Subclass 457 - Business (Long Stay) visa Information for Standard Business Sponsors

Subclass 457 – market salary rates

From 14 September 2009, all sponsors of Subclass 457 visa holders (457 sponsors) will be required to adhere to a new series of sponsorship obligations. For 457 sponsors who are standard business sponsors, the obligation to ensure equivalent terms and conditions of employment will mean that they pay market salary rates of pay to their overseas workers. For current Subclass 457 visa holders, transitional arrangements will apply.
More information on market salary rates (including transitional arrangements) is available.
See: Subclass 457 – Market Salary Rates
See also:
Subclass 457 – Market Rates Frequently Asked Questions – Sponsors
Subclass 457 – Market Rates Frequently Asked Questions – Visa holders

Minimum Salary Levels

Important: Payment of the Minimum Salary Level (MSL) only applies to existing Subclass 457 visa holders under transitional arrangements covered by market salary rates.

The Minimum Salary Level (MSL) is a requirement of immigration law and is separate from requirements under industrial law. This is an important issue for you, as both requirements must be complied with. The MSL was put in place to enhance the integrity of the Subclass 457 visa program. The Department of Immigration and Citizenship will assess the MSL requirement under immigration law and industrial relations authorities will assess requirements under industrial law.

What this means is that you must pay your sponsored worker the higher of either the MSL or the industrial instrument (such as an award or collective agreement) that applies to the position in which they are working. The Minister for Immigration and Citizenship sets the MSL for sponsored workers.

The MSL does not override requirements that you pay workers in accordance with Australian industrial instruments and conditions of employment. If a relevant industrial instrument requires a higher salary or overtime rate, then you must pay it. The rate of the MSL varies, depending on the occupational level of your sponsored worker and whether the visa was approved under a regional concession.

You should also consider the market when negotiating salary rates with your sponsored workers. If you do not pay in accordance with market rates, your sponsored workers are more likely to apply for employment with, and to be sponsored by, another employer.

The requirement to pay your sponsored workers at least the MSL relates to paragraph 1.20CB (1)(i) of the Migration Regulations 1994, which states that a standard business sponsor must make the following undertaking: ‘to ensure that, if there is a gazetted minimum salary in force in relation to the nominated position occupied by a sponsored person, the person will be paid at least that salary’.

In setting out the MSL that applies under the Subclass 457 program, paragraph 1.20B of the Migration Regulations 1994 states: ‘[MSL] means a level of salary worked out in the way specified in a Gazette Notice for the purposes of this definition.’ 

An important change is occurring on 1 July 2009 in relation to the way the MSL is calculated and applied to sponsored workers in the Subclass 457 program. This change will affect all existing and future sponsored workers to whom the MSL applies.

Changes from 1 July 2009

On 1 July 2009, a new Legislative Instrument (Gazette Notice) will be issued, which will increase the MSL by 4.1 per cent. This new instrument will apply not only to new sponsored worker visa applicants, but to all existing sponsored workers. This will mean that the formula for calculating the MSL will apply to every sponsored worker who is paid in accordance with an MSL.

The MSL levels that will apply for new sponsored workers (those granted visas from 1 July) are:

• $81 040 where the English language exemption is claimed
• $61 920 for Information and Communication Technology (ICT) workers
• $45 220 for non-ICT workers
• $55 725 for ICT workers under a regional concession
• $40 705 for non-ICT workers under a regional concession

The MSL level for existing sponsored workers already in your employment in Australia, who are paid in accordance with an MSL, will increase by 4.1 per cent. The following table sets out the impact this will have.

Minimum Salary Levels – Subclass 457

MSL Instrument Period of Effect	MSL Occupation Category	MSL prior to 1 July 2009	MSL from 1 July 2009
11/02/04 to 08/04/05	Non-ICT	$39 150	$40 755
	Regionally-certified	Industrial Award	Industrial Award
	ICT	$48 390	$50 375
09/04/05 to 02/05/06	Non-ICT	$40 590	$42 255
	Regionally-certified	Industrial Award	Industrial Award
	ICT	$52 700	$54 860
03/05/06 to 30/06/06	Non-ICT	$43 440	$45 220
	Regionally-certified	Industrial Award	Industrial Award
	ICT	$59 480	$61 920
01/07/06 to date	Non-ICT	$43 440	$45 220
	Regionally-certified (non-ICT)	$39 100	$40 705
	Regionally-certified (ICT)	$53 530	$55 725
	ICT	$59 480	$61 920
	English language exemption (from 10/09/07 only)	$77 850	$81 040

Note:
People granted a Subclass 457 visa as a primary applicant under regional concessions (certified by a Regional Certifying Body) prior to July 2006 do not fall within the MSL framework.

If you have an active labour agreement, any MSL increases are subject to the terms of that agreement.

The MSL in all cases is based on a 38-hour week. This change includes the 38-hour week arrangement to all visa holders who were approved prior to 1 July 2006.

No allowances (such as Living Away From Home Allowance) or bonuses can be included in the MSL.

No salary-packaged items or deductions are allowed from the MSL, other than:

• Pay As You Go (PAYG) tax withholding amounts; and
• Amounts that are 100 per cent tax deductible for the sponsored worker or otherwise exempt from Fringe Benefits Tax (FBT).

Key elements of the formula

The formula for calculating the MSL for every sponsored worker to whom the MSL applies is based on a 38-hour week and must be paid on a weekly, fortnightly or monthly basis. In any given week, a sponsored worker cannot be paid for less than 38 hours. For any hours in excess of 38 that are worked, the sponsored worker must be paid at least the equivalent hourly rate for every hour. If a relevant industrial instrument requires a higher salary or overtime rate, then you must pay it.

When determining whether a sponsor is meeting their requirement to pay MSL, the Department of Immigration and Citizenship looks at the amount of salary paid to a person separate from any allowances or bonuses. While some salary-packaged items are allowed, these are limited to items that would be either 100 per cent tax deductible to the sponsored worker, or exempt from FBT.
Note: Businesses should seek their own professional advice on whether an item is 100 per cent tax deductible or otherwise exempt from FBT.

Further information is available from the Australian Taxation Office website.
See: www.ato.gov.au

Further assistance

The following information provides some answers to commonly-asked questions and an illustrative case study around MSL. For further information on any aspect of the MSL, phone the department on 131 881 for connection to your nearest Subclass 457 monitoring area.

General questions

Can sponsored workers take action if a sponsor is not meeting their undertakings?

Yes. Compliance with the undertakings is a mandatory requirement of the program and visa holders do approach the Department if they have concerns. Generally, these concerns relate to sponsors not meeting monetary requirements. Options available to sponsored workers (or their dependants) if sponsors are not meeting their undertakings include:

• Approaching the department directly with information about the reason they believe the undertakings are not being met. The department will use this information to assist monitoring of the sponsor concerned. Experience has shown that these actions often result in monies owed being paid in full.   
• In cases where the sponsor has not been meeting their undertakings in full, sponsored workers (or their dependants) can also take legal action under section 140S of the Migration Act 1958 to recover debts due from a sponsorship undertaking in a court of competent jurisdiction.

What records do sponsors need to keep?

Employers in Australia are required to keep a range of employment-related records to comply with existing Commonwealth, State and Territory laws. The department expects that any sponsor will be able to demonstrate that they are meeting their undertakings through the records they keep.

Where information is available to the department that suggests a sponsor is not meeting their undertakings, and the sponsor cannot substantiate their claim that they have met the costs, action may be taken against the sponsor and a sanction imposed. Additionally, by not keeping appropriate records, employers increase the risk of successful legal action being taken against them by a third party (for example, a visa holder in relation to salary or state health department in relation to public health costs) under section 140S of the Migration Act 1958.

Does a sponsor need to meet the MSL weekly or on an annual basis?

The legislative instrument specifies that the MSL must be ‘paid on a weekly, fortnightly or monthly basis’, based on a minimum payment equivalent to 38 hours’ work. The hourly rate of MSL must be met for every hour worked in excess of 38 hours.

The sponsor needs to meet the MSL for every pay period. If the sponsor pays its employees on a fortnightly basis, then the MSL must be met for every fortnightly payment.

The Department of Immigration and Citizenship will assess compliance with the MSL at the point in the financial year that the monitoring is conducted. Generally, the period monitored will be from the start of the current financial year until the most recent pay period. If monitoring is conducted in the first three months of a financial year, records from previous financial years may also be audited.

Case Study

This case provides an example where there is a temporary disruption to business activity.

An electronics company, Commswhiz Pty Ltd, operates as an authorised service centre for repairing mobile phones. They are located in a Melbourne suburb.

Due to a sudden flood, the business premises, including workshop, received major water damage. The company was forced to temporarily close down for major repairs.

The company employs nine administration staff and 14 electronics technicians. One of the senior technicians is a Subclass 457 visa holder, Mr Torres, of Spain. His visa was granted 11 months ago and is valid for a total of three years.

What must the sponsor do?

As an approved Subclass 457 sponsor, Commswhiz Pty Ltd must continue to meet the sponsorship undertakings, including payment of the MSL for the period of the business closure.

What other options are available, particularly if the closure is for longer?

There are other options available to the company, particularly in situations where there is likely to be a lengthy stand-down of staff. These include:

• The company withdrawing sponsorship and informing the department. The visa holder would need to find another business to sponsor them or leave Australia.
• The company temporarily standing down the visa holder and making arrangements for them to depart Australia until the business reopens.

Why is the situation different than for Australian workers?

Subclass 457 visa holders are temporary residents in Australia and there are notable differences in their rights:

• they cannot access welfare services; and
• they have limited work rights. In order to move to a new employer without the risk of their subclass 457 visa being cancelled, they have to apply for, and be granted, a new visa before they commence work with that new employer.