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Changes announced in relation to the employer-sponsored permanent residence visa categories

The Department of Immigration & Citizenship (DIAC) has recently announced changes to take effect on 1 July 2012 to the permanent employer-sponsored visa program – i.e. the Employer Nomination Scheme (ENS) and Regional Sponsored Migration Scheme (RSMS).

The changes continue the reforms made in the last two to three years in the subclass 457 and General Skilled Migration (GSM) programs towards a more demand-driven skilled migration program.

The proposed changes to the ENS and RSMS program are significant in number. You can access the DIAC’s information about the changes here.

In summary, the key changes are detailed below.

Reduction in visa subclasses

From July 1, 2012 there will only be two employer- sponsored permanent visas, reduced from the current six application categories. The two application categories will be the:

  • Employer Nomination Scheme (subclass 186)  - effectively replacing the current subclass 121 & 856 visas
  • Regional Sponsored Migration Scheme (subclass 187) – effectively replacing the current subclass 119 & 857 visas.

The Labour Agreement subclass visas, 120 & 855, will be incorporated into these new visa subclasses.

Introduction of three eligibility streams

Within the two visa subclasses there will three eligibility streams

  1. The Temporary Residence Transition Scheme- for applicants who have worked for their employer on a Temporary Business 457 visa for 2 years
  2. The Direct Entry Stream – for applicants who have not worked in Australia, are based overseas or have not worked for at least two years on a Temporary Business 457 visa with their employer
  3. The Labour Agreement Stream – for applicants who have been sponsored by an employer under a labour agreement or regional migration agreement.

The first two streams are similar to the eligibility criteria in place under the current arrangements. Applicants are currently also eligible to apply if they are a Senior Executive and have a base salary of $250,000 AUD. This direct eligibility pathway has been removed however it still exists as an exemption under the proposed Direct Entry Scheme – as detailed further below.

Under the new arrangements the Temporary Residents Transition scheme will require the employee to work for the sponsoring employer for at least two years. This removes some of the flexibility that currently exists. At present employees can sponsor 457 visa holders that have been working with their employer for 12 months, on the proviso the employee has been working on a 457 for the remainder of the two year eligibility period with another employer.  As a result it is likely that a number of employees will be forced to apply under the more onerous Direct Entry System and therefore will be required to undertake a skills assessment.

Introduction of market rate salary

Businesses sponsoring applicants under the Temporary Residence Transition or the Direct Entry Schemes will now need to provide evidence that the employees are being paid at market rate. The specified minimum salary level requirements under the current employer-sponsored permanent resident visas will no longer apply.   

Consolidation of skilled occupation lists

The Subclass 457 occupation list, the Employer Nomination Skilled Occupation List (ENSOL) and the State and Territory Sponsored Occupation List (STSOL) will be consolidated into one list.

Increasing the age threshold

The age threshold for applicants has been increased from under 45 years of age to under 50 years of age. However, age exemptions will apply – as detailed further below.

Skill requirements for ENS and RSMS applications

Under the Temporary Residence Transition scheme, applicants for both the ENS and RSMS visa subclasses will not be required to undertake a skills assessment if they continue to be employed in the same occupation.

Applicants under the Direct Entry Scheme, both in the ENS and RSMS scheme, will be required to provide skills assessment and show that they have three years’ experience in the nominated role. However, this may not be required if the applicant meets the exemptions detailed previously, or if the applicant is applying under the RSMS scheme and has specific exemptions based on their nominated  occupation  -  as detailed further below.

English Requirements

Under the new streams the English requirements are as follows:

  • Temporary Residence Transition stream – the English requirement will be a minimum of score of five in the International English Language Testing System (IELTS) (Vocational)
  • Direct Entry stream – applicants will need to show competent English (six minimum in each component of the IELTS test), an increase from five currently in the ENS scheme and four and a half under the current RSMS scheme
  • Labour Agreement stream – applicants will need to meet the English requirement specified in the labour agreement.

English tests, however, will not need to be undertaken if they were required for the grant of an initial 457 visa or where the applicant meets specific exemptions based on nationality of passport or prior study in English  – as detailed further below.

Exemptions for age, skill and English language  

Under the current arrangements applicants can seek to apply through an exceptional circumstances provision in order to waive requirements relating to age, skills and English language ability.

From 1 July 2012, there will be specified exemptions available under the Temporary Residence and Direct Entry Scheme. These exemptions will include:

  • Age exemptions for applicants who are nominated in specific occupations OR where the applicant has been employed with their sponsor for the last four years and their salary is at least equivalent to the Fair Work high income threshold
  • Skills and qualifications exemptions where formal academic training is uncommon or where the applicant works in the scientific and technical specialist areas employed by Australian universities or scientific research agencies
  • Skill and qualifications exemptions where applicants are paid executive-level salaries (currently $250,000 AUD)  
  • English-language exemptions for citizens of specific countries (the United Kingdom, the United States of America, Canada, the Republic of Ireland or New Zealand) or as applicants through the Transition.

Where they can show they have five consecutive years of full-time study (secondary/higher education) where the tuition was delivered in English.

However, while the move to objective-specified exemptions is to be applauded for providing clarity, there will be circumstances where highly valued employees will no longer be able to apply under the more subjective exceptional circumstances provisions.

Specifying the training commitment

The training commitment has been changed from a subjective to objective criterion and employers must ensure they meet the subclass 457 training benchmarks. The current subclass training benchmarks require the business to provide evidence of:

  • Recent expenditure to the equivalent of at least 2% of the payroll of the business to an industry training fund and a commitment to maintain expenditure in each to that level or
  • Recent expenditure to the equivalent of at least 1% of the payroll of the business, in the training of Australia citizen and permanent resident employees of the business.

As per current RSMS arrangements, no training benchmarks need to be met for RSMS applications.

Position availability requirements

Employers will be required to confirm that the position will be made available for two years. This is a change from the current three years’ requirement.  

Deloitte View

Deloitte welcomes any initiatives to streamline the processing of permanent residency visas of skilled workers. However, it appears that the planned changes may be more complex than initially intended in both the short term and the long term.

In the short term, applicants will need to determine if they will still be eligible to apply for an employer-sponsored permanent resident’s visa from July 2012. Employees will also need to determine that if they are still eligible, whether they will need to undertake a more onerous application stream such as the Direct Entry Scheme.

Another important short-term consideration that needs to be taken into account is the likely changes currently being considered by the Australian Government to the Living Away from Home Allowances (LAFHA) for most, if not all, current 457 visa holders from July 2012. LAFHA is widely used as a recruitment and compensation tool to encourage individuals to work in Australia. The proposed LAFHA changes have highlighted two issues, namely:

  1. We understand that a significant number of 457 holders are asking their employers how they intend to compensate them for their loss of net earnings
  2. 457 visa holders receiving LAFHA want to know if their employers will support them with an application for permanent residence.

Therefore, in most cases it is unlikely that a review of an employer’s approach to company-sponsored permanent resident visas can be looked at in isolation from the approach to be applied to LAFHA.

Please note that the final shape of changes to the LAFHA are yet to be determined by the Australian Government. Any decision on supporting applications for permanent residence in light of the effects of LAFHA should be made in the context of the final legislation.

From a long-term perspective, employers will need to take into consideration how these ENS and RSMS changes may affect their ability to effectively undertake workforce planning. Businesses that rely upon foreign nationals to fill skill shortages will need to consider the effects of these proposed changes in their workforce planning and talent deployment strategies.

As an immediate imperative we encourage businesses to:

  • Review their corporate policy in regards to supporting employer-sponsored permanent residence applications, particularly with respect  to whether existing policy will meet the business needs to retaining staff or if it is sufficiently flexible to integrate the proposed changes
  • Ensure any applications that are currently being prepared are reviewed and lodged by June 30 2012 if possible
  • Decide whether there are any other any other business sponsored permanent residence applications that should be commenced and lodged prior to 1 July 2012
  • Review their commitment to training Australian citizens and permanent residents to ensure that the business continues to comply with their training benchmarks specified under 457 legislation.


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