HomeWorkplaceHRHow the 457 Visa changes will impact SMEs

How the 457 Visa changes will impact SMEs

Australia has long been regarded as a country which has been able to attract top international talent to encourage business growth and diversification which has been made possible through the Temporary Work Skilled (subclass 457) visa. But the abolition of the 457 scheme and introduction of a replacement program from March next year has received a mixed welcome.

Unions claim the changes would make no real difference and are merely ‘cosmetic,’ while some industries say it will make it far more difficult to secure experienced individuals and could prevent commercial growth and innovation along with having a have a huge cost implication on small businesses.

Out with The Old and In with The New

The 457 program may be replaced by temporary visa categories under the Temporary Skill Shortage (TSS) scheme, due to come into effect in March 2018. It will be split into two streams the Short-Term TSS and the Medium-Term TSS.

The Short-Term TSS visa will allow firms to fill posts with foreign workers on a temporary basis and is a two-year visa which only has the possibility of one renewal. The Medium-Term TSS stream will allow businesses to fill posts with foreign workers for up to four years and will require tighter English Language skills. It’s targeted at those in highly skilled occupations which have been assessed as being of high need to the Australian economy and may then qualify for permanent residency after three years.

But the financial outlay for small businesses to recruit these workers will be far higher than the costs associated with bringing someone in on a 457.  In addition, for many occupations where a ‘caveat’ applies, a company which has less than five staff, or does not turn over $1,000,000 will not be able to participate.

Complicating the scheme further is that some occupations will have different salary scales compared to the current across the board minimum salary scale approach.

Business Sponsors to Fund New Training Fund

Since the 457 was introduced, employers who have sponsored people through this program have had to contribute 1 or 2% of their payroll into training. The Australian Government said it found this difficult to police while it could verify that the money had been paid there was often no evidence what the money was being spent on.

In the recent Federal Budget, a new levy was unveiled for employers which is a fixed fee. This is a significant compulsory payment, and will be spent on the training and development of Australians.

The aim of this is to offer extra support to around 300,000 apprenticeships and traineeships in high-demand occupations that currently rely on skilled migration. This is to encourage more home-grown talent.

However, this foreign skilled worker levy will mean more costs for employers. The total amount payable will depend on the size of the company making the application.

Implications of The Levy

Businesses with a turnover of less than $10 million will be required to make an upfront payment of $1,200 for every year they employ someone on a Temporary Skill Shortage visa and make a one-off visa payment of $3,000 for each employee they sponsor for a permanent skilled visa.

Businesses with a turnover of $10 million or more per year will be required to make an upfront visa payment of $1800 for every year they employ someone on a Temporary Skill Shortage visa and make a one-off visa payment of $5,000 for each employee they sponsor for a permanent skilled visa.

If an employee is being sponsored for a permanent Employer Nomination Scheme (subclass 186) or a permanent Regional Sponsored Migration visa (subclass 187) then the employer will need to pay a one of visa payment of $5,000 for each employee.

Blow for Small Businesses

The small business community is undeniably the hardest hit.  The Industry Director of the Australian Chamber of Commerce Jenny Lambert has already said that she was ‘surprised at the size of the levy announced’ after her organisation was one of many involved in a consultation process which had recommended a training levy at just $400 for a small business.

This high levy combined with visa fees and new eligibility restrictions could deter business from using the visas and lead to a fall in applications. This could hinder rather than boost the coffers of the training budget.

The further announcement in the Federal Budget that the government will be reducing staff numbers at the Department of Immigration and Border Protection by 245 positions could also impact visa processing times.

For industries in the resources sector such as oil and gas, the health sector and others, it is a significant cost which could be incurred on companies trying to sponsor hundreds of specific skills needed on site which are not available locally.

There will also be new English language requirements which will make it harder for those from non-English speaking countries to obtain a visa.  These are typically trade related jobs and this test will be a real obstacle for them

Squeeze on Overseas Talent

It is unrealistic to think that the Skilling Australian Fund will be able to provide the myriad of skilled talent needed within Australia. Experience counts for so much and that’s why we will continue to look for specialist positions such as chief executive officers, specialist technical representatives or senior academics from overseas.

The cut in the skilled shortage list and the new levy on businesses will undoubtedly mean that companies will initially try to fill gaps from within Australia. But by ignoring oversees talent it may prove to make Australia less competitive on a global scale. The immigration changes and the recent budget announcement appear to be more populist rather than good policy. Making it more difficult to achieve Australia Citizenship seems counter intuitive when someone is living on a permanent visa and making a real contribution to Australian society.

About the author

Dan Engles is a trusted migration expert and dynamic and influential business leader.  He heads up the migration company Visa Solutions Australia based in Perth, WA and has helped hundreds of companies to solve their migration and recruitment problems. As well as working within the migration industry he’s also been a senior economist at the Chamber of Commerce and Industry for WA and for the Commonwealth Treasury.