Employers must establish their credentials when wishing to sponsor skilled workers to live and work in Australia under the temporary sponsored 457 visa program. Sponsors owe certain obligations to the government and to its sponsored skilled workers in exchange for this opportunity to sponsor.
Employers’ Sponsorship Obligations
Part of the strengthened government approach to the employer sponsored 457 visa program is the imposition and monitoring of the obligations which attach to the grant of a sponsorship and which apply to the company once granted a Standard Business Sponsorship (SBS). The requirement to provide training was previously a commitment only, but since 1 July 2013 it is a formal sponsorship obligation. The main ones from an everyday standpoint are listed below:
- Obligation to provide training to Australians and permanent residents
If an entity is a SBS and lawfully operated a business in Australia at the time of SBS approval as a standard business sponsor (or at the time you had your terms of approval varied), it must contribute to the training of Australians by:
- spending an equivalent of at least two per cent (%) of payroll in payments to an industry training fund that operates in the same industry; or
- spending an equivalent to at least one per cent (%) of payroll in the provision of training to employees of the business who are Australian citizens or Australian permanent residents.
The obligation begins on the day the sponsorship was approved. The sponsor must meet this obligation in each 12 month period from approval date within which a sponsor employs a sponsored 457 visa holder (including if the sponsored visa holder is not employed for the full twelve months).
Where approval as an SBS is varied, the sponsor must meet the training requirement if it employs one or more primary sponsored persons.
The obligation ends either:
- if the sponsor is an accredited sponsor, six years after approval as a sponsor
- if the sponsor is not an accredited sponsor, three years or one year after approval as a sponsor.
- Obligation to ensure equivalent terms and conditions of employment
This is the obligation to pay market salary usually either shown by comparing salary of local equivalent worker(s) known as the ‘site’ rate – or where no local or equivalent workers are employed, by objective evidence of market salary in the industry;
- Obligation to cooperate with inspectors;
- Obligation to keep records;
- Obligation to provide information to DIBP when certain events occur
Examples of ‘certain events’ occurring includes change or cessation of sponsored employee(s), change of sponsor’s name or staff structure even where there is no change of ABN, change in sponsor’s status such as receivership or liquidation, change of directors and change of physical address and contact details. Generally this will include anything which affects or changes information filed with the department must be advised.
Where a sponsor’s ABN changes as a result of business take-over or sale, a fresh sponsorship will be required. The new sponsorship application will require the current requirements to be met.
There are other sponsorship obligations which sponsoring employers will be subject to, as a result of 457 sponsorship approval by the government.
For the full list of sponsors obligations (including those noted above) please see this link Sponsors’ Obligations:
Potential and existing sponsors should familiarise themselves with these obligations and also the training obligation. Administrative systems to deal with these obligations are a smart move, because compliance or failure to comply may affect the right to sponsor in the future and also permanent residence pathways available for its 457 sponsored workers.
***Compliance review – Temporary 457 Business sponsors
Our firm is offering existing employer sponsors the opportunity of an audit for the flat fee of $550 (including GST) to ensure that the sponsor is compliant with its sponsorship obligations, including provision of training in accordance with the training benchmarks and its responsibilities to employ legal workers. New legislation has increased fines for breaches of these sponsorship obligations and such breaches can impact on employer sponsors’ ongoing ability to nominate positions in the 457 program and to nominate employees holding 457 visas for permanent work visas and permanent residence.
All work required to make sponsors compliant will be separately charged either upon an hourly or a fixed fee basis.
Contact us to discuss or to make an appointment.
Matters Essential To Meet For Sponsorship
There are certain matters which the Sponsor must satisfy to be approved as a Standard Business Sponsor (SBS)
- Lawfully operating– The sponsor can be any type of lawfully operating business entity however the smaller or more specialist a sponsor is the more difficult it may be to meet some of the criteria, especially the training benchmarks.
- Training benchmarks– Under the new regulations, sponsors will be expected to meet the new training expenditure benchmarks A or B (usually more often B and A as the alternative):
- Benchmark A provides for cases where a proposed sponsor cannot meet Benchmark B (for example is not employing local workers). This benchmark requires a payment of at least 2% of the payroll of the business, to be made to an Industry Training Fund or other approved training provider relevant to the business.
- Benchmark Bis the requirement for all companies operating for over 12 months, to show recent expenditure, by the business, to the equivalent of at least 1% of the payroll of the business, in the provision of training to employees of the business (including 457 visa holders) on training (including out-sourced or structured in house training) for its Australian and permanent resident workforce.
‘Payroll’ includes employees only but the cost can include the wages and salaries of apprentices and trainees. If a company has not been operating for 12 months and it can provide evidence of an auditable training program together with an undertaking to commit for the term of the sponsorship, then that will meet DIBP requirements.
For further information on the Training Benchmarks you can have a look at the following publications:
Some terms explained:
Payroll is the amount of money an employer pays in wages to their employees in the 12 months immediately before an application for sponsorship is lodged.
Payroll expenditure includes any:
- superannuation contributions (mandatory or otherwise)
- eligible termination payments that are defined as wages in the Act relating to payroll tax in the relevant state or territory.
Payments to contractors or sub-contractors count as payroll if the contractor provides some labour services in fulfilling the requirements of the contract. For example, if your contractor is a bricklayer or a carpenter, any payments you make to them should be included as payroll expenditure.
For expenditure to qualify as recent, it must have occurred in the 12 months immediately before you lodge your application. This applies to both benchmarks.
If you include payments to contractors in your payroll expenditure, you can also count any eligible training expenditure on them towards the benchmarks.
Provision of training – now a crucial obligation not just a commitment
The requirement to meet either Training Benchmark A or B if a company wishes to sponsor, has since 1 July 2013 taken on much greater significance. A 457 visa employer sponsor was always (at least after September 2009) obliged to maintain its spending on training locals at the level and quality approved for SBS for the life of the sponsorship. However it is quite likely that many companies – particularly small to medium-sized companies – after achieving employer sponsorship status have failed to keep up with this training commitment on a year to year basis. Before 1 July 2012, this failure only became an issue if a company was monitored by DIBP and this training lapse was discovered. Prior to 1 July 2012
Since 1 July 2013, if sponsor companies fail to maintain the training commitment for each year of the sponsorship term commencing from grant date, they may be prohibited from nominating any long serving 457 visa holders for ENS or RSMS or even sponsoring further 457 visas. However there is now some flexibility, in that this training commitment can be disregarded (upon submission) by DIBP in circumstances where:
- Training benchmark A & B have been combined in any one year; or
- The aggregate spending on the training benchmarks for the period of sponsorship adds up to the required % under the benchmarks
Even with this flexibility -which is discretionary – it is crucial that companies establish a system of accurate records of training activities and costs and monitor its training spend on a year to year basis to avoid having to seek the department’s approval.
This has effectively changed the system to self-regulation by directly penalising companies failing to meet the 457 training benchmarks!
Unfortunately DIBP only offers
(i) either the Direct Entry pathway as an alternative to companies who may have honestly under-spent or missed training due to management staff turnover, or
(ii) where there are skill assessment issues, to re-sponsor 457 visa holders under a fresh employer sponsorship for 457 visa holders to ‘start again’ for a further two years under the Temporary Residence Transition pathway.
Matters Essential To Meet For Nomination
Nomination of occupation from the 457 visa skill list of occupations
Only skilled occupations deemed to be in shortage and included on the 457 occupation list (current CSOL) can be sponsored under the 457 visa program. Employers and employees wishing to sponsor or be sponsored permanently, should ensure that the chosen 457 visa occupation is also on the Employer Nomination Scheme (ENS) skills list to be eligible for the 457 Temporary Residence Transitional pathway to permanent residency.
Employment conditions no less favourable that local employees (payment of ‘market salary’)
Minimum wage or salary level (MSL) has since 14 September 2009 been replaced by the requirement for Sponsors to pay the ‘market rate’. This is a rate calculated on the circumstances prevailing in the Sponsor’s workplace and generally is to be at a rate (and work conditions) no less favourable than would be enjoyed by local workers doing similar work with similar skills and experience.
If a sponsor has no local employees to establish the market (or site) rate, then objective evidence has to be provided from market surveys and other information sources to establish the ‘market’ rate for the particular industry.
The nominated ‘market rate’ can be no lower than the new threshold of $53,900.00 (before super and any other allowances) and this is usually for a 38 hour week but can include part-time employment as long as the market rate is met. If the award rate is below the market rate and there are no other local employees above the threshold doing the same job, then the nomination will fail (unless the addition of guaranteed benefits exceed the threshold figure).
The sponsorship will usually be monitored by the Department of Immigration and Border Protection (DIBP) within 12-15 months of SBS approval and visa grant. This exercise is to check that the agreed terms of the appointment as approved and market salary, together with the other sponsorship obligations noted above are being complied with.
Labour Market Testing (LMT) requirement for 457 visas
Where applicable, approved Standard Business Sponsors (SBS) will need to undertake LMT and must – as part of that process – provide sufficient evidence to the Department of Immigration and Border Protection (DIBP) with their 457 visa nomination about:
- Their attempts to recruit Australian workers;
- How they have determined on the basis of these attempts that there is not a suitable qualified and experienced Australian citizen, permanent resident or eligible temporary visa holder available to fill the position.
An eligible temporary visa holder is a person who, at the time of the nomination is the holder of:
- A Subclass 417 (Working Holiday Maker) visa or a Subclass 462 (Work and Holiday) visa who is employed in the agricultural sector by the nominating employer (or an associated entity of that business) and the temporary visa does not prohibit the person from performing that employment.
The LMT requirement does not apply to nominations lodged by parties to a labour agreement.
Who will be impacted by LMT?
As anticipated, the majority of professional occupations currently approved for the 457 visa program are exempt from this new requirement.
In summary, LMT will be required where a sponsor is seeking to nominate an individual in one of the following occupation groups:
- Engineers – including engineering managers, professional engineers, engineering technicians and drafts-people
- Nurses – including registered and enrolled nurses and midwives
- Trades and technicians – all approved occupations in these categories
- Where a sponsoring business has retrenched an Australian employee or an Australian employee has been made redundant within the four (4) month period prior to lodging a nomination for the same occupation group.
Exemptions to LMT – international trade obligations and major disasters
Exemptions to the LMT requirement will be available for all occupations in the following circumstances:
- where it would be inconsistent with one of Australia’s international trade obligations; or
- where the nominee would be providing assistance in relation to a major disaster which has occurred in Australia.
Exemptions relating to major disasters can only be given directly by the Minister for Immigration and Border Protection (in writing).
To claim an exemption from labour market testing on the basis of an international trade obligation, one of the following must specifically apply:
- the worker is a citizen of Chile or Thailand or is a citizen or permanent resident of New Zealand
- the worker is a current employee of a business which is an associated entity of the sponsor, and that business is located in an ASEAN country, Chile or New Zealand. ASEAN countries include Brunei, Myanmar, Cambodia, Indonesia, Singapore, Thailand, and Vietnam
- the worker is a current employee of an associated entity of the sponsor, which operates in a country that is a member to the World Trade Organisation (WTO, currently 158 member countries), and the worker is being nominated for an ‘Executive or Senior Manager’ level position (including chief executives, managing directors, sales and marketing, finance, human resource, and engineering managers). Such person must have responsibility for the entire or a substantial part of the sponsor’s operations in Australia
- the sponsor’s business currently operates in a WTO member country and is seeking to establish a business in Australia, and is nominating an occupation at ‘Executive or Senior Manager’ level (as described immediately above)
- the worker is a citizen of a WTO member country and has worked for the sponsor in Australia on a full-time basis for the two years prior to lodging the nomination.
HR and recruitment management- best practice
While most highly skilled occupations approved for the 457 visa program will be exempt from the LMT requirements, it is important that sponsors ensure that redundancies and retrenchments are accurately recorded and disclosed to relevant internal parties with responsibility for recruitment and immigration matters.
As a minimum, an understanding of how a position must be tested should be grasped. Essentially, a position must be advertised through a range of methods to thoroughly test the labour market. These methods include:
- Posting the job on internal job boards
- Advertising in relevant print and industry publications;
- Engaging in-house recruiters, external recruiters or head-hunters;
- Posting the job on social media and professional networking sites;
- Participation in recruitment events (trade shows, expos, etc).
There are no specifications regarding which media specifically is used, how long the advertisement must be posted, or its contents, although the criteria must be non-discriminatory
To satisfy the case officer analysing the nomination that there are no suitable Australians to fill the role, sponsors must provide the following information:
- The mode of advertising used;
- When it occurred;
- Which geographical area the advertising was conducted in;
- The fees incurred through conducting the advertising.
It is timely then for sponsors to identify how recruitment efforts can be monitored and recorded for future use if required. Processes and reporting mechanisms aimed at ensuring minimal delays should be implemented or improved in the event that LMT is required.
For further assistance and advice in relation to this new Labour market testing requirement, please contact us
For further information on the Temporary 457 Work Visa click here.
*** Please contact us for further assistance and advice on any related 457 visa sponsorship issue.