Review of the 457 Market Rate
February 9, 2016
On 23 December 2015, The Minister for Immigration and Border Protection, Peter Dutton MP, announced an “Expert review of the 457 temporary skilled migration threshold (“TSMIT”).”
What is the TSMIT?
The TSMIT was implemented in September 2009 as part of a raft of reforms to the Subclass 457 visa programme. The basic premise of the TSMIT is that 457 visa holders should be provided with terms and conditions of employment which are no less favourable than those provided to an Australian employee performing equivalent work. The TSMIT is currently $53,900 and has remained at this level since 1 July 2013. Before 2013, the TSMIT was indexed each year in accordance with the Australian average weekly earnings as reported by the Australian Bureau of Statistics.
Common misconceptions about the TSMIT
Many people assume the TSMIT is used as a minimum salary level to pay foreign workers; however, it is more than this. Employers sponsoring a 457 visa holder must demonstrate that an equivalent Australian employee is being paid or would be paid over the TSMIT, a concept referred to as the market rate. If the market rate is below the TSMIT (i.e. an Australian would not ordinarily be paid at least $53,900) a sponsoring employer cannot nominate this role to be filled by a 457 visa holder. While practically it serves as a minimum salary level for a potential 457 visa nominee, it also acts as a monetary indicator that a position is of a sufficient skill level for the 457 programme.
The TSMIT also recognises that a 457 visa holder will have access to the same monetary safeguards of the Australian welfare system as an Australian permanent resident or citizen. The reasoning being that if a 457 visa holder has reasonable means of support, they are less likely to breach their visa conditions and are less vulnerable to mistreatment or exploitation.
Why have the Review?
A report by the 457 integrity review recognised that the TSMIT plays an important part of the 457 visa programme. It provides an actual dollar amount that ensures ease of compliance and it aligns with the perception of the 457 visa programme that it is aimed at skilled and experienced workers. The report recommended the TSMIT level as set on 1 July 2013 be frozen at $53,900 and then reviewed in two years. On 21 October 2015, the Government announced this review would be brought forward as part of an agreement with the Opposition to ensure the safe passage of legislation with respect to the signing of the China Australia Free Trade Agreement. The key issues to be considered in the review, amongst others, are:
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Whether a variable TSMIT should be implemented to accommodate certain circumstances (i.e. occupation based variation, geographical location of position, number of family members included on the 457 visa);
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If a variable TSMIT be introduced, should these variations operate as an increase or decrease of the TSMIT;
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What evidence should be considered when determining the level of the TSMIT; and,
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Whether and how to index the TSMIT
The Independent Review also recognised concerns from regional areas that the “one size fits all” approach of the TSMIT can deter businesses in regional areas from accessing the 457 visa programme to fill genuine skills shortages in those areas. These concerns were noted for the review and will be taken into consideration when recommending any changes to the TSMIT.
Ramifications for Business
Should the TSMIT be increased, this may hamper the ability of business to sponsor some positions in the future for a 457 visa where the market rate is below the new TSMIT. However, the review may recommend more flexibility in the application of the TSMIT, especially as it relates to regional areas.
Fragomen will make submissions to the review on behalf of our clients and will continue to provide updates throughout the review process.
