Strengthening the integrity of the 457 program

On 28 February 2013, the Department Of Immigration and Citizenship released the following fact sheet to explain the pending changes to the Subclass 457 visa scheme:

The purpose of the 457 visa program is to enable employers to fill skill shortages by recruiting qualified overseas workers where they cannot find appropriately skilled Australians.

The 457 visa is a temporary visa, intended for filling short to medium term skill shortages, in a quick, flexible way to meet business needs. The program contains a number of in-built protections to prevent local workers’ conditions from being undercut and overseas workers from being exploited.


The program was significantly reformed in 2009: why are further changes necessary?

The Worker Protection Act 2008 introduced a sponsorship framework which was designed to ensure the working conditions of sponsored visa holders meet Australian standards. These reforms have been largely effective in achieving their objective.

While the subclass 457 visa program is meeting its overall intent, there are external factors influencing program trends.  The 457 program has expanded well above the national employment growth rate, and while most employers are using the subclass 457 appropriately,  the nature of the program’s use by some employers indicates that the criteria is not being fully met.

Additionally, the Australian economy is very buoyant compared to many other countries, which makes us an attractive destination for people who may be facing high unemployment and low wages at home.

Within the program, significant growth was recorded in 2011-12 from applicants applying from onshore who held a working holiday maker visa or student visa.  These subclass 457 visa applicants held mostly vocational qualifications, and in some industries accounted for over half of total grants.

This trend suggests the program is being increasingly used by temporary visa holders seeking to remain in Australia instead of supplementing the Australian labour force.


What are the new measures?

On 23 February 2013, the Minister for Immigration and Citizenship announced a number of reforms to the subclass 457 program. These reforms are aimed at strengthening the Department of Immigration and Citizenship’s capacity to identify and prevent employer practices that are not in keeping with the criteria of the subclass 457 program.

The measures being brought forward include:

  • the introduction of a genuineness criterion under which the department may refuse a nomination if the position does not fit within the scope of the activities of the business
  • an increase in market salary exemption threshold from $180 000 to $250 000 to ensure that higher paid salary workers are not able to be undercut through the employment of overseas labour at a cheaper rate
  • the removal of English language exemptions for certain positions. Many long-term 457 workers go on to apply for permanent residence, and  this change will ensure that the 457 program requirements are brought into line with the permanent Employer Sponsored program which requires a vocational English ability. This change will benefit visa holders by ensuring that 457 visa holders, who have an ongoing position with their employer and want to apply for permanent residence in the long-run are not disadvantaged because of their language ability. Applicants who are nominated with a salary greater than $92 000 will continue to be exempted from the English language requirement
  • enhanced regulatory powers for the department to ensure that the working conditions of sponsored visa holders meet Australian standards and that subclass 457 workers cannot be exploited or used to undercut local workers
  • amendments to existing training benchmark provisions to clarify that an employer’s obligation to train Australians is ongoing and binding for the duration of their approved sponsorship, including for newly established business
  • amendments to clarify that 457 workers may not be on-hired to an unrelated entity unless they are sponsored under a labour agreement
  • amendments which will allow the department to refund a visa application fee in circumstances where an employer nomination has been withdrawn.


What is the intent of these measures?

The Department of Immigration and Citizenship’s capacity to detect and respond to the integrity concerns is limited by current legislation. The new measures will strengthen the integrity framework without adversely affecting visa application processing times and ensure that the potential impact on business is minimised.

The measures will ensure the subclass 457 program better meets its overarching intent of acting as a supplement to, rather than a substitute for the Australian labour market.

The measures will also close loopholes in the current legislative and policy settings to ensure that the program can only be used by appropriately skilled persons and to fill genuine skills shortages. This will enable Australians workers to have fair and equal access to employment opportunities.

Further, the measures will strengthen the sponsorship obligations to ensure that the working conditions of sponsored visa holders meet Australian standards and that they are not exploited. Strengthening the sponsorship obligations will also provide further disincentive to use the program in a manner which was not intended.


When will the changes happen?

The comprehensive suite of measures will be introduced on 1 July 2013. In the lead up to the changes, detailed information will be made available to assist sponsors and visa holders and their representatives understand the new requirements.


How will the changes affect Australian businesses?

The changes will not adversely affect the vast majority of employers who are using the program appropriately. The changes will, however, strengthen the government’s capacity to identify and prevent employer practices that are not in keeping with the purpose of the 457 program.


How will the changes affect current 457 visa holders?

There should be no adverse effects on existing visa holders if they are already doing the right thing. The 457 visa is a temporary visa, intended for filling short to medium term skill shortages, in a quick, flexible way to meet business needs. The Worker Protection reforms which took effect in

September 2009 introduced a range of sponsorship obligations to ensure the working conditions of sponsored visa holders meet Australian standards and that they are not exploited.


How will the changes affect future 457 visa applicants?

The vast majority of 457 visa applicants who are genuine will not be affected by the changes. In some circumstances applicants whose applications are processed after 1 July 2013 may be required to provide further evidence to demonstrate their claims for a 457 visa.


What affect will the changes have on addressing real skills shortage problems?

Where employers can demonstrate a genuine need for skilled workers from overseas, they will still be able to sponsor people to fill skills gaps. Employers who make genuine attempts to open job opportunities up to Australians, who pay appropriate market rates and who are committed to the ongoing training and up-skilling of Australians will still have access to the subclass 457 program to supplement their skilled workforce.


What is labour market testing and how has it been used in the past?

Traditional forms of labour market testing involves advertising the position prominently in national and local newspapers, trade magazines and/or on job seeker websites over a number of weeks to prove that no suitably qualified Australians could be found for the position.

In the past, by the time an employer approached the Government to sponsor a skilled worker from overseas, they had already tested the local labour market thoroughly. However, they were still forced to go through the prescribed process which usually involved extra costs and delays for the employer.


Why is the government not reintroducing Labour Market Testing?

The 457 program is an important part of how Australia meets a number of our international trade obligations. These obligations mean we can’t limit access to our economy of people who wish to do business with us. Part of doing business with us often involves sourcing skilled labour from other countries. Australia must remain open for business people and service providers and the reforms to the 457 program will not adversely impact these obligations.


What incentives are there to encourage employers to employ Australians first?

The 457 sponsorship requirements ensure that if a suitably qualified and experienced Australian is readily available to work where needed, employers will look to them first.

If a suitably qualified Australian worker is readily available and acceptable, they are the more preferable option because it is comparatively less expensive to source a local worker.

There are significant costs to the employer when sponsoring a 457 worker.

These costs include:

  • paying sponsorship and nomination fees
  • costs of recruitment
  • providing equal terms and conditions including paying market rates
  • maintaining a financial commitment to training levels
  • being liable for the cost of return travel to the person’s country of origin.


When these costs are factored in, it is more expensive to employ an overseas worker than a local worker of the same skills and experience.