Subclass 457 – Market Salary Rates

Background

From 14 September 2009, all sponsors of Subclass 457 visa holders (457 sponsors) are required to adhere to new Sponsorship Obligations. The sponsorship obligations replaced the previous sponsorship undertakings that applied prior to 14 September 2009.

For standard business sponsors, the obligation to ensure equivalent terms and conditions of employment will mean that they must pay their overseas workers the market salary rate.

Sponsors who are parties to approved labour agreements must pay their overseas workers in accordance with the terms of the labour agreements.

The introduction of market salary rates is part of a wider package of reforms to the Subclass 457 visa program designed to ensure that it continues to provide industry with needed skills, while not undermining local training and employment opportunities or exploiting overseas workers.

The requirement to pay market salary rates means that sponsored Subclass 457 visa holders will benefit from the same terms and conditions of employment as are provided to an Australian undertaking equivalent work in the same workplace at the same location.

This package of reforms addresses many of the integrity issues associated with the Subclass 457 visa program highlighted by the business-led External Reference Group, the Subclass 457 Integrity Review conducted by Ms Barbara Deegan, and by the Skilled Migration Consultative Panel.

How are market salary rates assessed?

Where there is an equivalent Australian in the workplace, the market salary rate will be determined by the industrial arrangement that applies to this worker. The Subclass 457 visa holder must be provided the same terms and conditions that are provided to the equivalent Australian worker.

Examples of industrial arrangements include enterprise agreement, industrial award, award conditions with over award salary rates and common law contract.

Where there is no Australian performing equivalent work in the same workplace, the employer may demonstrate the market salary rate by reference to the applicable modern award or enterprise agreement. In absence of an award or enterprise agreement the employer is to provide the department with a range of evidence to substantiate the market salary rate. The evidence could include, but is not limited to, relevant remuneration surveys or published earnings data or evidence of what employees performing equivalent work are paid in similar workplaces. The employer is required to satisfy the department that the terms and conditions of employment proposed are appropriate for that location and industry.

In addition, for the nomination to be approved, the market salary rate must be greater than the Temporary Skilled Migration Income Threshold (TSMIT). This means nominations for which the applicable market salary rates are below the TSMIT are likely to be refused.

The Temporary Skilled Migration Income Threshold – currently $47 480 per annum

The Temporary Skilled Migration Income Threshold (TSMIT), is currently set at $47 480 per annum, from 1 July 2010. The TSMIT is set at that level to ensure that all Subclass 457 visa holders have sufficient income to independently provide for themselves in Australia.

The TSMIT helps to ensure that Subclass 457 visa holders do not impose undue costs on the Australian community or find themselves in circumstances which may put pressure on them to breach their visa conditions. This is particularly important given these workers do not have access to a range of government support available to Australian citizens and permanent residents.

Should Subclass 457 visa holder be paid the TSMIT?

The TSMIT has no bearing on what the Subclass 457 visa holder should be paid in the workplace and should not be considered as the applicable market salary rate where the sponsor does not currently employ an equivalent Australian citizen or permanent resident. It is the market salary rate for the nominated occupation, not the nominated worker’s proposed salary, which is compared to the TSMIT. Therefore, it is not possible for a 457 sponsor to inflate a nominated worker's proposed salary in order to meet the TSMIT requirement.
Example: If the market salary rate for an occupation is $39 500 – that is, the market salary rate amount that is paid to an equivalent Australian in the sponsor's workplace – then the nomination is likely to be refused, as the market salary rate is below the TSMIT. Even if the sponsor decided to offer the nominated worker a salary of $47 480, then the nomination would still be refused, as it is the market salary rate that the department compares to TSMIT, not the actual salary proposed.

Upper salary threshold for providing evidence of market salary rates

Where the salary proposed for the nominated worker is equal to or greater than $180 000 (which equates to the threshold for the top personal income tax rate), the sponsor is not required to provide evidence that this proposed salary is set according to the market salary rate for that occupation.

Transitional arrangements after 1 January 2010

The transitional arrangements described above for Subclass 457 visa holders whose visas were granted on the basis of nominations approved before 14 September 2009 ceased on 1 January 2010. From 1 January 2010, sponsors must pay these visa holders the market salary rate unless it is less than the applicable prescribed salary level. In other words, sponsors must pay these Subclass 457 visa holders the greater of either the market salary rate or the prescribed salary level for the duration of their visa.

There are five such prescribed salary levels or ‘base rates of pay’:

• $81 040 for Subclass 457 visa holders who benefited from the English language exemption
• $55 725 for Subclass 457 visa holders working in Information and Communication Technology (ICT) occupations who were granted their visa under certified regional employment arrangements
• $61 920 for all other Subclass 457 visa holders working in ICT occupations
• $40 705 for all other Subclass 457 visa holders who were granted visas under certified regional employment arrangements
• $45 220 for all other Subclass 457 visa holders.