Sweeping changes to 457 visa program from September 2009

The Australian Department of Immigration (DIAC) has introduced a number of changes to the sponsorship regime for temporary workers in Australia on subclass 457 visas.

The changes came into effect on 14 September 2009 and involve the following:

• New criteria for approval as a business sponsor, including a training benchmark
• Complete revision of the sponsorship obligations of employers using the 457 program, as well as sanctions for breach of obligations
• New list of approved occupations for 457 visas, along with new legislation for approval of nomination
• Introduction of market rate salary levels for 457 visas
• Removal of employers’ obligation to pay health costs for new 457 visas, and requiring 457 holders to have private health insurance
• Changes to the 8107 work restriction on 457 visas, and allowing 457 holders to "transfer" to a new sponsor without applying for a new 457 visa

Sponsorship Approval

The Department of Immigration aims to streamline the approval process for employers seeking to sponsor employees under the 457 program. As a result, the requirements for approval as a business sponsor have been completely re-written. 

Training benchmark

Businesses must meet one of two requirements in meeting the training benchmark:

1. Payment to an industry training fund of at least 2% of payroll
2. Expenditure of at least 1% of payroll on training of employees

It was previously possible for a business to show that they were introducing or utilising new technology in Australia as an alternative to demonstrating training, but this no longer appears to be possible.

Benefit to Australia

The "benefit to Australia" requirement, which previously applied to sponsorship approvals, is no longer required. Employers previously needed to show that employment of a person on a 457 contributed to employment of Australians, trade in goods & services, competitiveness of an Australian business sector or links with international markets.

Employment of local labour and non-discriminatory employment practices

Employers are now required to provide an attestation that they have a strong record or demonstrated commitment to employing local labour and non-discriminatory employment practices. This presumably means that it may be more difficult for employers who have a large number of 457 holders to sponsor further applications.
 
The emphasis on non-discriminatory employment practices might result in issues for employers preferentially hiring overseas nationals or paying lower salaries to overseas workers.

Nomination requirements

The legislation for approval of 457 nominations has also been completely revised. The occupation the employee is to work in must, in general, be on the list of approved occupations for 457 visas. The employer must now certify that the duties of the position match the ASCO definition of the occupation, and that the qualifications and experience of the applicant meet the skill level specified in the definition.
 
A revised 457 occupations list was produced on 11 September 2009. A number of "not elsewhere classified" occupations have been eliminated. These are occupations where the tasks and duties are not specified by ASCO, and are considered "catch all" occupations.
 
An attempt has been made to narrow the "not elsewhere classified" occupations still on the list by including definitions and a list of allowed specialisations. This has also been done for butchers and project/program administrators. Another category targeted for elimination are occupations in the meat industry – an area where employment of 457 visa holders has been of concern to unions for some time.
 
Farmers and farm overseers have been added to the approved list of 457 occupations. Another interesting addition is that the legislation has a provision to require employers to seek the support of certain organisations for a nomination to be approved in certain occupations. Presumably, this would include occupations where labour unions had concerns about presence of overseas workers in Australia.
 
The only way to nominate employees who are not the approved list is to negotiate a "labour agreement" with the Department of Immigration and the Department of Employment and Workplace Relations.
 
This process can take many months and the agreement can be quite restrictive in terms of which occupations can be nominated, salary level and training undertakings. Previously, it was possible for employers operating in regional areas to nominate occupations outside the usual list, but this concession has now been eliminated.

Market rate salaries

From 14 September 2009, new 457 visa applicants must be paid at the "market rate". The market rate will depend on the occupation and location of the employee. Evidence must be provided by the employer as to what the market rate is for the occupation, unless the base salary is over AU$180,000. This replaces the previous system that allowed for grant of a 457 visa, providing the salary level was above a clearly specified minimum for the occupation.
 
For existing 457 visa holders, employers have until 1 January 2010 to ensure that they are being paid the market rate. This will require an extensive audit process for larger users of the 457 program.
 
The intention of the change is to ensure that 457 visa holders are paid in accordance with Australian standards. The stated intention is to avoid exploitation of overseas workers. In reality, the change seems to be in response to concerns that workers on 457 visas put downward pressure on Australian wages and salaries.

Health costs and insurance for 457 holders

Employers who have employees on 457 visas that were granted prior to 14 September 2009 are expected to cover costs of public hospital treatment of the 457 visa holders. The health obligation is no longer part of the sponsorship obligations for 457 visas granted after 14 September 2009.
 
Instead, employees must show that they have adequate medical insurance to be granted their 457 visa, and must maintain this insurance during their stay in Australia on their 457 visa.
 
Employers previously had significant exposure to potentially very high health costs under the previous sponsorship obligation regime. Requiring the employee to hold suitable insurance is a more sensible way to offset the risk. However, requirement that the insurance be already in place prior to visa grant could be rather troublesome. Many applicants would need to pay for health insurance without being sure that their 457 visa will be granted.

Impact on overseas based standard business sponsors

The changes also affect applications from overseas based standard business sponsors. Since the 14 September 2009, to become an approved standard business sponsor, an overseas business must:
 

1. Apply for approval in accordance with the prescribed process (filling the correct form and paying the appropriate fee)
2. Not be a standard business sponsor already (unless they were approved before 14 September 2009)
3. Be lawfully operating
4. Have no adverse information known about them or a person associated with them, unless it is reasonable to disregard the adverse information
5. Be seeking to be approved as a standard business sponsor with the intention of sponsoring a Subclass 457 visa applicant/ holder to:

• Establish or assist in establishing a business operation in Australia with overseas connections on behalf of the overseas business, or
• Fulfil, or assist in fulfilling, a contractual obligation of the overseas business.

If the overseas business has no business operation in Australia, they are not required to meet the training requirement or make an attestation in relation to their record/ commitment to employment of local labour or non-discriminatory employment practices.
 
If, on the other hand, there is an Australian business operation, the overseas business must apply for approval as a standard business sponsor and nominate Subclass 457 visa applicants/holders to work in Australia. This is so they can be assessed against the training and attestation requirements. The overseas business will not be able to sponsor a Subclass 457 visa holder to work in the Australian business operation. The sponsorship will have to come from the local business operation.

English language requirements

Since the 14 September 2009, all primary Subclass 457 visa applicants who are sponsored by a standard business sponsor must demonstrate that they have English language proficiency that is equivalent to an International English Language Testing System (IELTS) test score of at least 5 in each of the four test components of speaking, reading, writing and listening.
 
This new requirement affects not only all new Subclass 457 visa applications made after 14 September 2009, but also applications lodged before, but not decided by, that date.

Sponsorship obligations

A new regime of sponsorship obligations has been introduced. The most significant changes include:

• Elimination of health obligation for 457 visas granted after 14 September 2009
• Changes to the events which must be notified to the DIAC, as well as the timeframe (10 business days) and method of notification
• Clarification of the obligation to return 457 holders and family members to their home country
• Requiring the employer to maintain certain records for a period of two years
• Forbidding employers from recovering the cost of obtaining sponsorship approval and recruitment fees from the sponsored employee

Work restriction 8107 and changing employers for 457 holders

457 holders are now able to change employers without needing to apply for a new 457 visa. The process of doing this is for the new employer to lodge a nomination and once this is approved, the 457 holder can work for the new employer.
 
The work restriction on 457 visas, condition 8107, has been rewritten to reflect this change. Subclass 457 visa holders can only work for the employer who most recently nominated them. If a 457 holder ceases employment, they must start working again within 28 days, or otherwise be in breach of their visa conditions.

Conclusion

Probably the most significant of the changes is the requirement to pay 457 employees at the market rate. In most cases, the market rate will be much higher than the minimum salary level that applied prior to 14 September 2009. Whilst some guidance has been provided on determining market rate, this requirement is very subjective and is likely to result in signifcant delays for employers using the 457 program going forward.
 
Changes to the sponsorship obligations are mostly quite sensible and make the requirements easier to determine.
 
The training benchmark will be very difficult for employers to meet if they rely mainly on "on the job" training. Employers must now in general show payments to external training providers or that they have hired a training officer to meet the training requirement. High-tech companies which would have previously relied on the introduction or utilisation in Australia of new technology will be disadvantaged.
 
Changes to the work conditions on 457 visas are very much in favour of 457 holders, as they make it easier to transfer to a new employer without applying for a new 457 visa.
 
-By Mark Webster
 
Mark Webster is the founder and director of Acacia Immigration Australia Pty Ltd. He has been a registered migration agent since 1999, and in 2003 became a member of the MIA NSW Executive.