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Key recommendations: Independent Review of the Subclass 457 Program

The contents of this article are correct as at 10 October 2014.

This article contains a summary of the key recommendations of the Independent Review into the Integrity of the Subclass 457 Programme produced in September 2014.

Recommendations were put forth essentially with the aim of deregulating and streamlining the 457 programme while maintaining the programme’s integrity.

The recommendations will be of particular interest to sponsoring/nominating employers, as well as 457 applicants and visa holders.

The recommendations are currently being reviewed by the government and have not been implemented yet. It is expected that some of the recommendations may be implemented near the end of this year or in 2015.

How many of the recommendations translate into changes to the law, remains to be seen.

As changes are introduced we will provide a further update.

Recommendation – Remove or reduce Labour Market Testing

  • That the current legislative requirement for labour market testing (LMT) be abolished. Currently, there is more of a “one size fits all approach” with the LMT requirement which is not tailored for each occupation. It was acknowledged that, as the OECD has pointed out, employer-conducted labour market testing is not “fully reliable”, and in the Australian context has proven ineffective.
    • Currently, approved business sponsors seeking to lodge a 457 nomination must undertake Labour Market Testing (“LMT”) unless an exemption applies.
      • Currently LMT is only required for the occupations of Engineers, Nurses and Trades/Technicians.
      • There are also a number of exemptions depending on the passports and/or work history of the applicants.
    • Instead of retaining this requirement, the recommendation proposes that it would be more appropriate for the New Council to consider occupations in over-supply or those where there are concerns about over-use in certain regions or occupations.
    • More specific and targeted LMT could be imposed for those occupations that are deemed by the New Council:
      • To be in over-supply
      • To be over-used

Recommendation  – Expanding list of eligible 457 occupations

  • That the Consolidated Sponsored Occupations List (“CSOL”) be retained as a list of occupations which are at Skill Level 3 and above.
  • That the CSOL should be able to be amended in two ways:
    • The addition of skilled occupations which can be shown to exist in the community but which may not be on the ANZSCO list
    • The refinement of the CSOL where there may be integrity or appropriateness concerns.
  • That the Council provide advice on those occupations where some concern exists and recommend additional requirements or limitations on occupations and/or regions.
    • Currently, business sponsors can only nominate occupations on the CSOL which comprise occupations that are defined by the Australian and New Zealand Standard Classification of Occupations (“ANZSCO”).
    • This recommendation proposes that the New Council should advise the government on the development of a more responsive CSOL for the 457 programme.
    • For example, if industries can present evidence that a skilled occupation exists and is not currently on the ANZSCO list, they can seek to have the occupation defined and added to the CSOL.

Recommendation  – Market Salary Rate

  • Market rate framework should continue to operate in the 457 programme but that individuals paid above the top marginal tax rate (currently $180,000) should be exempt from this requirement.
    • Currently, business sponsors are required to demonstrate that prospective 457 visa employees will be paid at market salary rate (i.e terms and conditions of employment are no less favourable than those of an Australian worker performing the same work.
    • Currently business sponsors are exempt from this requirement if the prospective sponsored employee’s annual earnings are $250,000 or above.

Recommendation – Temporary Skilled Migration Income Threshold (“TSMIT”)

  • While there is an argument for abolishing the TSMIT, that it nevertheless be retained to allow for streamlining within the wider programme.
  • That the current TSMIT be retained at $53,900 p.a. but that it not undergo any further increases until it is reviewed within two years.
  • That the two roles currently performed by the TSMIT (that is, acting as a determination of the eligibility of occupations for access to the scheme and as an income floor) be more clearly articulated in the 457 programme, and that consideration be given to accepting the eligibility threshold as up to 10 per cent lower than the TSMIT.
  • That the government give further consideration to a regional concession to the TSMIT, but only in limited circumstances where evidence clearly supports such concession.
  • That in circumstances where the base rate of pay is below the TSMIT, the current flexible approach adopted by the department, taking into account guaranteed annual earnings to arrive at a rate that meets the minimum requirement of TSMIT be continued and made more visible to users of the programme and their professional advisors.

Recommendation – Training benchmarks

  • That the training benchmarks be replaced by an annual training fund contribution based on each 457 visa holder sponsored, with the contributions scaled according to the size of business. 
    • Currently, business sponsors are required to meet their training obligations each year for the term of their sponsorship by undertaking either of the following:
      • Benchmark A: contributing 2% of their gross payroll to an Australian training fund; or
      • Benchmark B: spending 1% of their gross payroll on training its Australian employees.
    • The report proposed a simpler training model which is based on the concept of a “social licence” whereby, in return for being able to sponsor overseas workers under the 457 programme, sponsors help to contribute to the broader issue of providing employment and training opportunities for disadvantaged Australians and apprentices.
      • This could be done by the sponsor contributing on the basis of each 457 visa holder that they employ, e.g $400 per annum per visa holder.
      • The annual contribution amount be proportional to the size of the business.
  • That there be a new sponsorship obligation to ensure that the cost of the sponsor of the training contribution cannot be passed onto a 457 visa holder of third party.

Recommendation  - English language requirement

  • That the English language requirement be amended to an average score. For example, in relation to International English Language Testing System, the 457 applicant should have an average of 5 across the four competencies (or the equivalent for an alternative English language testing provider).
    • Currently, 457 visa applicants need at least 5 in each component of the International English Language Testing System (“IELTS”).
    • The alternative English language test is the Occupational English Test (“OET”). 457 visa applicants require at least a “B” in each component (unless registration or licensing bodies require a higher level of proficiency).
  • That greater flexibility be provided for industries or businesses seeking concessions to this requirement for certain occupations on a case by case basis
    • Currently, unless the applicant is exempt, there are no available concessions to this requirement.
  • That consideration be given to alternative English language test providers.
    • Currently, only tests conducted by IELTS and OET are recognised by the Department for 457 visa purposes.
    • It was recommended that consideration be given to include TOEFL internet based tests, Pearson Test of English Academic, Cambridge English: Advanced and the International Second Language Proficiency Rating test.
  • That consideration be given to expanding the list of nationalities that are exempt from the need to demonstrate they meet the English language requirement.
    • Currently, only passport holders of the UK, USA, the Republic of Ireland, Canada and NZ are exempt from this requirement.
  • That those who studied a total five cumulative years of study at a secondary and/or higher education institution in English be exempt from this requirement.
    • Currently, only those who studied five consecutive years at a secondary and/or higher education institution in English can meet this requirement.
    • This exemption can be inflexible and difficult to prove at times.
      • For example: individuals who completed a four year bachelor degree and then took one year off to work before commencing and completing a masters degree would not be able to meet this requirement.

Recommendation  - Genuine position requirement

  • That targeted training be provided to decision-makers in relation to the assessment of the genuine position requirement. 
    • The genuine position requirement was introduced in the July 2013 reforms to ensure the 457 programme is only used for legitimate purposes. 
    • It gives case officers the discretion to refuse a nomination if there are concerns that the position associated with the nominated occupation is not genuine or was created specifically to achieve a migration outcome. 
    • Many stakeholders consider this requirement to be highly effective as it allows case officers to query dubious nominations. 
    • Some stakeholders believe this requirement:
      • Provides case officers with too much discretion
      • Is an unnecessary regulatory burden
      • Can lead to inconsistent decision making
  • That before decision-makers refuse a nomination on this basis, the sponsor be invited to provide further information to the decision-maker.

Recommendation  - Skills assessments

  • That the government should explore how skills assessments could more appropriately recognise a visa applicant's experience.
    • Currently, skill assessments are required:
      • For the occupations of Program and Project Administrator and Specialist Managers (not elsewhere classified)
      • For 30 trade occupations if the 457 visa applicant is a national of certain countries
      • Where a decision-maker is concerned in relation to the skills of a 457 visa applicant
    • The report states that there are no reasons for the existing skills assessment requirement to change. 
    • Some stakeholders expressed concern about the length of time taken to complete a skills assessment, the cost involved and that VETASSESS (one of the skills assessment bodies) does not appropriately recognise work experience. 
    • No proposal was put forth as to how VETASSESS could better recognise work experience.

Recommendation – Sponsorship

  • That Standard Business Sponsors should be approved for five years and start-up business sponsors for 18 months. 
    • Currently, most standard business sponsors are approved for three years.
    • Start up business sponsors that have operated for less than one year are only approved for one year.
    • Long-term heavy users of the 457 program can apply for accredited status which can extend the approval period up to six years and allows for priority processing of nomination and visa applications.
  • That as part of the government’s deregulation agenda, the department should develop a simplified process for sponsor renewal.
    • This recommendation’s aim is to reduce unnecessary duplication and administration.
  • That the timeframe for the sponsor to notify the department of notifiable events as set out in legislation should be extended to 28 days after the event has occurred.
    • Currently, business sponsors must inform the Department within 10 working days of a notifiable event occurring.
    • Amending this to 28 days would align with the obligations of companies under Corporations Law.
    • One of the notifiable events includes informing the Department about a sponsored person’s change of duties. The report suggested that this obligation should be amended so that business sponsors should not be required to inform the Department about a sponsored person’s change of duties unless they are working in a different 4-digit ANZSCO Unit Group.
      • This would mean, for example, that a business sponsor should not be required to inform the Department if a sponsored person who was nominated for the occupation of Accountant (ANSZCO Code: 221111) began performing the duties of a Management Accountant (221112) or Taxation Accountant (221113).
  • That it be made unlawful for a sponsor to be paid by visa applicants for a migration outcome, and that this be reinforced by a robust penalty and conviction framework. This recommendation’s aim is to maintain the integrity of the 457 programme.

Recommendation – Fees

  • The panel received feedback from stakeholders that the 457 visa fees are excessive and act as a disincentive to participation in the program.
  • Consequently, the panel has recommended that the government should review the fee structure, especially for secondary visa applicants and visa renewal applications.
  • Currently, the Department’s visa fees for the 457 programme are as follows:
    • Primary applicants $1035
    • Secondary applicants over 18 $1035
    • Secondary applicants under 18 $  260
    • Subsequent Temporary Application Charge* (“STAC”) $  700
*The STAC generally applies where a person holds a temporary visa which they applied for in Australia, who then applies for a ‘subsequent’ temporary visa whilst in Australia.

Recommendation  - Information provision

  • That sponsors be required to include as part of the signed employment contract:
    • A summary of visa holder rights prepared by the department; and,
    • The Fair Work Ombudsman’s Fair Work Information Statement.
  • That improvements be made to both the accessibility and content on the department’s website specific to 457 visa holder rights and obligations, and utilising the department’s significant online presence more effectively to educate 457 visa holders on their rights in Australia
  • The aim of this recommendation is to reduce the risk of exploitation among 457 visa holders.

Recommendation  - A streamlined approach

  • Streamlined processing is only available to heavy users of the 457 programme that have applied for and have been approved for accredited status. 
  • The panel has recommended that consideration be given to creating streamlined processing within the existing 457 programme as a deregulatory measure. To maintain programme integrity, streamlining should be built around risk factors including business size, occupation, salary and sponsor behaviour.
    • Essentially under this recommendation, business sponsors would be divided into three streams based on the above risk factors and those in Stream 1 would have their visa applications processed faster.
    • For example, the indicative model proposed in the report (see page 77) provides that business sponsors in Stream 1 would have to demonstrate that:
      • They have a high turnover (at least $4 million per year)
      • They have been an approved sponsor for more than four years
      • They have no sanction history
      • The nominated occupation is on the “new” Occupation List 1 (a list of highly skilled jobs to be issued by the Department that is envisaged to be responsive to concerns based on the Council’s advice).
      • The nominated base salary is greater than $129,300.
    • If a business sponsor falls within Stream 1, further deregulation measures would follow:
      • No Market Salary Rate (“MSR”) assessment
      • No TSMIT
      • Genuine position certification (but current legislative provision still exists)
      • No English test required
      • No formal skills assessment required.
      • Current MSR sponsorship obligation would not apply
      • New obligation that base salary must remain above the Fair Work Act threshold, currently at $129,300.
      • New circumstances to bar or cancel a sponsorship if position is found not to be genuine.

Recommendation  - Pathways to permanent residence

  • That 457 visa holders be required to work for at least two years in Australia before transitioning to the Employer Nomination Scheme (“ENS) or Regional Sponsored Migration Scheme (“RSMS”), and that consideration be given to the amount of time required with a nominating employer being at least one year.
    • Currently, the existing pathway most used by 457 visa holders is the Temporary Residence Transition Stream (“TRTS”) which is one of the two streams of ENS or the RSMS for permanent residence.
    • This stream is for 457 visa holders who have worked for at least two years in the same nominated occupation in the business of a nominating employer who wants to offer them a permanent position.
    • The permanent position must be full-time, ongoing and available for at least two years and consistent with the position in which the visa holder has already worked in the business.
    • The aim of this recommendation is to reduce the potential for employers to use the lure and opportunity of permanent residence to exploit 457 visa holders.
  • That consideration be given to reviewing the age restriction on those 457 visa holders transitioning to the Employer Nomination Scheme or Regional Sponsored Migration Scheme.
    • Currently, 457 visa holders wishing to transition to the ENS or RSMS must be under 50 at the time they lodge their application unless they are exempt.
  • That consideration be given to facilitating access for partners of primary sponsored 457 visa holders to secure permanent residence under the Temporary Residence Transition stream.
    • The report noted that temporary residence visa holders working in Australia often transition to become a primary sponsored 457 visa holders merely to facilitate and secure permanent residence under the TRTS. Such groups include the partners of primary 457 visa holders.
    • Currently, only primary 457 visa holders can lodge an application for permanent residence under the TRTS and if they wish, include their partner.
    • This recommendation suggests the Department to consider facilitating a direct transition to permanent residence under the TRTS of the ENS/RSMS for partners or other temporary residence visa holders working in Australia.

Recommendation  - Monitoring

  • That greater priority be given to monitoring, and that the department continue to enhance its compliance model to ensure those resources are applied efficiently and effectively.

 Recommendation  - Inter-agency cooperation

  • That there be greater collaboration between the department and the Australian Taxation Office to uphold integrity within the 457 programme and minimise the burden on employers.
  • That a change to 457 visa conditions be introduced to place an obligation on the visa holder to provide the department with their Australian tax file number. 

If you are an Australian organisation which is a 457 sponsor or proposing to become a sponsor under the scheme, please click this link to contact Visa Lawyers Australia if you have any questions concerning this article.