What does the 2017 Budget mean to the 457 visa program?

Last night’s Budget, on top of changes to 457 visa announced on the 18th of April,  has sent further shockwaves through the migration profession.  Measures around the 457 program are cause for significant concern to those businesses and industries who rely on this program who have a genuine need to employ people from overseas to meet genuine labour shortages from within the local labour market, especially in regional areas.

Depending on the size of the sponsoring business, the new foreign skilled worker levy will increase the costs of doing business to some employers by millions of dollars. This especially hits big companies in regional areas hard.  At the top end of the scale, a South Australian employer in regional SA who employs one hundred 457 visa holders will now be required to pay an additional $1800 per person per year on top of their existing commitment to training.  This is in addition to increased visa application charges that will commence in March 2018, when the 457 visa is replaced by the Temporary Skilled Shortage (TSS) visa.  When combined with the new $3000 to $5000 cost to businesses for each 457 visa holder applying for permanent residency, business costs will significantly increase. 

 

How much more will this cost?

In the case where a business has a turnover of more than $10 million dollars and who then apply for permanent residency after 3 years, the increase costs include;

  • $1800 per person per year over 3 years, totalling $5400, plus,
  • $5000 per person to apply for a permanent employer sponsored visa.           

Whilst the Skilling Australians Fund will benefit $10,400 for each 457 visa holder who applies for permanent residency, this will come out of the pocket of Australian businesses.   

In this scenario, a regional employer who employs one hundred 457  visa holders, they will now be required to pay an additional $1,040,000 in training expenses for every one hundred 457 visa holders who apply for permanent residency; not including visa application charges.

For businesses with a turnover of under $10 million dollars, the cost per employee will be $6600 per 457 employee.

 

Background

The biggest change in Budget 2017 is that the Australian government will introduce a levy on employers seeking to employ skilled foreign workers, in March 2018, in line with the commencement of the Temporary Skilled Shortage (TSS) visa which replaces the 457 visa.

For the TSS visa, this levy will be applied as a fixed fee per annum, per person.  Announced in the Budget is also a once-off fixed fee for a permanent employer sponsored visas.

Currently, employers have to contribute either 1 or 2 per cent of their payroll to training if they employ foreign workers.  As a result of these changes, businesses who have a demonstrated commitment to training and already make a significantly investment in training and upskilling their local workforce will now be subjected to additional costs.  It is now probable that many businesses will be forced to significantly reduce their existing commitment to training and upskilling locally, in an attempt to offset these additional business expenses. This will be to the detriment of the local workforce, especially in regional SA.  In addition to this, will that $1,040,000 contribution made by the large business in regional SA be reinvested into training in their industry sector or within that regional area or will this funding levy be spent elsewhere in Victoria, New South Wales or in another jurisdiction?

All this is bad news for regional and other businesses accessing uniquely skilled workers to increase local industry capability under the 457 program. The flow on effect is reduced employment and training opportunities, leading to regional population damage and, therefore, decreased local demand. Considering these potentially massive implications, it would be interesting to access the Government’s modelling with regards to the impact that these changes will have on businesses or regional SA, and the broader economic benefit that the 457 program contributes to regional communities.

 

The new levy

The new levy will replace the current training benchmark financial obligations for employers.  The new levy will be;

 For businesses with a turnover of less than $10 million per year:

  • An upfront payment of $1,200 per visa per year for each employee on a Temporary Skill Shortage visa; and
  • A one-off payment of $3,000 for each employee being sponsored for a permanent Employer Nomination   Scheme (subclass 186) visa or a permanent Regional Sponsored Migration Scheme (subclass 187) visa.

 For businesses with a turnover of $10 million or more per year:

  • Required to make an upfront payment of $1,800 per visa year for each employee on a Temporary Skill Short  age visa; and
  • Make a one-off payment of $5,000 for each employee being sponsored for a permanent Employer Nomination Scheme (subclass 186) visa or a permanent Regional Sponsored Migration Scheme (subclass 187)

 

Is the introduction of the new levies just about raising revenue ? 

You bet.  The 18 April changes to the 457 and permanent residency visas includes a new 3 year requirement for someone wanting to transition from a temporary 457 visa to a permanent Employer Nomination Scheme (subclass 186) visa or a permanent Regional Sponsored Migration Scheme (subclass 187) visa – an increase on the existing 2 year transitional period requirement.  This now means that the Government will collect between $1200 to $1800 per person for the additional 1 year that applies to any of the 94,890 primary 457 visa holders in Australia who will be seeking to apply for a permanent employer sponsored visa in Australia.  The Migration Council Australia report ‘More than Temporary’ suggests that approximately 50% of 457 visa holders will transition to permanent residency in Australia.

If 50% of all primary 457 visa holders (45,945 people) did apply for a permanent employer sponsored visa, from March 2018 employers will need to pay between $3000 or $5000 for each employee being sponsored for a permanent visa.  At an average cost $4000 per person, this will potentially raise $183,780,000 in additional revenue, plus more into the future, dependent on the number of new 457/TSS visas granted and those eligible for a transitional visa.

But that’s not all.  There are also new financial obligations to employers. Higher Visa Application Charges (VAC) will apply to the new TSS program.  The VAC will be increased from the current $1,060 per primary 457 visa to $1,150 per primary visa for the short-term Temporary Skills Shortage (TSS) stream and $2,400 per primary visa for the medium-term stream.   This will potentially cost a business with a genuine demand for one hundred 457 visa holders up to an additional $134,000 in visa application costs for primary applicants and I imagine the cost of subsequent family members will also increase, potentially costing hundreds of thousands of dollars in additional fees.

These implementations, in addition to the current minimum salary level for the 457 program, make employing staff from overseas a significantly more expensive option compared to recruiting from within the domestic Australian labour market.  But what happens when there is no one available or suitable from within the local domestic labour market to do the job or where no one is willing or suitable to be trained to fill these vacancies?  

The Government has also announced that all visa application charges will be indexed in line with the forecast CPI on the 1st of July 2017.  Last year 14.9% of SA’s share of the 457 program was employed by the SA Government, therefore, these changes will also affect each and every South Australian tax payer.

 

Where these changes expected ?

The 457 program has been under review for over 3 years and, while changes to the 457 and training benchmark were widely anticipated, I do not believe that anyone in the migration profession or the wider business community would have anticipated such exploitative changes. 

These are significant changes to the 457 program and are an outright attack on those businesses who have little or no option than to employ overseas workers, especially in regional and rural areas where genuine ongoing shortages exist from within the local labour market and where for the foreseeable future there is no end in sight to address these shortages. 

The additional impost to these businesses are significant.

For more information about these changes, or to discuss the impact of these new guidelines please contact me on (08) 8210 9800 or mark@migrationsolutions.com.au

One Comment

Damien Minter

Hi, If I apply for my visa after March 2018 and I include my girlfriend on the application, will we have to pay $5,000 for her also? (I work for a large multinational bank). Who has to pay this charge, me or the business (or doesn’t-it matter)? – This really adds an extra hurdle to getting PR

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