The key issues raised in the submissions to the inquiry can broadly be
- whether there is a need for labour market testing for the
subclass 457 visa program; and
- the impact that labour market testing would have on employers using
the subclass 457 visa program to hire workers where there is a shortage of
skilled Australian workers.
Need for a labour market testing condition for subclass 457 visas
There was some support expressed for labour market testing for subclass
The Australian Council of Trade Unions (ACTU) argued:
Without genuine labour market testing, no proper assessment
can be made as to whether there are in fact genuine skill shortages that
justify the employment of overseas labour in any given case. At present, all
that employers are required to do to gain access to overseas workers under
the 457 program is attest to the fact that they have a strong record of,
or a demonstrated commitment to, employing local labour. There is no
requirement for employers to actually do anything to employ local workers
before they can access the 457 visa program. This is clearly inadequate, and
only serves to undermine community confidence in the program.
In a similar vein, Dr Joo-Cheong Tham of the Melbourne Law School at the
University of Melbourne contended:
If the central goal of the 457 visa scheme is to address
skill shortages then it must have some regulatory mechanism to ensure that
workers brought under the scheme meet actual shortages (and not simply the
desires of sponsoring employers). A labour market testing requirement is a
rather straightforward mechanism for this – it expressly requires sponsoring
employers to demonstrate a labour shortage.
The Transport Workers' Union made a similar claim in relation to the
need for clearer labour market testing:
We have genuine concern that currently no labour market
testing is required by employers to prove they have sought to fill the position
with a local residents. At present, all that employers are required to do to
gain access to overseas workers under the 457 program is attest to the fact
that they have a strong record of, or a demonstrated commitment to, employing
As did the Australian Workers' Union, arguing that:
Temporary migration visas are issued due to a scarcity of
supply that is alleged by an employer. It is only logical that such a lack of
supply be proved through some form of evidence with the onus of proof falling
upon the applicant, which in this case is the employer.
However, other submissions opposed the introduction of labour market
For example, the Business Council of Australia argued:
The fundamental tenets of Australia's current approach – a
government-determined list of eligible occupations coupled with a requirement
to pay market salary rates – are effective in striking the right balance
between filling skill shortages quickly and safeguarding job opportunities for
At the public hearing, Mr Simon Pryor from the Business Council of
[Business Council of Australia does] not see any evidence of
systemic problems nor excessive growth, the two key arguments which the
government makes for bringing this scheme in. On the contrary, official data
reveals a scheme moderating along with the economy. Growth in visas is only 1.7
per cent higher this year than last year, a total of 940 additional visas.
Again, the few cases that do come up where there might be problems should be
dealt with by enforcement and not by onerous new rules for all.
The Australian Mines and Metals Association (AMMA) contended that
employers already face a 'high regulatory bar' to accessing skilled migrants
and that the additional requirement of labour market testing was unnecessary:
Before a position in a business can be filled with a
temporary skilled migrant, the sponsor must certify that [the] position is
suitably skilled and that the qualifications and experience of the visa holder
are equivalent to what would be required of an Australian employed in that
approved occupation. Market rates and conditions that would be paid to an
Australian in the same job in the same workplace must also be provided.
Sponsors incur additional costs for employing workers on 457
visas including application fees (recently [doubled] from $455 to $900), health
insurance, language testing, flights to and from Australia, and agent fees for
finding the worker. These additional costs make it typically $15,000 (though up
to $60,000) more expensive to hire a skilled migrant than a local, in addition
to the much lengthier process required. These in-built mechanisms render the
onerous documentation and bureaucracy associated with [labour market testing]
Submissions argued that the subclass 457 visa program does not provide employers
with a 'low cost option' to avoid hiring Australian workers.
For example, the Business Council of Australia argued:
It makes no sense to suggest employers would seek to use the
457 visa scheme to avoid hiring Australians because it is cheaper and faster to
hire local labour when it is available. Employers already incur higher costs
when employing a foreign worker compared to local workers. In making the
decision that a skills shortage can only be met by hiring a 457 visa holder,
business needs to factor in additional costs arising from:
- funding assistance to help with relocation and repatriation – these
costs vary and are generally higher for professionals
- on-costs associated with worker top-up training, providing health insurance
cover, funding and/or subsidising visa and residency applications
- program compliance costs, e.g. demonstrating payment at the market rate,
demonstrating that training requirements are being met, monitoring and
However, Dr Tham questioned the extent to which the 457 visa
program imposes higher costs on the engagement of 457 visa holders:
[M]any 457 visa workers are recruited on-shore so there is no
relocation costs for these workers and the recruitment costs for these workers will
be comparable to those incurred for local workers. [I]t also fails to
adequately account for the trajectory of many 457 visa workers who go on to
become permanent residents. [I]t does not acknowledge at all the cost incentive
of hiring some 457 visa workers. With local workers, there is structural wage
inflation with local workers tending to seek wage increases commensurate to the
increase in Australian living standards; such pressure is much less present
with many 457 visa workers especially those from countries with lower living
Government and Department responses
In his Second Reading Speech, the Minister set out the purpose of the
subclass 457 visa and outlined the government's concerns that the program
was not working as intended:
[The Bill] will require subclass 457 sponsors to undertake
labour market testing in relation to a nominated occupation, in a manner
consistent with Australia's relevant international trade obligations, to ensure
that Australian citizens and permanent residents are given the first
opportunity to apply for skilled vacancies in the domestic labour market.
The use of the subclass 457 visa program has been growing
strongly in recent years. The number of primary subclass 457 visa holders in
Australia has risen from 68, 400 in June 2010 to 106, 680 as at 31 May 2013, an
increase of 56 per cent.
Many growing industries, including those connected with the
resources boom, such as mining, as well as non-resource-sector users of the
program, such as health care and information and communications technology,
accounted for a large portion, over half, of all subclass 457 visa grants in
However, strong growth has also been recorded in industries
in which employment has fallen recently, such as accommodation and food
service, and retail trade.
It concerns the government that, at a time when the labour
market has been flattening and some sectors and regions have experienced
lay-offs and increased unemployment, the subclass 457 program has continued to
Coupled with this strong growth is a tendency for some
employers to source foreign labour through the subclass 457 program without
regard to the Australian domestic labour force.
These trends highlight that current requirements do not
commit sponsors to using the sub class 457 program as a supplement to, rather
than a substitute for, the domestic labour force.
In the recently released report of the Migration Council
Australia, survey data of subclass 457 employer sponsors revealed that 15 per
cent of employers say that they have no difficulty finding suitable labour
locally and yet they sponsor employees from overseas under this scheme.
In its submission, the Department of Immigration and Citizenship
(Department) reiterated why labour market testing was being introduced:
Labour market testing means testing the Australian labour
market to demonstrate whether a suitably qualified and experienced Australian
citizen or Australian permanent resident is readily available to fill the
The purpose of the labour market testing element of the Bill
is to ensure that the Subclass 457 visa is only used to meet genuine skill
needs, and cannot be used by businesses that do not make genuine efforts to
provide employment opportunities to Australian citizens and permanent residents.
Impact of labour market testing
A number of submissions contended that the introduction of labour market
testing would be contrary to the fundamental purpose of the 457 visa program,
that is, to provide a fast, flexible solution to skilled labour shortages.
AMMA described the proposed changes as 'unworkable, impractical and [likely to]
lead to a blowout in processing times and costs for 457 visas'.
The submission from the ANU College of Law, Migration Law Program argued:
[T]he provisions concerning Labour Market Testing create an
added burden on genuine sponsors without improving the 457 visa process or
filtering out any participants misusing the program...
[T]he introduction of Labour Market Testing condition will
only add another layer of complexity, delay and administrative cost to the 457
visa scheme, without addressing the objective. These amendments are likely to
deter employers from pursuing sponsorship altogether. The provisions
effectively compel employers to spend more time and money on advertising even
where that advertising will be ineffective.
However, at the public hearing, Mr Tim Shipstone of the ACTU described
this type of opposition to the Bill as 'completely overblown'.
Mr Shipstone explained:
It is not clear exactly to us what the massive burden is in
expecting that employers will first have made attempts to recruit suitably
qualified and experienced workers and that they provide evidence of those
recruitment efforts. If an employer is genuine about sourcing local workers first,
it would be reasonable to assume that those recruitment efforts were happening
already, as a matter of course.
Submissions highlighted three specific aspects of the labour market
testing condition that were problematic:
- the proposed six month time frame for labour market testing;
- the type of evidence required of labour market testing; and
- the skill and occupation exemption to labour market testing.
Time frame for labour market
Submissions criticised the period of six months that the Minister indicated
in his Second Reading Speech would be the time frame within which labour market
testing is required.
The ACTU argued that a period of six months for labour market testing is too
[Six months] allows for too long a period to elapse in a dynamic
labour market where conditions change. For example, labour market testing done
in August 2008 before the [global financial crisis] hit could not have been
considered relevant six months later in February 2009...
[T]his period should be no more than 3 months, for all
[labour market testing] evidence specified. A 457 visa nomination made in
December 2013 should not be able to rely on the results of job advertising
conducted in June 2013, because market conditions can change too rapidly.
The Migration Institute of Australia suggested that a period of six
months for labour market testing may disadvantage both employers and visa
It is difficult to see how employers will be able to access
skilled workers under the 457 programme in a timely manner, if they are
required to carry out [labour market testing] over a period of six months. In
many instances this may either disadvantage the employer because of the
critical loss of time involved in carrying out the [labour market testing]
and/or may disadvantage the visa applicant as they may lose the opportunity of
being sponsored because adequate [labour market testing] had not been carried
out previously by the proposed sponsor.
In its submission, the Department confirmed that the proposed period to
be specified for labour market testing is six months:
The intention of the amendment is to provide a balance
between giving Australian citizens and permanent residents an opportunity to
apply for jobs and ensuring that Australian businesses do not experience undue
delays in filling skilled labour needs which would negatively impact on their
The committee is aware that there is some uncertainty about the six
month time frame for labour market testing. Some of the evidence that the
committee received showed that some stakeholders believed that they would have
to wait six months after advertising a vacancy before they could apply to employ
someone under a 457 visa. It is the committee's view that the intent of the
Bill is to allow employers to apply to use a 457 visa within a six month period
after advertising the initial vacancy. For example, a vacancy could be
advertised in January, a recruitment process could be concluded some 4 weeks
later, and then, if no suitable applicant had been found, an application could
be made then to employ someone under the subclass 457 visa program.
Because of the above uncertainty, the committee urges the government to
provide immediate clarification about the operation of the proposed six month
time frame for labour market testing.
Evidence of labour market testing
Some submissions raised concerns in relation to some of the types of
evidence that would satisfy the labour market testing conditions. For example, the ACTU
argued that evidence of '[c]opies of, or references to, any research released
in the previous six months relating to labour market trends generally and in
relation to the nominated occupation' (proposed new paragraph 140GBA(5)(b)) was
The concern with the provision in practice...is that this could
amount simply to a report commissioned by a consultant that makes a general and
untested case that skill shortages exist in the relevant occupations. It falls
well short of evidence that the local labour market has been actively tested.
AMMA argued that the provision to the Department of some of the evidence
of labour market testing in proposed new subsection 140GBA(6) – such as
details of fees and other expenses paid in the course of recruitment – may mean
that employers face the possibility of breaching commercial-in-confidence and
even privacy obligations.
In relation to the evidence of recruitment processes in proposed new
subsection 140GBA(6), the EM states:
The purpose of this amendment is to provide guidance on the
kinds of evidence an approved sponsor may give about the attempts of the
approved sponsor to recruit suitably qualified and experienced Australian
citizens or Australian permanent residents to the nominated position (and any
similar positions). However, this provision is not intended to preclude the
approved sponsor from providing other kinds of evidence in this regard.
It would be in the sponsor's own interest to provide
authenticating detail about recruitment attempts and other relevant information
with a nomination application. If insufficient detail is given, that could make
the case for the nomination less persuasive.
On the provision of evidence of recruitment processes, the Department's
In providing details of the result of recruitment attempts,
sponsors can provide reasons, if having undertaken labour market testing in
relation to the nominated position, and having received an application/s from
suitably qualified Australian citizens or permanent residents, why the
applicants for the position were not recruited.
At the public hearing, an officer from the Department provided the following
explanation as to what would be expected in relation to the evidentiary
The way the bill is written at the moment obviously focuses
primarily on what we would see as a normal recruitment method, which is that
people advertise and consider whether or not the applicants are suitable for
the positions. In the event that they are not, they would come to us with a
nomination for a 457 worker. What the department would be seeking is the
evidence of that activity occurring, which is something we do not do at the
moment. While there is an attestation saying, 'We've looked locally,' it is not
enforceable. This is the mechanism that the government has chosen to make that
The range of evidence proposed is also to recognise that we
have everything from very large global companies to very small businesses
seeking to use the process. Some use agents to do their recruitment for them;
some recruit within their particular geographic area. The department is of the
view that the measures proposed in the bill under proposed section 140GBA,
subsection 5(a) to (d), give a degree of flexibility in what evidence the
department would accept in considering whether a genuine attempt has been made
to access Australian citizens and permanent residents from the labour market
prior to looking overseas for a 457 worker.
Skill and occupation exemption
A number of submissions commented on the skill and occupation exemption
in proposed new section 140GBC (item 2 of Schedule 2).
For example, AMMA contended:
Section 140GBC of the bill provides for the Minister, by way
of legislative instrument, to make exemptions from the [labour market testing]
requirement for certain occupations within Skill Levels 1 and 2.
Managers, Professionals and certain Technicians are Skill
level 1 and 2 occupations, while Trades occupations are generally Skill level
3. Given that trade and technical roles are estimated to comprise 40% of all
457 visa applications – and they remain in acute shortages – AMMA is
particularly disappointed that the government has not explained why it is
targeting these occupations.
The Australian Chamber of Commerce and Industry (ACCI) expressed concern
at the proposal to allow the Minister, by way of legislative instrument, to
exempt occupations from the labour market testing condition, without the
requirement for consultation with industry:
ACCI believes that this would create uncertainty and
confusion amongst employers as the list for exempt occupations could become a
fluid listing, prone to frequent change and not adequately communicated to
The ACTU argued that all occupations should be subject to labour market
testing and proposed new section 140GBC should be removed from the Bill
altogether. However, if the exemption was to remain, the ACTU recommended
'[a]t the very least...unions and other stakeholders [should] be consulted before
any decisions are made on such exemptions'.
The EM provides the following rationale for the skill and occupation
Reforms to the Subclass 457 Visa Program are designed to
address areas of greatest risk. Growth in use of the Subclass 457 Visa Program
and evidence of inappropriate use is concentrated in lower skill level and
lower paid occupations.
[Proposed n]ew section 140GBC recognises that most
occupations classified as Skill Level 1 or Skill Level 2 in ANZSCO are
generally considered to be low risk, and accordingly, allows the Minister to
exempt certain approved sponsors from the requirement to undertake labour
market testing on the basis of the skill level required for the nominated
The legislative instrument mechanism provides the Minister
with the flexibility to specify different occupations within the 'Skill Level
1' and 'Skill Level 2' classification in ANZSCO to be exempt from labour market
testing. This would allow the Minister to make a legislative instrument to
exempt most, but not all, Skill Level 1 occupations and certain Skill Level 2
The committee agrees with the many submissions which emphasised the important
role that the subclass 457 visa program has to play in enabling employers to
address skilled labour shortages where appropriately qualified Australian
workers are not available.
Given that the 457 visa program is intended as a means of complementing
the local labour force, and not as a means of supplementing this workforce, it
would seem a central element of the scheme that it only be used in cases where
there is, in fact, a demonstrated genuine labour shortage which is unable to be
filled by Australian workers. The Australian Government has identified trends
in the subclass 457 visa program which call into question whether the scheme is
effectively achieving this.
While the committee acknowledges that there was significant opposition
to the introduction of a labour market testing condition for the subclass 457
visa program, in the committee's view, the proposals in the Bill ensure that
the subclass 457 visa program provides a balance between ensuring job
opportunities for Australian workers and enabling employers to fill skilled
The committee understands that many submissions to the inquiry were critical
of the lack of a Regulation Impact Statement in relation to the amendments
proposed in Schedule 2.
However, the committee notes that, on the basis of exceptional circumstances,
an exception has been granted to the requirement for a Regulation Impact
Statement for this schedule of the Bill. Instead, a post-implementation review
will be required within one to two years of the Bill's implementation.
The committee appreciates that some submissions expressed reservations
about a number of specific provisions of the Bill. The committee believes that
post-implementation review would be the best forum in which to assess the
operation of the changes in the Bill and address any issues.
Accordingly, the committee supports the passage of the Bill.
The committee recommends that the bill be passed.
Senator Trish Crossin
Navigation: Previous Page | Contents | Next Page