employer had to get a further sponsorship approval, and this would only be approved if the employer could justify the numbers and had a balance between local and overseas workers.

From 2009, there is no limit to the number of 457s an approved sponsor can nominate. As a result, even small companies can potentially sponsor large number of 457s. The practice of informally on-hiring these employees to unrelated entities appears to have been increasing.

Compliance and Enforcement

Press releases mention that Compliance and enforcement powers will be beefed up to stop employers who have routinely abused the 457 system. It appears that this will be targeted both at employers exploiting 457 workers and also employers seeking to undercut local workers.

Employer obligations and sanctions were already beefed up in 2009 to address these issues. The Employer Sanctions legislation, which makes it easier for the Department of Immigration to fine employers who have people working for them in breach of visa conditions, has just passed through the Senate.

It is not clear what additional measures are being contemplated, but it is arguable that the biggest impact would be to ensure adequate resources are made available to monitor compliance with the current legislation. It is hoped that the Department will also review and clarify sponsorship obligations - many of these are ambiguous and difficult to comply with in practice.

Conclusion

The 457 program has been modified on a regular basis - the legislative basis for controlling the program already exists for most of the issues which have been identified, and simply needs to be enforced more rigorously. 457 sponsors are already required to deal with a fairly high regulatory burden, and I would argue that more would be achieved by implementing two relatively simple changes:
  1. Reintroduce a quota of sponsorship slots for each approved sponsor. This will greatly limit the possibility of informal on hire arrangements, and employers relying more on overseas employees than locals
  2. Provide the Department of Immigration more resources to monitor the current sponsorship obligations

Feel free to contact us if you would like more information about sponsorship overseas workers or the proposed changes.

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