Australia: Impact of 457 changes to employer sponsored permanent residency

Last Updated: 8 May 2017
Article by Jackson Taylor
Subtitle: 'Responsive skills lists' and business risk in migration

The Australian government announced sweeping changes to the 457 visa program from 19 April 2017. However, the changes will not only have a direct impact on 457 visa applicants and employers, but also on a wider range of Australian skilled visas, in particular, the 186 Employer Nomination Scheme visa, also known as the employer sponsored permanent resident visa.

Data released by the Department of Immigration and Border Protection (DIBP) shows that more than 60% of those who applied for the 186 Employer Nomination Scheme in 2015-2016 would not qualify under the new system.

In a globally competitive market, Australia competes with other nations to attact and retain the best international talent and develop innovative products and solutions. These changes risk making it more difficult for business to secure the right skills for the job on a long-term basis, thereby impeding innovation and raising the cost of doing business in Australia.

Uncertainty bleeds into permanent residency

So how did changes to the 457 program result in such a significant impact on employer sponsored permanent residency? The answer is in the division of the previous broad based 'skills list' (featuring more than 600 occupations) into two distinct lists.

The less favourable 'Short Term Skilled Occupation List' includes approximately 450 occupations and provides access to a 2-year temporary visa which can be extended once for a further 2 years while the visa holder is in Australia. It does not provide access to permanent residency.

The more favourable 'Medium and Long Term Skill Shortage List (MTSSL)' includes approximately 170 occupations and gives access to a 4-year visa (renewable indefinitely) and employer sponsored permanent residency.

These lists are designed to be responsive and will be reviewed every 6 and 12 months based on labour market demand. It is unclear how the current lists were determined. At present, DIBP have stated only that the lists were established in conjunction with the Department of Employment and the Department of Education. No further information on the methodology was provided despite requests of senior Department officials.

Stakeholders have been advised that from December 2017 a new process will be adopted to seek input from businesses and industry bodies, which will be used in conjunction with data from the aforementioned Departments. Presently, it is unclear how this process will work and what, if any, appeal will be available to industries if critical occupations are not available.

The 'best interests of Australia'

These lists are intended to respond to labour market needs and thereby serve the 'best interests of Australia', by providing a pathway to permanent residency for those in occupations which are of strategic value to Australia. It is unclear however whether the process will serve the needs of individual businesses or the prospective migrants intended to fill the roles.

The government's policy seems to apply a narrow definition of 'best interest' without regard to how business innovation drives economic growth. By restricting permanent residency to a narrow range of occupations the government deems desirable, it limits businesses looking to innovate outside this area. This overly narrow approach has the potential to impose restrictions on how businesses can innovate, create jobs, and benefit the broader economy.

The benefit of the previous occupation list was that businesses could access any skilled occupations where they could demonstrate a need. While some of the occupations on the previous CSOL were ridiculed in the media (antique dealers and shearers, for example), the diverse range of occupations meant that businesses could respond to market demands. Under the new rules, an international retailer looking to establish in Australia would not be able to obtain a visa for their Retail Buyer as the occupation is no longer eligible for sponsorship.

Problems with a 'dynamic' skills lists

The frequent changes in skilled occupation lists will make it difficult to attract and retain the most skilled workers. DIBP have stated that 457 visa holders will not be 'grandfathered' based on which list their occupation was in when they arrived in Australia. As such, a visa holder may enter Australia while their occupation is on the MLTSSL, ostensibly with a pathway to Permanent Residency. If the occupation is moved to the STSOL while they are in Australia, any right to access permanent residency will cease.

Likewise, while the occupation of CEO or University Lecturer may be moved to the MLTSSL from July 2017, there is nothing to prevent any occupation from being moved to the STSOL or removed entirely in future reviews. This uncertainty and unpredictability poses a real risk to businesses.

Prospective migrants comparing an opportunity in Australia with another highly desirable destination (such as Canada or the UK) will factor in the uncertainty of obtaining permanent residency in any migration decision. This has the potential to make Australia a less desirable destination and thereby make it more difficult for employers to attract and retain the best candidates.

These challenges make it difficult for businesses to plan future growth. Businesses require certainty that they will have continued access to critical skills, and offering key staff access to permanent residency is a key component. Faced with this uncertainty, some businesses which are considering establishing operations in Australia will move to a more immigration friendly jurisdiction. Existing businesses who are unable to source critical skills will move offshore or wind up.

Impact of immediate implementation

The immediate nature of the changes announced by the government have caused a number of other issues. Resource industry stakeholders have indicated that existing projects have been put at risk by restricting access to engineering occupations on the 457 visa. The lack of stakeholder consultation has resulted in many businesses being negatively affected by the changes.

The government was widely criticised after it revealed that CEOs and University Lecturers were deliberately placed on the Short Term Skilled Occupation List. The government response has been to encourage affected industries to push for the occupations to be moved to the MLTSSL, granting access to a pathway to permanent residency. While this approach may resolve the issues in those occupations, the broader problems of the dynamic lists remain unaddressed.

The changes announced by the government have been developed and implemented without sufficient stakeholder consultation. If the proposed changes continue without further amendment many businesses will experience significant difficulties in securing critical skills. The broader risk is that employers will not be able to fill the most highly skilled roles, in turn inhibiting global competitiveness, and damaging the broader Australian economy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Jackson Taylor
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