In April, the Turnbull government announced it was axing the 457 visa programme and replacing it with a new Temporary Skill Shortage (TSS) visa. Effective immediately and fully implemented by 2018.

The government says the TSS will support businesses in addressing ‘genuine skill shortages in their workforce’ and ‘contain a number of safeguards which prioritise Australian workers’.

As an FYI, the 94,890 primary 457 visa holders in Australia represent less than 1% of Australia’s labour market[i].

The TSS is split into two streams

1. Short-Term Skilled Occupations List (STSOL) – a two-year visa with the option to re-apply for another two years, but with no pathway to Permanent Residence (PR) . This list will be reviewed every six months.
2. Medium-Term Skilled Occupations List (MLTSSL) – a four-year visa that can be renewed as long as the occupation is still on the list, and with a PR pathway after three years. This list will contain occupations that have been assessed as being ‘of high value’ to the Australian economy and aligned to the government’s longer term training and workforce strategies.

The list of eligible occupations

  • Has been reduced by 216

  • 268 are available for the two-year visa

  • 167 for the four-year visa

  • There are also new limitations and 26 caveats that have been applied to many other visa occupations

Both visas demand

  • At least two years’ relevant work experience (something not required under the 457)

  • Higher standards of English proficiency

  • Character checks / Criminal record checks

  • Maximum age of 45 at the time of application

Employers must also meet mandatory labour market testing

  • Non-discriminatory workforce test requirements

  • Temporary Skilled Migration Income Threshold requirements[ii]

  • Pay Australian market salary rate.

Industries affected 

With hundreds of job categories cut from the list of eligible occupations, most industries will be affected by the changes to varying extents.

What the visa change has inadvertently done is made the Australian business community acutely aware of the key talent gaps within each sector and identify where talent can be ‘home grown’ versus where we need to draw on a global talent pool.

With the government seeking input from industry and a revised occupation list to be published on July 1, heads of industry from across the many affected sectors including technology, science and research, mining, retail and hospitality, are actively working to build the case for ‘critical jobs’ to be reinstated.

The Australian recruitment industry has not been spared with many recruiters facing an uncertain future in Australia, particularly those missing the March 2018 PR cut off. Unsurprisingly the recruitment industry has been working alongside various industries to draw attention to roles where there is a local skills shortage.

For example:

  • The retail sector will highlight the critical role of web developers ahead of Amazon’s imminent arrival.

  • Universities will seek to remove the two-year work experience requirement for specialised researchers.

  • Hospitality will seek recognition for work experience in place of degree qualifications.

Attracting the right global talent to CEO roles will become much harder, and likely more expensive, as this role has been relegated to a two-year visa with no path to permanency. With only two years’ work and no PR there is less incentive to uproot families and move to the other side of the world for a role. At the same time, the 45-year age barrier is also an issue for executive recruitment given many global executives only consider moving later in their careers.

According to research undertaken by the Australian Financial Review, more than a third of chief executives of ASX100 companies are foreign-born, exposing how dramatically the federal government’s visa changes could reshape Australia’s C-suite, potentially hurting business and the economy.

The cost implications

Under the multipronged approach to tightening visa requirements, employers will be faced with additional costs to bring foreign workers into the country.

  • Visa application charges for the short-term (two-year) stream will increase from $1060 to $1150

  • Medium-term (four-year) applications will cost $2400 each

On top of this, from March 2018, companies will also be required to pay an annual foreign worker levy that will contribute to the government’s training and development fund designed to encourage more ‘home-grown’ talent.

The total amount payable will depend on the size of the company making the application.

  • For companies turning over less than $10 million per year, there will be a fixed fee of $1,200 (per visa, per year) for each employee on a TSS visa.

  • They must also make a one-off payment of $3,000 for each employee being sponsored.

  • For those with turnovers over $10 million, the fixed fee is $1,800 per visa per year

  • And a one-off payment of $5,000.

What we may see is the additional cost to employers passed directly on to the individual and included in an international candidate offer as a ‘standard’ ongoing annual fee for the privilege of working in Australia. When you are trying to attract talent to Australia, these kinds of levies are the sort of thing that can be a deal breaker..

There is only so far that Aussie blue sky and sunshine will go  in terms of attracting the best talent when competing with global employment hubs such as Singapore, Toronto, New York, Kuala Lumpur and Bangkok to name a few.

How the changes will impact recruitment

Will the TSS visa option be attractive to foreign talent? Will the changes be a deterrent to working in Australia? Circumstances will differ from one candidate to the next and be dependent on their age and stage of life.

Recruiters will still be able to find 90 per cent of the talent required to support the Australian business community. But what no one is able to do yet is provide definitive advice around the pathway to Permanent Residence.

What experience tells me is that talent will fall into one of two categories; those wanting to come to Australia and contribute regardless whether they will be able to stay or not. The other and more problematic category are those in senior roles with specialist skill sets that will only consider opportunities where there is clarity around pathways, particularly where families are involved.

With the TSS visa occupations list scheduled for review every six months, it will be critical for recruiters to keep across the changes. The best recruiters will also remain close to key recommendations being made by key sector and industry groups to the government, like the 45-year age cut off for senior executives and c-suite roles.

Conclusion

The Australian talent market is extremely diverse. It is one of the most challenging talent markets in the world geographically and in terms of the spread and diversity of talent. This unique combination makes creating one visa programme to address the nuances of each industry and sector near impossible.

Recognising this, the government has shown a willingness to engage with the business community since announcing the changes. Still, it will be difficult for anyone to assess whether the new TSS better addresses the nation’s skills shortages until the 457 visa replacement programme has been in place for at least a year.

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[i] As at June 30, 2016 according to the DIBP’s subclass 457 quarterly report. [ii] Set at $53,900 as at 12 April 2016.