The focus of the interim report of the inquiry into Australia’s skilled migration program is:
the purpose of the skilled migration program, whether it is meeting its intended objectives and whether any immediate adjustments are necessary in the context of the future of work and the pandemic recovery.
Australia’s competitiveness in attracting entrepreneurs, venture capital, startups and the best and brightest migrants with cutting edge skills.
The Committee received evidence highlighting issues which have had an impact on the ability of the skilled migration program to achieve its objectives. Many of the issues were having an impact on Australia’s skilled migration program prior to the pandemic. The pandemic has exacerbated those issues. Evidence was also received about the desirability of Australia as a destination for skilled migrants.
This chapter outlines some of the broad issues raised in evidence and concludes with the Committee’s comment and recommendations.
The evidence provided to the Committee overwhelmingly suggested that Australian employers prefer to employ an Australian over a skilled migrant wherever possible. Mr Cecil Bass, a migration agent, stated:
Australian businesses have always looked to employ Australians first, in a general sense.
The Council of Small Business Organisations of Australia (COSBOA) noted that ‘Every one of our hairdressing salons would prefer to employ an Australian first because, quite frankly, it's cheaper.’ COSBOA also stated:
The demand we have is for skills. I need to point out that the whole aim of having someone come into the country is to be able to transfer skills, not to take jobs; that is not the intention of someone putting on someone from overseas.
ICT International had significant difficulties hiring a forestry scientist in Australia and although their preference was to hire locally they explained:
…we got no applicants and we ran the advertisement twice in Australia for a period of one month each time. We had no applicants, so then we were forced to go internationally with our advertising.
ICT International explained that bringing this one skilled migrant to Australia would create additional jobs in Australia:
This skilled person will lead to at least two or three local people being able to be employed because of the sales he would generate from Brazil.
The Restaurant and Catering Association of Australia (RCA) explained to the Committee that every chef and front-of-house manager brought in from overseas creates on average 20 jobs:
Let's say you have 5,000 skilled foreign chefs and front-of-house managers who are willing to run a business in Australia. You're looking at 100,000 Australian employees.
Mr Paul Gianniotis described the impact of current vacancies on the metal fabrication business, ProWay in Wagga Wagga:
As of today, we're looking to put on five metal fabricators, and we just can't get the position filled at the moment. We have about 20 metal fabricators, so we're in the order of 20 per cent short of what we need to do what we want to do here.
Mr Gianniotis explained how many Australian jobs could be created as a result of employing these five fabricators:
For every fabricator, we are currently employing 1.1 x labourers and 0.65 x supervisors. So off 5 x skilled fabricators, possibly another 8.75 Australian jobs could be employed off the back of.
The latest Labour Force statistics from the Australian Bureau of Statistics show that the current unemployment rate is 6.4 per cent, which is 1.1 percentage points higher than a year ago.
The Australian Chamber of Commerce and Industry (ACCI) noted that although there is higher unemployment than before COVID, there is a difference in the demographics of the unemployed and the demographics of the skilled migration program.
At the moment, even though we have more people unemployed—although that's going down each month since the recovery has commenced—even though we have higher unemployment than pre COVID, the demographics of the unemployed are almost entirely different from the demographics of the skilled migration program. You actually have to make sure you can access the skills to ensure that you're growing the jobs for the people who are in the unemployed situation. They're just in no way equivalent.
The Australian Industry Group reflected on the reporting of skills shortages in the current environment:
Basically, it comes down to quite a deep mismatch between the labour that's in demand and the pool of people that are currently out of work in Australia.
The Committee heard that employers are finding it difficult to fill positions, particularly in regional areas and are struggling to get a single application for positions where 10 years ago there would have been a number of applications.
Mr Gianniotis described the local situation in Wagga Wagga:
What is happening now is we're a situation where we're climbing over the top of each other. If a new fabricator comes into town, they get five job offers within 24 hours. We climb over the top of each other. People are snavelling each other's resources, offering higher money and all sorts of things. We're finding that there's a higher turnover of tradies in recent times because of the shortage.
Mr Gianniotis also noted the difficulty of attracting Australians to move to regional areas:
With regard to the locals, it's very difficult to get somebody who was born and bred in the city to even consider coming across the mountain range—or into the country.
Mr Anthony Melville from the Australian Industry Group noted that an engineering firm from Bendigo was finding it difficult to find a graduate engineer locally, and were placed in the position of having to consider offshoring their engineering work to Asia.
The labour challenges are being further exacerbated by state border closures. The impact of state border closures and movement of people between states was described as having an impact on the ability of employers to fill vacancies.
The difficulties of fly in, fly out, the uncertainty over borders and the concerns about disconnection from family have exacerbated the fact that the Australian workforce is currently demonstrating all the evidence of being less mobile in the COVID crisis than previously.
Labour market testing
Unlike other skilled visa categories, such as state nominated and the skilled independent visas, employer nominated visas are subject to labour market testing. This is despite the fact that the Committee has heard evidence that skilled migrants on employer sponsored visas and skilled independent visa holders have better outcomes than state and territory sponsored skilled migrants. In November 2018, 94 per cent of employer sponsored migrants were in employment whereas 85 per cent of state/territory nominated skilled migrants were in employment.
Employers seeking to nominate an overseas worker for particular visa types are required to undertake labour market testing (LMT) to demonstrate that they are unable to find a suitable Australian worker.
The format of LMT varies depending on the stream the applicant is being nominated under but in most cases involves advertising the position in Australia, in English, within a certain period in certain places and including specific information. There are also exemptions from LMT for international trade obligations.
LMT was introduced as a response to an ongoing concern that overseas workers were displacing Australian workers.
New requirements were introduced commencing on 1 October 2020 which requires the nominated position to also be advertised on the government’s jobactive website and evidence of the three advertisements is required to be provided when the nomination is lodged.
Labour market testing process
The advice from the Department of Home Affairs for potential employers seeking to nominate an overseas worker is to check as to whether the organisation is exempt such as if international trade obligations apply or whether alternative arrangements apply. If neither of these is appropriate then the format of the LMT will depend on the stream under which the employer is nominating.
The table below provides the LMT requirements for the Temporary Skill Shortage (TSS) visa (subclass 482), the Short-term stream and Medium-term stream and the Skilled Employer Sponsored Regional (Provisional) visa (subclass 494) Employer Sponsored stream.
Table 2.1: LMT requirements
Duration of LMT
Advertisements should have run for at least 4 weeks
Applications must have been accepted for at least 4 weeks
Period of LMT
Four months immediately before lodging a nomination application
Four months since redundancies
At least two advertisements required plus compulsory advertisement on jobactive website
Recruitment website with national reach
Business website if accredited sponsor
Print/radio with national reach
Content of advertisement
Skills or experience requirements
Sponsor name or recruitment agency used by sponsor
In Australian, in English
Salary/salary range (if salary less than $96 400)
Copies of three advertisements including jobactive
Exemption where international trade obligations apply
Source: Source: https://immi.homeaffairs.gov.au/visas/employing-and-sponsoring-someone/sponsoring-workers/nominating-a-position/labour-market-testing
Table 2.2: Labour Market Testing Requirements for various other visa types
TSS visa (subclass 482)
Skilled Employer Sponsored Regional (Provisional) visa (subclass 494) Labour Agreement stream
Sponsors must provide LMT proof when requesting a labour agreement.
Where the labour agreement specifies, proof of LMT must be provided when an applicant is nominated
LMT is not required where a Minister of Religion Labour Agreement (MoRLA) is being sought.
Employer Nomination Scheme (ENS) (subclass 186) Regional Sponsored Migration Scheme (RSMS) (subclass 187) ‘genuine need’ requirements
Businesses seeking to nominate overseas workers for ENS and RSMS visa must demonstrate that there is a genuine need of the position including whether the business has sought to find an Australian worker for the position, such as through advertising the position on the Government’s jobactive website or through other national advertisements.
Global Talent Employer Sponsored (GTES)
Sponsors must provide evidence of LMT when requesting a GTES agreement.
Proof must be provided for each specific occupation sought under the GTES agreement at the time of the online application.
Sponsors must provide evidence of two attempts for each specific occupation to recruit qualified and experienced Australians. These attempts must have been conducted in the last 12 months prior to lodging the nomination application.
The GTES has no prescribed requirements for the content or duration of advertisements. The Department of Home Affairs will assess whether any advertisement genuinely tests the Australian labour market.
ACCI characterised LMT as ‘a regulatory burden rather than really providing evidence of the need’ for recruiting overseas workers.
According to ACCI, other aspects of sponsoring a skilled migrant offset the need for LMT:
You can be assured by the complexity and the problems that businesses have to go through in order to seek to get someone to fill a gap that’s outside of Australia – the cost, the effort, the complexity, the regulatory red tape, the time they have to spend. You can be assured, just by the fact that they’ve had to go down that path, that they have tried every other avenue to do that.
ACCI also contended that LMT would not address integrity issues that may arise when an industry brings in tradespeople from overseas and there are accusations of exploitation around payment of workers and the potential that the local workforce is being undercut on price.
The Migration Institute of Australia (MIA) agreed with ACCI that the general expense of overseas recruitment leads employers to prefer recruiting locally. It stated that ‘consideration needs to be given to scrapping labour market testing altogether’.
MIA argued that the labour market testing process is ‘past its use-by date’, and that many aspects are a nuisance:
Very few employers like open market testing. The ones who really object to it are the ones who are trying to apply for second or subsequent visas for existing staff. They may have recruited them when they came out here on working holiday visas. They may already hold a 457 or 482 visa. The employers simply have to go through a 28-day labour market testing exercise again, listing on two websites and also the government’s jobactive.
According to MIA, advertising on jobactive ‘is not fit for purpose for highly skilled people or people who are in well-paid jobs such as ‘engineers, managers and the like’. Rather, it is more suited to ‘the school leaver, the unemployed, the long-term unemployed and some trade occupations’.
The MIA further note that LMT causes significant delays for businesses:
The process is much more costly to the employer than employing an equivalent Australian employee and the additional obligations attached to sponsored workers more stringent than for Australian employees. LMT delays the process of applying to sponsor skilled migrants by at least a month and longer if an employer misses one small detail in the advertisements and are required to repeat the process again. For employers who make such errors the cost of a refused nomination is high with the non-refundable loss of application fees but more detrimentally, SAF [Skilled Australia Fund] contributions.
MIA stated that ‘any streamlining of labour market testing would be good’, as at present it is ‘pretty onerous’ and many employers do not understand it. As an alternative to discarding it entirely, MIA suggested:
…if you’re going to require labour market testing, require it for, say, a [ANZSCO] skill level 3, which is generally a trade occupation, but for occupations which are professional, technical, managerial, it should be scrubbed. Employers aren’t going to employ skill level 1 and skill level 2 people ordinarily if there are better qualified people around.
Other submitters also agreed with the need to simplify LMT, including the South Australian Department for Innovation and Skills.
The Australian Nursing and Midwifery Federation (ANMF) provided a contrary view, suggesting that LMT needs to be strengthened:
… we do think that the labour market testing requirements need to be strengthened. In our experience it's the private sector of the aged-care sector who take the bulk of the temporary skilled migrants who come for nursing. They do get employed across the public sector as well, but that's where the bulk sit. We would sometimes take issue with some of those employers in terms of what they regard as labour market testing and whether or not that's adequate.
The ANMF suggested changes to the requirements for LMT including employer obligations and ‘the need to advertise vacancies both locally and more broadly at market rates.’
The Construction, Forestry, Mining, Maritime and Energy Union (CFMMEU) described the increase in exemptions to LMT as a result of an increase in free trade agreements. The CFMMEU recommended that there should be ‘no exemptions from labour market testing’ and that current LMT arrangements should be improved to focus on local workers.
The Australian Automotive Dealer Association suggests a longer time than four months between the job advertisement and any employer nomination. They contend that there is insufficient time for employers to undertake the required steps and that ‘…a longer period of at least 6 months is more realistic.’
Skilling Australia Fund
The Skilling Australia Fund (SAF) was established as part of the 2017-18 Budget with a purpose of ensuring that businesses receiving a benefit from employing migrants were also skilling Australians.
Employers that sponsor migrants under the new temporary skill shortage visa and certain permanent skills visas are required to pay a levy to generate revenue for the SAF. The Skilling Australia Fund National Partnership Agreement notes that
…it will contribute to improved employment outcomes by supporting Australians to obtain the skills and training they need and increasing the uptake of apprenticeships and traineeships, pre-apprenticeships, pre-traineeships, higher apprenticeships, and other relevant employment related training.
The cost of the levy depends on the visa type, the size of the sponsoring business and the proposed period of stay of the overseas worker in Australia. Sponsors who are party to a labour agreement are required to pay the levy. Collection and management of the levy is the responsibility of the Department of Home Affairs.
Table 2.3: Levy costs
(annual turnover less than $10 million)
AUD1200 per year or part thereof
(annual turnover of $10 million or more)
AUD1800 per year or part thereof
Home Affairs provides four scenarios where it is possible to receive a refund of the levy:
The sponsorship and visa applications are approved, but the overseas skilled worker (visa holder) does not arrive/commence employment with the employer.
The employer's sponsorship and nomination application for the overseas skilled worker is approved, but the associated visa application is refused on health or character grounds.
A TSS visa holder leaves the sponsoring employer within the first 12 months of employment where the visa period was for more than 12 months. Refunds will only be available in this scenario for unused full years of the SAF levy. Note: This does not apply to ENS or RSMS holders who leave their employer within the first 12 months of employment
The nomination fee is refunded (for example where a concurrent sponsor application is refused).
The Committee heard criticism of the SAF for a range of reasons. These criticisms were centred on the cost of the levy, the point in the nomination process where the levy needed to be paid, the difficulty in obtaining a refund if a nomination was refused and a lack of clarity of what the Fund actually supports.
There was also a perception that the purpose of the SAF did not have a strong enough connection with the industries that are contributing to it.
Mr McKell from the Meat Industry Council commented that the SAF is not working to the benefit of the meat industry, let alone others as ‘it’s not targeted to the industry’.
Mr McKell noted that processing plants were doubling up on training costs, paying for their own training costs as well as the SAF levy and:
…they’re not getting the support, as far as putting that money back into the industry is concerned to train workers.
Mr McKell suggested that the money that businesses are expending [on the SAF] should come back to the industry.
The Migration Institute of Australia MIA echoed this sentiment noting the disconnect between the purpose of the SAF, to train Australians to take up apprenticeships and trainees, and the fact that most employers who are lodging applications and paying the SAF levy are from professional technical occupations.
They're professional, technical occupations …IT firms, engineering firms et cetera. So they are paying money to which they themselves are not getting any betterment.
Ms Markey from MIA outlined that the SAF levy was introduced to replace the training benchmarks and subsequently employers then lost the ability to claim the cost of training that they did in their own organisation such as for apprenticeships. She described anecdotal evidence of this impact:
We did have reports of large companies saying: ‘Well, that’s it; we’re not employing any more apprentices. We’re not doing any more training.’
Mr Bass proposed that the SAF should be scrapped or reduced. He explained:
I don’t know what it does; I don’t know where the money goes. I think it just goes into the general funds of the government. It’s just an impost on people to employ people.
MIA contended that the collection point for payment of the SAF levy is at the wrong point in the nomination process. They described the requirement of paying the SAF levy upfront before it is clear whether the nomination will be granted as problematic:
This requirement of collecting it upfront, where the employer has absolutely no idea whether or not they will have their nomination approved, is really very unfair, especially to small and regional businesses.
Mr Hourigan explained that many employers had lost the SAF levy for a refusal of a sponsored nomination often for what appears to be a minor transgression relating to the attachment of documents.
MIA described the situation where SAF levy is collected irrespective of the success of the employer’s nomination of an overseas worker. They explained the difficulty in obtaining a refund:
If the employer’s nomination or the visa application is refused, a refund of the SAF levy is only available in very limited circumstances and may not be refunded for example, where the employer’s nomination is withdrawn before decision, if the visa is refused or even in some circumstances where the visa holder dies. Employers find it unconscionable that the SAF levy is not refunded where the nomination/visa is refused and consider it akin to levying a tax on a service that has not been received.
MIA noted that the SAF acted as a deterrent for regional migration, where the additional cost of the Fund levy deters employers who want to sponsor skilled migrants, and are unable to fill positions with locals.
Labour agreements are a special arrangement between businesses, state or territory government, or industry and the Australian Government which enables the business to sponsor skilled overseas workers when there is a demonstrated need which cannot be filled by the Australian workforce and standard temporary or permanent visa programs are not available.
Labour agreements are developed between the Australian Government, represented by the Department of Home Affairs, and employers. They are generally in effect for five years and provide for visas to be granted under one or more of the following visa programs:
Temporary Skill Shortage (TSS) visa (subclass 482);
Employer Nomination Scheme visa (subclass 186); and
Skilled Employer Sponsored Regional (Provisional) visa (subclass 494).
There are five types of labour agreements:
Company Specific labour agreements;
Designated Area Migration Agreements (DAMA);
Industry labour agreements;
Global Talent Employer Sponsored (GTES) agreements.
The Northern Territory Department of Industry, Tourism and Trade (DITT) described the crucial role that the DAMA program plays in addressing skills shortages in regional areas. They describe their understanding of a DAMA as:
‘…a bespoke streamlined program, enabling employers to sponsor overseas workers in occupations that have been deemed to be in shortage in the particular region, alleviating skills shortages in a fast and efficient manner to ensure the ongoing operation of their business.’
DITT raised a concern with the adverse decisions being made by the Department of Home Affairs where the basis for the adverse decision is a lack of genuine labour market need for the positions being nominated. DITT contend that this adverse decision making does not align with the ‘NT’s specific labour needs, is causing business stress, contradicts the purpose of the DAMA and is impeding COVID-19 recovery.’
DITT also outlined a perceived approach by the Department of Home Affairs to refuse labour agreements if the workforce has over 30 per cent of overseas workers. They contend that:
While this threshold has been part of its procedural instructions for assessing standard requests for labour agreements, this has never been applied in respect to labour agreements sought under a DAMA head agreement. The stringency of its application fails to take into account that the occupations in the DAMA head agreement have been derived from extensive labour market analysis and have been enlisted on the basis of known shortages in the local workforce.
DITT relayed concerns from NT employers regarding the ‘prolonged assessment timeframe for processing DAMA applications’. They noted that in one example:
…the processing of a visa application was delayed by over eight months, in which time the labour agreement held by the business expired, requiring the business to effectively start the application process again and thus pay the Skilling Australians Fund levy twice.
Mr McKell reflected on the meat industry labour agreement provisions and the requirement that local labour needs to be found and the complications that the pre-employment medical testing presented.
From the studies and the research—particularly in the meat processing sector, let alone the other sectors—they've found that, unfortunately, a lot of those applicants do not pass the pre-employment medical to a certain degree because, firstly, of physical incapability, and, secondly, failure with respect to alcohol and drugs. That's not restricted to just the rural and regional areas; that's metropolitan areas as well.
Mr McKell noted that there was a reliance on visa workers in the meat processing sector and with the international border restrictions the industry has been seeking flexibility in relation to the meat industry labour agreement for workers who are currently in Australia, visa workers who either are unable to get home or are still fulfilling their visa requirements.
Mr Bass noted that businesses who are seeking aged-care workers ‘struggle tremendously to attract skilled workers to work in their businesses.’ Mr Bass explained that there is no pathway to permanent residence for aged-care workers unless the employer enters into a labour agreement with the Department of Home Affairs which he described as
‘…complex, expensive and unpredictable and takes six to nine months, even a year to negotiate. It’s not business friendly.’
As Australia begins the recovery process from the COVID-19 pandemic, this is a valuable time to consider how the current skilled migration settings are serving the needs of Australia now and in the future.
During the initial phase of this inquiry, the Committee has been looking at some of the key features of the skilled migration program and seeking contributions from those who have experience in navigating the sometimes complex pathway to skilled migration.
Despite the evidence that employer-sponsored migrants have better economic outcomes and are directly filling skills gaps, evidence suggests employers face much greater regulatory challenges to accessing skilled migrants to fill their immediate workforce shortages. More needs to be done to ensure that employers can more easily access the skilled migrants they need.
Australia lost over 500,000 people on temporary migration visas in the last 12 months. Many of those people were workers who were vital to Australian businesses. Many of the jobs these migrants do create jobs for Australians as outlined in Chapter 1.
However the evidence that the Committee has received clearly shows that there are issues with aspects of the skilled migration program and that these issues have been and will continue to cause problems for employers seeking to sponsor skilled migrants to come to Australia.
Labour market testing
The evidence presented to the Committee about LMT centred on the premise that although it was intended to ensure Australian workers were considered before nominating an overseas worker, it was not achieving this end. The Committee was told that LMT was a regulatory burden on employers, serves no purpose, and is just another layer of bureaucracy.
In a post-COVID-19 environment, the Committee sees value in streamlining some of the current processes to make it easier for employers to get the skilled migrants they need who can also help create Australian jobs.
Rather than being prescriptive about what constitutes LMT, the Department of Home Affairs should ask for evidence of reasonable attempts of labour market testing with penalties for failure to adequately test.
LMT is particularly onerous for small businesses that have fewer resources. The preference for Australian businesses is to employ Australians and indeed labour market testing may be better directed at non-Australian businesses.
LMT should not be necessary where the Government has already identified skills shortages by putting them on the PMSOL or critical skills list. It also seems and unnecessary burden to require employers to advertise on the jobactive website for occupations that are unlikely to be filled by jobactive participants.
The Committee therefore recommends that LMT streamlined to facilitate the timely employment of skilled migrants and to therefore assist economic recovery and job creation for Australians.
The Department of Home Affairs should streamline labour market testing to:
be less prescriptive about what constitutes labour market testing
only require Medium and Large businesses to conduct labour market testing;
require labour market testing for businesses headquartered outside Australia or businesses owned by someone who is not an Australian citizen;
remove the requirement for employers to advertise any occupations which are on the PMSOL or critical skills lists; and
remove the requirement for employers to advertise for all occupations classified as Skill Level 1 and 2 on the jobactive website.
Skilling Australia Fund
The Skilling Australia Fund was a key issue that came to the attention of the Committee. Many organisations and individuals reflected on the significant cost of the SAF levy to an organisation, as well as the point in the nomination process when it needs to be paid, and the lack of ability to have the cost refunded if there is an issue with the nomination application for a skilled migrant.
The Committee is also concerned that there seems to be a lack of connection between the types of organisations which are paying the SAF levy and those organisations that benefit from the SAF.
The Committee is concerned about anecdotal evidence that businesses have had to pay the SAF levy more than once for a single application. It would seem that the administration of the scheme needs careful attention to ensure that nomination process for businesses is clear and that, as described to the Committee, a ‘minor transgression’ does not result in increased costs and time taken to get a critically important skilled migrant into a role.
The Committee recommends that at least until the pandemic period is over, the Department of Education, Skills and Employment and the Department of Home Affairs remove the requirement for employers to pay the Skilling Australia Fund as part of the visa sponsorship process.
If the levy is retained:
Consideration should be given to aligning the payment of the levy to the commencement of employment of the skilled migrant or guarantee a refund to the sponsor if the application is unsuccessful.
If the employer can demonstrate they have spent the same amount or more than the levy in the previous 12 months on training their Australian employees in skills relevant to their work for the employer, they should not be required to pay the Skilling Australia Fund levy.
The Federal Government should establish greater transparency over the State Governments’ use of funds from the Skilling Australia Fund to skill Australians.