Australia: Subclass 457 visas to be abolished and replaced

What is the change? In a surprise announcement aimed at “putting Australians first,” Prime Minister Malcolm Turnbull announced Tuesday that the Government will abolish the Subclass 457 Temporary Skilled Work visa and replace it with a new Temporary Skill Shortage (TSS) visa stream that more tightly controls the migration and hiring of skilled foreign workers.

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What does the change mean? Employers should expect significant changes to take effect immediately and additional changes as the 457 visa criteria are narrowed and the program is phased out. Existing 457 visa holders are not affected.

Key dates:

19 April 2017: Employers should expect an immediate elimination of 216 occupations eligible to be filled by foreign nationals under the 457 visa program and caveats attached to 59 additional occupations. As of 19 April, two new occupations lists – the Medium and Long-term Strategic Skills List (MLTSSL) and the Short-term Skilled Occupation List (STSOL) – will take effect and replace the previous Skilled Occupation and Consolidated Sponsored Occupation lists. Applicants with pending 457 visa applications whose occupation is no longer eligible will have the opportunity to withdraw their application and request a refund. 457 visas granted on or after 19 April (regardless of filing date) will be valid for only two years unless the occupation is on the MLTSSL, in which case it will be valid for four years.

1 July 2017: In July, additional changes will be introduced, including the requirement that 457 visa applicants provide police clearance certificates, possible additional adjustments to eligible occupation lists, elimination of the English language exemption for high-salary earners (i.e. base salary of at least A$96,400), an expansion of applicants required to perform mandatory skills assessments, minor changes to training benchmarks for 457 sponsors and new information fields added to the 457 application form .

March 2018: The Temporary Skill Shortage visa will replace the Subclass 457 visa. The new visa stream will have stricter criteria, shorter validity periods and will require that employers undergo labour market testing for Australian candidates before hiring a foreign candidate, among other changes.

  • Implementation time frame: Immediate and ongoing until March 2018.
  • Visas/permits affected: Temporary Work (Skilled) subclass 457 visas, Temporary Skill Shortage (TSS) visa.
  • Who is affected: Australian companies recruiting and hiring foreign skilled workers under the Subclass 457 visa program.
  • Impact on processing times: Processing times may be lengthier during the transition. Additionally, obtaining police clearances can be a lengthy process (one of the changes to take effect from 1 July 2017) and should be factored into overall document preparation time lines.
  • Business impact: The changes will have a significant impact on the ability of companies to recruit and hire foreign skilled workers.
  • Next steps: Employers with pending 457 visa applications should consult their BAL professional to determine whether they need to withdraw applications based on the new occupation lists. Companies planning on lodging applications should also discuss whether occupations on the caveat list will negatively impact those filings. The Government has published a Fact Sheet on the upcoming changes. Information on the new occupation skills list may be viewed here, and the list of eliminated occupations may be viewed here.

Background: Turnbull made the announcement Tuesday, saying that the 457 visa program had lost its credibility and that the new visa stream would help ensure that “foreign workers are brought in to fill critical skill gaps, not brought in simply because an employer finds it easier to recruit a foreign worker than go to the trouble of hiring an Australian.”

“We must ensure that our migration system works in the national interest and that Australian jobs are filled by Australians whenever possible,” he said.

The Temporary Skill Shortage (TSS) visa will introduce the following reforms:

  • Visa applicants will be required to have at least two years of prior work experience in the occupation they will fill.
  • Employers will be required to pay a minimum market salary to prevent undercutting of Australian workers.
  • Labour market testing will be mandatory unless an international agreement applies.
  • Foreign workers holding a two-year TSS visa will be allowed one renewal only.
  • Workers holding a four-year TSS visa may renew in-country and have a path to permanent residency after three years (instead of two).
  • Employers will undergo a test to ensure they are not discriminating against Australians.
  • Authorities will strengthen the requirement that employers contribute to the training of Australian workers.
  • Applicants must meet English language testing requirements (unless exempt).
  • Penal clearance certificates will be mandatory (to become effective from 1 July 2017).

BAL Analysis: The Subclass 457 visa program has faced ongoing calls for reform. Its elimination is likely to dramatically narrow the eligibility criteria for companies to recruit foreign skilled workers across a range of occupations. BAL is closely following developments and will update clients as additional changes are announced. The release of information is fluid and the above is based on current available information at the time of publishing.

This alert has been provided by BAL Australia. For additional information, please contact australia@balglobal.com.

MARN: 0101248

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