SPONSORSHIP OBLIGATION
AMENDMENTS:
STRENGTHENING THE EFFECTIVENESS OF
THE WORKER PROTECTION REFORMS
(OBPR ID: 2012/14171)
REGULATION IMPACT STATEMENT
Department of Immigration and Citizenship
January 2013
SPONSORSHIP OBLIGATION AMENDMENTS:
STRENGTHENING THE EFFECTIVENESS OF THE WORKER PROTECTION
REFORMS (OBPR ID: 2012/14171)
REGULATION IMPACT STATEMENT
Contents
1.
2.
3.
Setting the scene - The Temporary Work (Skilled) (Subclass 457) visa
program:
1.1
Glossary of terms
1.2
Eligible skilled occupations
1.3
List of sponsorship obligations and the monitoring process
1.4
Sanctions for non-compliance
Introduction
2.1
Overview of RIS
2.2
Overview of the Temporary Work (Skilled) (Subclass 457) visa
program
2.3
Overview of the Worker Protection Act
2.4
The Deegan Review
2.5
Intention of the Worker Protection Act
Problem
3.1
Current outcomes which are contrary to the above stated
intentions
3.1.1 Regulation 2.86 - obligation to ensure primary
sponsored person works or participates in nominated
occupation, program or activity
3.1.2 Regulation 2.87 – Obligation not to recover certain costs
from a primary sponsored person or secondary sponsored
person
2
4.
5.
6.
7.
Options
4.1
Maintain status quo
4.2
Amend policy settings
4.3
Amend regulations
Proposed solution - amend regulations
5.1
Objectives of the proposed regulatory amendments
5.2
First issue: Unintended employment relationships
5.3
Second issue: Recovery of costs
Impact Analysis – compliance consequences, benefits and risks
6.1
Likely impact of the proposed regulatory changes upon
sponsors
6.2
Likely costs of compliance
6.3
Likely impact of the proposed regulatory changes upon
sponsored persons
6.4
Likely impact of the proposed regulatory changes upon
sponsored persons
6.5
Benefits
6.6
Risks
Consultation
7.1
External consultation
7.2
Internal consultation
8.
Implementation and transitional arrangements
9.
Conclusion
3
SPONSORSHIP OBLIGATION AMENDMENTS:
STRENGTHENING THE EFFECTIVENESS OF THE WORKER PROTECTION
REFORMS
REGULATION IMPACT STATEMENT
1. SETTING THE SCENE
1.1
Glossary
ANZSCO
Australian and New Zealand Standard Classification of
Occupations
Approved sponsor
A person who has been approved by the Minister
(under s140E of The Migration Act 1958) in relation to
a kind and class of visa prescribed by the regulations;
and a person whose approval has not been cancelled
Australian
An Australian citizen or permanent resident
Associated entity
As defined in section 50AAA of the Corporations Act
2001
CSOL
The Consolidated Sponsored Occupation List (CSOL)
details the occupations which a sponsor may nominate
under the 457 visa program
Direct employment
relationship
For the purposes of the 457 program, a direct
employment relationship requires that an employer
provides standard employment entitlements such as
PAYG tax, superannuation and leave
Labour agreement
Labour agreements are formal agreements between
the Australian Government and an employer. They
enable employers to fill vacancies with 457 visa
holders where they would not otherwise be able to
under the standard 457 Program. Labour agreements
enable employers to, amongst other things, on-hire
sponsored employees to unrelated businesses
On-hire industry
Companies who seek to recruit overseas workers to
hire out to unrelated businesses
Primary sponsored
person
A primary sponsored person is an overseas person
skilled worker who has been nominated to work
temporarily in an occupation in Australia by a standard
4
business sponsor
Secondary sponsored
person
A secondary sponsored person is someone who
is included in the nomination by the sponsor for the
primary sponsored person on the basis of being a
member of the primary sponsored
person’s family unit. A secondary sponsored person is
often also a secondary visa applicant
Secondary visa
applicant
A secondary visa applicant is a person who is
Standard business
sponsor
An Australian or overseas business that has been
Unintended
employment
relationship
For the purposes of the 457 visa program,
seeking to meet the secondary requirements for the
grant of a subclass 457 visa on the basis of being a
member of the primary visa applicant’s family unit
approved as a standard business sponsor by the
Minister (under s140E of The Migration Act 1958).
This includes existing and formerly approved sponsors
employment relationships which:

involve the sponsor
circumventing the benefits and
entitlements (such as PAYG tax,
superannuation or leave) that are
normally associated with a direct
employment relationship; or

1.2
where the authority to direct and control
the work of a primary sponsored person
may be ambiguous.
Eligible skilled occupations
An occupation which is nominated by an approved standard business sponsor
must be eligible for the subclass 457 visa program. A list of the skilled
occupations (the Consolidated Sponsored Occupation List) can be viewed at
http://www.immi.gov.au/skilled/_pdf/sol-schedule1-2.pdf
Sponsors who want to employ subclass 457 visa holders in an occupation that is
not included on the Consolidated Sponsored Occupation List must do so under a
labour agreement.
A new nomination application is required for each occupation and position which
a sponsor seeks to fill. If the nominee is already the holder of a subclass 457
visa, they may be required to undertake a skills assessment to show that they
have the required skills for the newly nominated occupation.
5
1.3
Sponsorship obligations and monitoring
The sponsorship obligations were introduced by the Migration Legislation
Amendment (Worker Protection) Act 2008 (the Worker Protection Act) in
September 2009. The amendments sought to protect the rights of sponsored
temporary visa holders, and to ensure that the program is being used to meet
genuine skills shortages, and is not being used to undercut local labour wages
and conditions. The obligations that most approved sponsors are required to
satisfy are:
• Cooperating with inspectors
• Ensuring the visa holder is provided at least equivalent terms and
conditions of employment as an equivalent Australian citizen employee
in that workplace
• Paying return travel costs if requested by the visa holder
• Paying for the costs of removing a former 457 visa holder from
Australia where they have become an unlawful non-citizen
• Keeping appropriate records (such as records relating to pay and
conditions)
• Providing records to the department when requested
• Notifying the department when certain events occur (such as the
cessation of employment of a sponsored person)
• Ensuring the sponsor employs the person in the nominated occupation
• Preventing the sponsor from recovering certain costs from the visa
holder.
The department has a team of trained monitoring officers and inspectors whose
role is to ensure that approved sponsors who employ primary sponsored persons
comply with the sponsorship obligations.
Monitoring officers and inspectors conduct audits each year to ensure that
sponsors are satisfying their obligations. In the 2011/12 program year, 1754
sponsors were audited and of those, 856 received a site visit. During site visits,
visa holders, sponsors and other employees are interviewed for the purpose of
determining the sponsor’s compliance with the obligations.
1.4
Sanctions for non-compliance
If an approved sponsor fails to satisfy a sponsorship obligation they may be
subject to administrative action, an infringement or civil court action. Specifically
a sponsor may:
6
• be barred for a specified period from sponsoring more skilled overseas
workers
• have their sponsorship cancelled
• be served with an infringement notice for each failure of a sponsorship
obligation. The amount of the first infringement is AUD 5,100 for a
body corporate or AUD 1,020 for an individual. For a second
infringement, the amount increases to AUD 10,200 for a body corporate
and AUD 2,040 for an individual
• be subject to a civil penalty order made by a civil court. Penalty orders
are up to AUD 51,000 for a body corporate and AUD 10,200 for an
individual.
In addition, administrative actions may be taken against an approved sponsor in
the following circumstances:
• the approved sponsor has provided false or misleading information to
the department or the Migration Review Tribunal
• the approved sponsor no longer satisfies the criteria for approval as a
standard business sponsor or for variation of that approval
• the approved sponsor has been found by a court or a competent
authority to have contravened a Commonwealth, state or territory law
• a primary sponsored person has been found by a court or a competent
authority to have contravened a Commonwealth, state or territory law
relating to licensing, registration or membership which the primary
sponsored person is required to comply with to work in the nominated
occupation
• Where the approved sponsor fails to pay public health costs for
sponsored persons who were approved prior to 14 September 2009.
In the 2011/12 program year, the Department applied 125 administrative
sanctions (barring or cancelling the sponsor from the 457 program), issued 49
infringement notices and successfully prosecuted a sponsor, with the court
imposing a civil penalty of AUD 35 000. The most common reasons for
sanctions relate to failure of Regulations 2.79 - Obligation to ensure equivalent
terms and conditions of employment, Regulation 2.82 – Obligation to keep
records and Regulation 2.83 – Obligation to provide records and information to
the Minister.
2. INTRODUCTION
2.1
Overview of RIS
7
This Regulation Impact Statement (RIS) has been prepared by the
Commonwealth Department of Immigration and Citizenship (the Department). Its
purpose is to assist the Australian Government in determining whether to amend
the Migration Regulations 1994 (the Regulations).
The objective of the proposed change is to strengthen the effectiveness of the
worker protection reforms that came into effect in 2009 amending the Migration
Act 1958 and the Regulations. Since its introduction, application of the
legislation has highlighted the need for some minor regulatory amendments to
tighten the operation of two of the existing obligations to ensure they operate as
originally intended to both protect employment opportunities for Australians and
the rights of overseas workers.
Specifically, the changes will prohibit sponsors from establishing certain
employment relationships (such as on-hire arrangements and independent
contracting arrangements) and thus avoid standard employee entitlements; and
ensure that sponsors are solely responsible for meeting certain costs, thereby
strengthening the current obligation not to recover certain costs.
Tightening the regulations to better support their original policy intention will
ensure such practices are against the law (currently they are technically legal,
whilst not in the spirit of the program). It will also allow the Department to take
sanction action against the small number of sponsors who may seek to take
advantage of the current situation for their own gain. These amendments,
together with an education campaign, will help to bring into compliance those
sponsors who are behaving beyond the policy intention of the regulations.
Whilst the vast majority of 457 sponsors ‘do the right thing’, the small percentage
who do not place the integrity of and public confidence in the 457 visa program at
risk.
This RIS identifies the likely impact of the amendments to the sponsorship
obligation framework and outlines the consultation process which the Department
has undertaken, and is continuing to undertake, with stakeholders.
This RIS discusses the implications of implementing the proposed legislative
change for various stakeholders. The primary impact the RIS identifies is the
greater clarity, integrity and certainty that the proposed amendments would
deliver.
This RIS has been prepared in accordance with the Best Practice Regulation
Handbook. A Guide to Regulation: Second Edition: December 2012 issued by
the Office of Regulation Review.
2.2
Overview of the Temporary Work (Skilled) (Subclass 457) visa
program
The Temporary Work (Skilled) (Subclass 457 visa) is the most commonly used
program by employers to sponsor overseas workers on a temporary basis. It
8
allows businesses to sponsor overseas workers for up to 4 years in skilled
occupations only.
The intent of the 457 visa program is to enable employers to address skilled
labour shortages by recruiting skilled overseas workers where they cannot find
appropriately skilled Australians. The subclass 457 visa provides a fast and
flexible process for employers to meet their short-term skill needs.
The subclass 457 visa is uncapped and demand-driven.
The application process consists of three stages:
1. Sponsorship, the business must:
a) demonstrate that they are lawfully operating,
b) attest to a strong record of employing local labour and a commitment
to non-discriminatory recruitment practices, and
c) demonstrate a strong record of, and commitment to training
Australians.
2. Nomination, assesses whether:
a) the occupation is eligible under the 457 program, and
b) the overseas worker is being paid the appropriate salary for the
position in Australia.
3. Visa, assesses whether the applicant:
a) has the skills to perform the job
b) meets the required level of English proficiency, as well as
c) whether they meet the health and character requirements to enter
Australia.
As at 1 January 2013, the sponsorship application charge is $420, and the
nomination charge for each sponsored person is $85. (A full list of charges for
visas and services is available at www.immi.gov.au/allforms/990i.htm).
2.3
Overview of the Worker Protection Act.
The Migration Legislation Amendment Worker (Worker Protection) Act 2008
(the Worker Protection Act) came into effect on 14 September 2009.
9
The Worker Protection Act amended the Migration Act 1958 (the Act) to enhance
the framework for the sponsorship of non-citizens seeking entry to Australia for
the purpose of work.
The Act changes intended that approved sponsors must meet certain
requirements, such as ensuring that the terms and conditions of employment that
are provided to a sponsored worker are no less favourable than those provided
to an equivalent Australian citizen or permanent resident in the same workplace.
For further details on the sponsorship obligations, refer to the Department’s
website http://www.immi.gov.au/skills/skillselect/index/visas/subclass-457/
The amendments also introduced a new enforcement regime, including inspector
powers and penalties that were not previously available to the Department. Civil
penalty provisions and a supporting civil penalty framework were introduced,
which provide that, in addition to ordering a payment of a pecuniary civil penalty,
a court may order payment of a debt owed to a person in relation to a
sponsorship obligation.
The Department monitors sponsors to ensure they continue to meet sponsorship
requirements. Sponsors who do not meet their sponsorship obligations may be
subject to sanction action, including being barred from using the program, having
their sponsorship cancelled or a civil penalty imposed.
2.4
The Deegan Review
The worker protection reforms were introduced following the recommendations of
the Visa Subclass 457 Integrity Review which was conducted by Ms Barbara
Deegan and finalised in October 2008. The purpose of the review was to
improve the integrity and operation of the temporary skilled migration program
(Subclass 457 visa) program. In particular, its aim was to safeguard employment
and training opportunities for Australian workers and protect the rights of
subclass 457 visa holders.
The Deegan Review recognised the inherent inequality in the relationship
between employers and sponsored temporary overseas workers and that 457
visa holders may be vulnerable to abuse as a consequence of their temporary
visa status. As they are usually reliant on their sponsor, both for ongoing
employment and to remain legally in Australia, they may be willing to endure
unfavourable terms and conditions of employment. It may not be in their short
term interest to complain, particularly if they have the ultimate goal of
transitioning to permanent residence.
The Executive Summary of the Visa Subclass 457 Integrity Review Final Report,
page six, (available at http://www.immi.gov.au/skilled/skilled-workers/_pdf/457integrity-review.pdf) notes that stakeholders provided ‘‘numerous examples of the
exploitation of workers on Subclass 457 visas”. In evidencing this, the report
stated that the Australian Human Rights Commission received complaints that
10
sponsored temporary visa holders were not being paid overtime, or were working
longer hours or days than non-visa employees. Additionally, in some instances
access to sick leave was limited, and dismissal resulted if the visa holder took
sick leave, leave to care for a sick spouse or child, or was pregnant. Further,
some visa holders were overcharged on rent or other expenses organised by the
employer.
2.5
Intention of the Worker Protection Act
The Worker Protection Act was intended to:
• strengthen the integrity of the temporary skilled visa program by
ensuring it is responsive to market rates, while protecting the
employment opportunities for Australians and the rights of overseas
workers.
• strike an appropriate balance between:
o facilitating the entry of overseas workers to meet genuine skills
shortages;
o preserving the integrity of the Australian labour market; and
o protecting overseas workers from exploitation.
Essentially, the Worker Protection Act was intended to ensure that sponsors
must pay primary subclass 457 visa holders the market salary rate. It was
intended to send a price signal to employers that overseas workers are more
expensive than employing Australian citizens and permanent resident workers.
Once overseas recruitment and compliance costs are factored in, there are
greater costs to engage an overseas worker compared to equivalent domestic
skilled workers. This is an intended outcome. The costs of sponsorship and
nomination charges and complying with the suite of sponsorship obligations
provide an incentive for employers to hire and train Australians in the first
instance.
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3. PROBLEM
3.1
Current outcomes relating to two sponsorship obligations which are
contrary to the above stated intentions
The 2009 Worker Protection Act reforms are broadly effective in ensuring that
subclass 457 workers are subject to the same terms and conditions of
employment as are provided to an equivalent Australian worker undertaking
equivalent work in the same workplace at the same location. Where there is no
equivalent Australian worker, the onus is on the employer to provide a range of
evidence such as remuneration surveys, Australian Bureau of Statistics’ data, or
evidence of what employees are paid in similar workplaces to substantiate the
market rate.
However, experience in processing sponsorship applications and the monitoring
of approved sponsors, has revealed that the current wording of the existing
sponsorship obligations does not always adequately support their policy
intention. As a result, the Department cannot take sanction action against a
small number of sponsors who are not ‘doing the right thing’ and thereby placing
at risk the integrity of and public confidence in the 457 visa program.
This RIS relates to the operation of two sponsorship obligations in particular
which, while largely operating as intended, do allow a small number of sponsors
to circumvent their obligations (without technically breaking the law), thereby
impacting upon the integrity of the program:

Regulation 2.86 - obligation to ensure primary sponsored person works or
participates in nominated occupation, program or activity

Regulation 2.87 - obligation not to recover costs from a primary sponsored
person or secondary sponsored person
With respect to each regulation in question, the following contrary outcomes are
occurring.
3.1.1 Regulation 2.86 - Obligation to ensure primary sponsored person
works or participates in nominated occupation, program or activity
Policy intends that a 457 visa holder be in continual paid employment for the
period of their visa.
Regulation 2.86 requires that a primary sponsored person be engaged only as an
‘employee’ of the sponsor or an associated entity of the sponsor. Whilst the term
‘employee’ is not defined in migration legislation, it is intended to mean that a 457
visa holder only be engaged in a direct employment relationship with their
sponsor and receives the associated benefits and entitlements. This means that
12
the visa holder works in a particular position in the workplace of the sponsor (or
an associated entity), thereby reducing the risk that they lose their employment
status and ability to support themselves in Australia. In addition, under a direct
employment relationship, employees ordinarily receive certain benefits and
entitlements (such as leave).
For the purpose of regulation 2.86, it was never intended that a 457 visa holder
be on-hired or engaged in an employment arrangement that resembles that of an
independent contractor (unless it is an exempt occupation). These employment
arrangements are inherently less secure and it is more likely that employment will
not be available on an ongoing basis. Also, an employer is able to bypass the
terms and conditions of employment that are associated with a direct employeremployee relationship.
This practice leaves a visa holder significantly disadvantaged even where the
‘hourly rate’ is nominally the same. For example, sponsor A employs a visa
holder as an electrician. The visa holder is engaged on an employment contract
which provides the following conditions:
•
•
•
An annual salary of $55 328 or $28 an hour for a 38 hour week
4 weeks of annual leave as well as 10 days of paid sick leave
9% superannuation ($4 979.52)
Sponsor B employs a 457 visa holder also as an electrician in the same area.
Rather than employing the visa holder on an employment contract, the visa
holder is requested to obtain an ABN and is engaged on a contract for services.
The contract provides that the visa holder will be paid $28 an hour for 38 hours a
week. The visa holder will not be paid for any leave that is taken and the visa
holder is responsible for paying their own tax and superannuation.
Even in the circumstance where the sponsor otherwise compensates the
sponsored person for not receiving superannuation and leave entitlements, the
intention of the program is that a sponsor engages a sponsored person in a
contract of employment, with the requisite entitlements.
The 457 program does, however, acknowledge that in certain industries (such as
health), it is common practice for professionals to establish independent
contracting arrangements. These occupations are exempt from the requirement
under Regulation 2.86 for a sponsored visa holder to be engaged only as an
employee. The instrument which lists the exempt occupations is available at
http://www.comlaw.gov.au/Details/F2010L01412. In these exempt occupations,
the independent contracting arrangement is by mutual agreement between the
employer and sponsored visa holder and the sponsor must pay market rates and
satisfy the sponsorship obligations.
 On-hire arrangements
The Deegan Review recommended that Labour Agreements be the only
legislated pathway available for on-hire companies seeking to access Subclass
13
457 workers (Reference: Visa Subclass 457 Integrity Review Final Report, p 13).
This followed concerns that on-hired 457 workers could be benched during slow
work periods and that their conditions/security of employment may be precarious.
The on-hire labour agreement contains inbuilt checks and balances to assist in
managing these risks and to provide additional protections for visa holders.
Regulation 2.86 is not operating as intended to prohibit on-hire arrangements
(unless under a Labour Agreement). If a standard business sponsor is found to
have on-hired a subclass 457 visa holder to an unrelated entity, no failure of the
obligation may be found against that sponsor, as the visa holder may still be
considered an ‘employee’ of the sponsor and thereby fall within the parameters
of Regulation 2.86.
The modern test of an employee/employer relationship is the multi-factor test
(drawn from the High Court's decision in Hollis v Vabu Pty Ltd (2001) 207 CLR
21), where the totality of the relationship between the parties is examined in
order to determine if an employment relationship exists. Some of the key factors
in determining if a subclass 457 visa holder who is on-hired is an ‘employee’ of
the standard business sponsor include whether the sponsor exercises control
over matters such as recruitment, wages, discipline and dismissal
(notwithstanding the fact that the client company exercises day-to-day control
over the work performed). The on-hired employee is normally an employee of
the ‘on-hirer’ company, and not an employee of the company to whom they are
on-hired.
The number of sponsors in the on-hiring of 457 visa holders outside of a Labour
Agreement is unknown. The monitoring network has however identified some
examples of this activity. In the most serious case, monitoring investigations
found that a sponsor was on-hiring a worker to an unrelated entity in another
state for a profit. The Department could not pursue civil litigation in this case due
to the wording of the regulations, as it was considered likely that the sponsor
would be able to argue that the visa holder was an employee.
 Unintended independent contracting arrangements
Unintended independent contracting arrangements are not considered to be
widespread in the 457 program, but have been identified in some cases,
particularly in the construction industry.
The March 2011 report by the Construction, Forestry, Mining and Energy Union,
‘Race to the Bottom: Sham contracting in Australia’s Construction Industry,
estimated between 5200 and 9200 temporary visa holders (including subclass
457 visa holders) and New Zealand citizens may be working in Australia under
sham contracting arrangements.
14
Migration legislation only limits the employment mode of 457 visa holders. There
is no requirement for other temporary visa holders (eg those on a Working
Holiday visa) to be engaged only as direct employees.
Following this report, the department undertook a Construction Industry
Campaign which assessed the manner in which subclass 457 construction
industry sponsors are engaging visa holders. A random sample of 52 sponsors
was monitored to determine whether their visa holders were engaged as direct
employees. Of these, it was found that 47 (90 per cent) were engaging 457 visa
holders as direct employees. Issues relating to unintended employment
relationships (sham contracting) were found or suspected in five cases.
Typically, the 457 visa holder was found to be operating under their own
Australian Business Number (ABN), thereby allowing the sponsor to circumvent
the standard employee entitlements (such as superannuation and leave) and the
associated costs.
While the selected sample was too small to be of statistical significance, the
findings do indicate that some sponsors are not using the Program as intended.
Questions regarding the legality of taking action under regulation 2.86 in relation
to sham contracting arose during the campaign. Given this uncertainty, no
sanction action was pursued in the five identified cases.
Relevant case law suggests that if a standard business sponsor is found to have
engaged a subclass 457 visa holder in an arrangement that resembles that of an
independent contractor, it may be that the sponsor who has done so cannot be
found to have failed the obligation in Regulation 2.86 as the visa holder may still
be an ‘employee’ of the sponsor. The Department understands that when
determining whether a person is an ‘employee’, the courts view the ultimate
question as being whether a person is acting as the servant of another or on his
own behalf. This may be the case in circumstances where the sponsor exercises
control and directs the 457 visa holder in the manner in which they do their work.
In this event, no sanction action can be taken by the Department as there has
technically been no breach of the obligation. While the Department may refer
cases of non-compliance with industrial relations law to the Fair Work
Ombudsman (FWO), or another relevant organisation such as for the Fair Work
Building and Construction), the Department has no independent power to quickly
remove such sponsors from the program.
This is contrary to the intention of the Regulations that an overseas worker
should fill genuine nominated skilled vacancies within the sponsor’s business
only, and that employing an overseas worker should be more expensive than a
local worker.
3.1.2 Regulation 2.87 - Obligation not to recover certain costs from a
primary sponsored person or secondary sponsored person
The Deegan Review recommended that employers be expressly prohibited from
entering into any arrangement for the purpose of obtaining money from a visa
15
holder as a consequence of the visa holder obtaining the employment and be
prohibited from making any deduction from the wages of a visa holder for
payment to any agent.
Regulation 2.87 requires approved sponsors not to recover certain costs from a
primary or a secondary sponsored person. The costs relate specifically to the
recruitment of the primary sponsored person and costs associated with becoming
or being an approved sponsor, including migration agent costs.
Policy intends that a sponsor must bear the recruitment costs associated with
becoming an approved sponsor. In this way, the obligation acts as a price signal
to sponsors, ensuring that it is relatively more expensive to engage an overseas
skilled worker than a skilled Australian. This premise relates to the fundamental
tenet of the 457 visa program that business should seek to recruit skilled
Australians in the first instance, and only where an appropriate skilled Australian
cannot be found locally, should sponsors turn to overseas workers.
Whilst this obligation is operating effectively to prevent the ‘recovery’ of such
costs, it does not prevent a small number of sponsors from transferring these
costs to visa holders by requesting upfront payment (thus avoiding the act of
‘recovery’). This practice is contrary to the intention of the obligation and is
against the spirit of the 457 visa program.
In such cases, the Department cannot evidence a failure of Regulation 2.87, and
cannot take action against a sponsor who seeks to take advantage of the current
wording of the obligation for their own financial benefit.
The precise number of sponsors engaging in this behaviour is unknown.
However, the Department has received several recent queries (three emails over
the past six months and questions at migration agent briefings) from migration
agents seeking to clarify the issue. Typically the magnitude of the costs a
sponsor may seek to recover is in the vicinity of $10 000. The nature of these
costs may relate to the cost of sponsorship and nomination charges, migration
agent costs associated with the lodgement of sponsorship and nomination
applications, and recruitment costs.
The Department acknowledges that the regulation may allow pre-payment of
certain costs, which avoids the act of recovery. In response to agents, the
Department reminds them about the intent of the regulation, and advises that the
merits of each case are considered when determining whether a failure has
occurred.
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4. OPTIONS
Options to address these issues include:
4.1
Maintain the status quo
Pros:
a) Release resources currently allocated to proposed
regulatory amendments and communication of those
amendments
Cons:
a) A small number of sponsors will continue to take
advantage of the current wording of the Regulations
b) Sponsored overseas workers will continue to be vulnerable
to abuse
c) Ongoing risk to the integrity of the 457 visa program
.
Discussion
The Regulations at 2.86 and 2.87, designed to protect overseas workers (in
accordance with the recommendations of the Deegan review), are known not
to be fully effective. Cases of unintended behaviour have been identified
since the introduction of the Worker Protection reform.
It is acknowledged that there is no evidence of widespread or systemic
abuse. It should, however, also be acknowledged that it is not possible to
determine the scale of the problem or the number of cases involved because
evidence is difficult to obtain.
• Monitoring resources are very limited and will only ever cover a
relatively small percentage of sponsors. In 2011-12, of the 22 450
sponsors, 1754 were monitored, or almost 8 per cent. If limited
monitoring has detected some cases, it is reasonable to assume that
other cases are likely to exist but remain undetected.
• Visa holders susceptible to exploitation are unlikely to come forward
and complain and thereby put their employment and visa status at risk.
• Departmental data reports on sanction outcomes. If there is no
sanction, data is not available.
To do nothing, allows a known integrity risk to continue (and potentially
grow).
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4.2
Review policy settings to mitigate the unintended consequences of
the existing legislation
Pros:
a) Minimal resources involved in reviewing current policy
settings.
Cons:
a) Reviewing policy settings that underpin compliance and
enforcement of the sponsorship obligations cannot fix the
problem. Current policy settings take the interpretation of
each regulation to the extent allowed by the law,
b) The Department cannot pursue sanction action under
policy. It must be legislatively based,
c) Some sponsors will continue to behave in a manner which
is contrary to the intention of the legislation and the
Department will have no power to pursue sanction action.
Discussion
Policy currently guides monitoring officers in the interpretation of the
sponsorship obligations and the enforcement actions that are possible.
Policy cannot be amended to enable sanction action against a sponsor who
is not behaving within the bounds of policy intention, without regulatory
change.
4.3
Amend the regulations to tighten their operation
Pros:
a) The proposed amendments will reduce the opportunity for
sponsors to behave contrarily to the policy intent of the
program,
b) The Department will be able to pursue sanction action
where sponsors are non-compliant,
c) Integrity of and public confidence in 457 visa program will
be maintained.
Cons:
a) The cost of allocating resources to regulatory change,
b) The resources required to advise sponsors of the
amendments,
c) The impact upon sponsors to ensure that they are
compliant with the amendments,
d) Regulation change might not prevent some sponsors from
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identifying and pursuing other loopholes.
Discussion
The 457 visa program is high profile and subject to media and stakeholder
scrutiny. The community needs to have confidence that the program is
operating with integrity to ensure that Australia remains internationally
competitive in attracting temporary skilled overseas workers. At the same
time, the program must not impact negatively upon the employment and
training opportunities of Australian workers and protect the rights of overseas
workers.
The integrity of the 457 visa program is dependent on the strength of the
regulations which support its operation. The regulations need to effectively
discourage sponsors from not complying with the policy intent.
The proposed amendments will tighten the operation of the sponsorship
obligation regulations 2.86 and 2.87. Whilst these obligations are largely
operating as intended, they are inadvertently allowing unintended sponsor
behaviour.
Regulation 2.86 relies on the interpretation of well-established concepts of
‘direct employment’ and ‘on-hire’. There exists a large body of case law
around the interpretation of these concepts that has highlighted the
inadequacy of the current construct of the obligation. Sponsored visa
holders engaged in unintended employment arrangements may still be
‘employees’.
The proposed amendment to Regulation 2.86 will require a sponsor to
provide a written contract of employment to the Department as part of the
nomination process, and maintain a record of any subsequent written
contracts of employment with the sponsored person. In addition, they will be
required to ensure that the terms and conditions of any subsequent contract
of employment are no less beneficial than the original contract supplied to
the Department at the time of nomination.
This amendment will also be reflected in relevant intersecting regulations
which apply to the nomination process and the obligation to keep records
(Regulation 2.82).
In terms of supplying workers to support seasonal demands, options, such
as a Labour Agreement which specifically caters to the on-hire industry, or
the Seasonal Worker Program which facilitates the provision of labour to
employers in the horticulture industry where local labour does not satisfy
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seasonal demand, are available to employers. Given this, the proposed
regulations are unlikely to have any unintended consequences in this area.
It is expected that the proposed amendments will enable the Department to
take action in the types of cases identified in the Construction Industry
campaign, promote voluntary compliance and increase the likelihood of
employers ‘doing the right thing’ by providing entitlements such as annual
leave and sick leave. It is supported by a well-established understanding of
the concept of a contract of employment.
It is acknowledged that this amendment may not capture the undesirable
behaviour of all sponsors vis-à-vis 457 visa holders and that those who are
intent on doing so may identify further loopholes. Like any other employer in
Australia, a 457 sponsor is required to comply with applicable ‘workplace
laws’. In such cases, the department may refer the matter to the FWO, for
assessment against the requirements of the Fair Work Act 2009.
As far as on-hire is concerned, Regulation 2.86 will explicitly prohibit
standard business sponsors from on-hiring.
The proposed change to sponsorship obligation regulation 2.87 (and the
relevant nomination criterion) involves re-wording to ensure that approved
sponsors are solely responsible for the stipulated costs, which may be any or
all of the following:
•
•
•
the cost of sponsorship and nomination charges
migration agent costs, associated with the lodgement of sponsorship and
nomination applications
administrative costs and any sundry costs an employer incurs when they
conduct recruitment exercises, including:
o recruitment agent fees
o migration agent fees
o the cost of job advertising
o screening of candidates, short listing, interviews and reference
checks
o salaries of recruitment or human resource staff
o the cost of outsourcing background, police checks and
psychological testing
o training of new staff
o responding to queries for prospective candidates, and advising
unsuccessful applicants
o travel costs for the sponsor to interview and/or meet the applicant
either overseas or in Australia.
This will remove the possibility to circumvent the act of ‘recovery’ by otherwise
transferring the cost to a visa holder or requesting a visa holder to pay up-front.
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5. PROPOSED SOLUTION
5.1 Objectives of the proposed regulatory amendments
Broadly, the objective of the proposed amendments is to strengthen the
effectiveness of the Worker Protection Act reforms that came into effect in 2009,
to ensure they operate as intended to protect temporary overseas skilled workers
and to prevent certain sponsors from behaving in a manner that is inconsistent
with the spirit of the Program. Specifically, it is proposed that the regulatory
amendments will:

prohibit employment relationships not intended to be permitted within the
subclass 457 program, such as on-hire arrangements not contained in an
approved labour agreement, and arrangements that may involve an
employer not providing the usual employee benefits and entitlements; and

strengthen the sponsor’s existing obligation to prevent the recovery of
certain costs from a sponsored person, and ensure a sponsor is solely
responsible for these costs, as originally intended. (Please note that it is
not proposed to add or remove any costs from the current meaning of
‘certain costs’).
To address these issues, the Department proposes the following amendments.
5.2.
First issue: Unintended employment relationships, including on-hire
and certain independent contracting arrangements
Remedy:
Amend Regulation 2.86 – Obligation to ensure primary sponsored
person works or participates in nominated occupation, program or
activity and consequently amend Regulation 2.82, Obligation to
keep records
The Department seeks to amend Regulation 2.86 to ensure unintended
employment relationships are explicitly prohibited for standard business
sponsors.
Specifically it may be amended to:

prohibit on-hire arrangements that fall outside approved labour agreements,
thereby enabling the department to take action against sponsors who do not
comply (noting the Department’s power to sanction does not extend to the
business receiving the on-hired worker)

prevent sponsors from engaging visa holders under unintended
independent contracting arrangements by requiring that:
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d) the sponsored visa holder be engaged on a written contract of
employment at nomination and for the duration of the sponsorship,
e) the sponsor maintain records of, and provide to the department on
request, copies of a written contract of employment vis-à-vis a
sponsored visa holder,
f) any subsequent written contract of employment vis-à-vis the
sponsored visa holder contains terms and conditions no less
beneficial than those approved at nomination.
Consequentially, an amendment to Regulation 2.82, Obligation to keep records,
is required to enable monitoring to detect and take action against noncompliance.
5.3
Second issue:
Remedy:
Recovery of costs
Amend Regulation 2.87 – Obligation not to recover certain costs
from a primary sponsored person or secondary sponsored person
The Department seeks to amend Regulation 2.87 to ensure that sponsors are
solely responsible for meeting certain costs associated with the recruitment of a
sponsored visa holder, including migration agent costs and cannot circumvent
this policy intention by avoiding the act of ‘recovery’.
Specifically, it is proposed to require that a sponsor does not transfer or seek to
transfer to the sponsored visa holder such costs; or seek payment of such costs
from the sponsored visa holder.
This new requirement is in addition to the current requirement not to ‘recover’
such costs.
6. IMPACT ANAYLSIS – COMPLIANCE CONSEQUENCES, BENEFITS AND
RISKS
It is important to note that the number of active 457 sponsors (22 450 in 2011-12)
is a very small percentage of Australia’s total employers.
The Australian Securities and Investments Commission website states that in
December 2012, 1 957 276 companies were registered in Australia. This figure
does not cover all businesses and employers, but is helpful in establishing
context and provides a perspective on the relatively small number of employers
that may be affected by the proposed amendments.
Further, note that of the 22 450 active sponsors in 2011-12, the number of
sponsors sanctioned (barred or cancelled) was 125. An additional 449 sponsors
were formally warned.
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6.1
Likely impact of the proposed regulatory changes
It should be noted that the proposed amendments will simply bring the operation
of the Regulations into line with the generally understood policy intent of the 457
visa program.
Impact of changes to 2.86,2.82
minor – apart from seeking advice, changes
will not impact on the majority of sponsors who
behave in accordance with program objectives
and already create and maintain records
relating to contracts of employment
Impact of changes to 2.87
minor – apart from seeking advice, changes
will not impact on the majority of sponsors who
behave in accordance with Program objectives
6.2
Likely costs of compliance
Sponsors, migration agents, migration lawyers and human resource staff will
need to understand the new requirements.
The Department will assist in minimising the costs associated with stakeholders
updating their knowledge about the new requirements by providing information
updates through the department’s website, peak industry bodies, and information
sessions. Supporting policy documentation will articulate how sponsors should
behave in order to comply with the new requirements and factors the department
will take into account in considering possible sanction action.
Migration agents maintain their industry knowledge as a matter of course.
Large users of the 457 visa program may have in-house legal counsel already
familiar with program requirements. It is reasonable to estimate that 2-3 hours
would be required for a migration professional or in-house legal counsel in a
large business to attend an information session and update their knowledge.
The majority of small to medium size businesses engage a migration agent to
facilitate the sponsorship process. This is a compliance cost, and may involve
two hours of advice from a migration agent, human resource manager or lawyer.
In terms of estimating the cost of an agent to provide advice on the proposed
regulatory changes, it is difficult to determine a figure, as the information
provided on the Office of the Migration Agents Registration Authority website lists
a range of fees charged for a specific migration outcome, rather than an hourly
rate. (See www.mara.gov.au/Consumer-Information/What-does-it-cost-to-usean-Agent-/What-does-it-cost-to-use-an-Agent-/default.aspx).
The Law Handbook suggests that lawyers may charge in the range $150 - $500
per hour. (Refer to the following link:
Aushttp://www.lawhandbook.org.au/handbook/ch02s02s03.php)
23
Assuming a billing level of $300 per hour for two hours, these compliance costs
are relatively minor.
Alternatively, small businesses may access the expertise of the Industry
Outreach Officer network (a dedicated team of Departmental officers who provide
migration information directly to industry bodies and unions) for information.
Standard business sponsors and their agents will also need to review their
documentation and hiring procedures for 457 workers, and ensure that they meet
the revised regulatory requirement for a written contract of employment from
23 March 2013 onwards. The vast majority of sponsors already meet this
requirement.
For those sponsors who, at present, have not engaged a 457 visa holder on a
written employment contact, it is expected that there will be some minor
compliance costs. In order to comply, they will be required to create and execute
contracts of employment which may require the use of an agent or lawyer to
ensure that these contracts meet all relevant state and territory laws. It is also
expected that these sponsors may incur costs in providing the benefits and
entitlements that are generally associated with a written contract of employment.
This may include:
 setting up appropriate payroll systems to ensure taxation is being deducted
and paid on behalf of the employee,
 paying superannuation on behalf of the employee,
 providing sick, annual and any other applicable type of leave, and
 obtaining appropriate workplace insurance.
It is expected that these compliance costs will be limited to an extremely small
cohort of sponsors, mainly in the construction industry.
Standard business sponsors who are currently on-hiring sponsored employees to
unrelated businesses (outside of a labour agreement) will lose the revenue
stemming from the on-hiring arrangement.
Approved sponsors who have sought to transfer costs associated with becoming
a sponsor and the recruitment of a 457 visa holder will bear sole role
responsibility for paying these costs.
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6.3
Likely impacts on sponsor behaviour
Compliant sponsors
In terms of their behaviour, the proposed regulatory changes will not impact upon
the majority of sponsors who already behave in accordance with the intention of
the regulations.
Non-compliant sponsors
The small number of sponsors who currently seek to circumvent the existing
Regulations for their own financial gain will no longer be able to do so. Such
sponsors will either be voluntarily brought into compliance or removed from the
program. This is a positive and intended consequence.
6.4
Likely impact on sponsored temporary visa holders
The proposed regulatory change will have an intended positive impact on
sponsored persons as:
 they will be better protected from unfairly bearing costs associated with their
recruitment; and
 they will be more likely to be engaged under more secure employment
arrangements and receive the standard benefits and entitlements which are
generally part of a direct employment relationship.
6.5
Benefits
The integrity of the 457 visa program will be more robust as it will operate as the
worker protection reforms intended to protect the rights of sponsored temporary
visa holders.
Administration of the program will be more transparent. Ambiguity regarding the
operation of the two regulations in question will be removed, and the
consequences for failing the regulations (potentially administrative and/or civil
action) will be clear.
Importantly, the department will have the power to take sanction action against
sponsors who do not comply.
Demand for the program is primarily a function of the state of the domestic labour
market. The 457 program intends that it is more costly to recruit an overseas
skilled worker than a skilled Australian. To the extent that the small numbers of
sponsors who currently circumvent the existing regulations for their own financial
gain are disinclined to use the 457 program, this is a positive outcome.
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6.6
Risks
Risk/issue
Likelihood Consequence Risk Rating
Mitigation
Sponsors currently
taking advantage of
loopholes may be
dissatisfied if the
regulations are
amended
Likely
Minor Sponsors
may be
annoyed
Minor
Nil
Not amending the
regulations to
prevent unintended
employment
arrangements and to
preclude sponsors
from passing certain
costs to a visa
holder, will have a
negative impact
upon the integrity of
the program
Likely
Minor
Minor
Remind
sponsors of
the intentions
of the
program and
seek
voluntary
compliance.
Amending the
regulations may not
eliminate all
unintended
behaviours
Possible
Minor
Minor
Ongoing
monitoring
and vigilance
of sponsors’
behaviours.
7. CONSULTATION
7.1
External consultation
The external consultation period commenced 11 December 2012. Consultation
was undertaken with the Ministerial Advisory Council on Skilled Migration
(MACSM). MACSM comprises council members drawn from a wide range of
backgrounds, experience and expertise in the private sector, unions, state and
territory governments, and tertiary sectors. The council provides independent
advice to guide the development of migration policies and programs.
At this meeting, feedback from union representatives was generally supportive of
the proposed changes. Business representatives were not convinced that there
was sufficient evidence to support the changes and requested further
information. This information was provided on 14 December 2012, and MACSM
members were requested to respond mid-January 2013. This consultation is
ongoing, but feedback received to date is broadly supportive of the changes.
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An Interdepartmental Committee meeting was held on 10 January 2013.
Participants were given an overview of the proposed changes to relevant
Commonwealth Departments. There was broad support of the proposed
changes. The Department of Education, Employment and Workplace Relations
requested further information regarding the measure designed to prevent
unintended employment arrangements. This consultation is ongoing.
The following specific issues were raised.
o Unintended employment arrangements
Feedback was generally supportive of the proposed regulatory change as it
was considered that it will prevent abuse of the 457 program.
Suggestions included giving consideration to employers in non-metro or
regional areas, who have different (seasonal) skill needs. It was also
suggested that the employer/employee relationship be defined under the 457
program, and that perhaps Industrial Relations Law is better placed to
address this issue.
The Department has noted the suggestions.
o Tighten recovery of costs
This proposed regulatory change was supported. There was a suggestion
that employers would benefit from further education regarding their
obligations. The Department has noted this suggestion, and will embark
upon an information campaign regarding the changes, when approved.
In summary, the outcome of the external consultation process is that
stakeholders welcome the move to strengthen the integrity of the 457 program,
and are generally supportive of the proposed regulatory changes while
cautioning that it is critical to educate sponsors about their obligations.
7.2
Internal consultation
The internal consultation commenced with a workshop, which was convened on
the 16 October 2012 with internal stakeholders. The purpose of the workshop
was to identify integrity issues within the 457 program, and develop measures to:
 counter emerging trends within the program;
 realign the program with its intention of acting as a supplement for, not a
substitute to, the Australian labour market; and
 fix legislative errors.
The following areas were represented: Legal, Policy, Visa Processing,
Operational Integrity, Systems and Finance areas.
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Workshop participants welcomed the opportunity to discuss integrity issues and
were supportive of the changes proposed to regulations 2.86 and 2.87. The
issues and views expressed were taken into consideration in progressing the
proposed regulation changes.
Consultation with internal stakeholders is ongoing.
8. IMPLEMENTATION
Pending budget priorities, systems, and legal drafting resources, the changes are
scheduled for 23 March 2013.
9. TRANSITIONAL ARRANGEMENTS
The requirement for standard business sponsors not to on-hire and to engage a
sponsored visa holder on a written contract of employment will take effect from
23 March 2013. This means sponsors will need to create a written contract of
employment for all new nominations approved from that date and for existing 457
visa holders (to the extent that such a contract does not already exist). The
Department acknowledges that it may take some time for sponsors with existing
457 visa holders who are not engaged on a written contract of employment to
comply with this new requirement. Accordingly, policy settings will be reasonable
and provide some time for sponsors in these circumstances to move towards
compliance.
The requirement for approved sponsors to bear certain recruitment and migration
agent costs will take effect from 23 March 2013.
10. CONCLUSION
While the issues identified are thought to be relatively minor, the prevalence of
the unintended behaviours cannot be quantified precisely. However, the
proposed amendments are considered to be proportionate to the issues and risks
identified, and address the need to maintain public confidence in the integrity of
the 457 program.
There are compliance costs associated with the proposed regulatory changes, in
terms of acquiring knowledge in order to satisfy the sponsorship obligations, and
for those sponsors who do not currently engage visa holders under a contract of
employment.
On balance, while the proposed amendments do not eliminate the possibility that
other legislative limitations may become apparent, the amendments provide
further clarification on the intent of the 457 program, and as such, provide an
incremental improvement to the integrity of the program. The amendments will
also further support the effectiveness and enforcement of the sponsorship
obligations.
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