What is the market rate requirement?
As part of the request for endorsement to the Department of Trade, Business and Innovation, the employer must show that the overseas worker they sponsor for a Subclass 457 visa will be paid at least the local market rate.
To meet this requirement and be endorsed, the employer must demonstrate that the proposed overall terms and conditions of employment offered to overseas workers will be no less favourable than those that are or would be provided to an equivalently skilled and experienced Australian worker performing the same work at the same location. Additionally, the proposed overall terms and conditions of employment must be within the market rate range for the occupation within the region.
The market rate requirement is designed to ensure that the Subclass 457 visa program is used by employers to supplement the Australian workforce where there are genuine skill shortages, and not to undermine salary and employment conditions of Australians. The only time the market rate is not required to be evidenced is when the proposed Guaranteed Annual Earnings of the overseas worker will be at least $250 000 per annum.
What are terms and conditions of employment?
Terms and conditions of employment are considered to be less favourable if the Guaranteed Annual Earnings of the overseas worker are less than the Guaranteed Annual Earnings of the comparable Australian employee.
Guaranteed Annual Earnings include the following:
- guaranteed allowances (such as accommodation or food allowances), and
- agreed reasonable monetary value of non-monetary benefits (such as a motor vehicle) to which the employee is entitled in return for the performance of work.
Guaranteed Annual Earnings do not include the following:
- payments or amounts that cannot be determined in advance (such as overtime, performance based commissions or bonuses)
- reimbursements paid to the employee, or
- compulsory superannuation payments.
What evidence do I need to provide?
The type of evidence that must be submitted depends on whether the business already employs an Australian citizen or permanent resident (an Australian) in the same role in the same location.
If the business does employ a comparable Australian in the same role in the same location then the following should be provided:
- a payslip or employment contract (with identifying details removed) for the comparable Australian, and
- a comparison of the duties, number of hours worked and level of experience of the Australian and the overseas worker to show that the salary and other terms are comparable.
If a business does not employ a comparable Australian in the same role in the same location then the following should be provided along with an explanation as to how the business has determined the proposed Guaranteed Annual Earnings of the overseas worker:
- the relevant industrial agreement, enterprise agreement or award
- information from employer associations or unions
- ABS statistics
- Australian Government’s Job Outlook data
- remuneration surveys, and
- job vacancy advertisements.
What is the TSMIT?
For a standard Subclass 457 visa sponsorship an employer must pay their overseas worker guaranteed annual earnings that are at least the Temporary Skilled Migration Income Threshold (TSMIT), which is currently $53 900 per annum.
Under the DAMA arrangements the salary offered by a Northern Territory employer to an overseas worker must also be at least the TSMIT, unless a concession has been negotiated. If a concession has been negotiated the salary offered must be no less than the value of the concession.
Please note: Unless the Subclass 457 visa holder’s country of citizenship has reciprocal arrangements with Australia, they are not eligible for government support including Medicare and the Pharmaceutical Benefits Scheme. In addition, as part of their visa conditions, these Subclass 457 visa holders are also required to maintain private health insurance for the duration of their stay in Australia. This is also required for any family members included on their visa residing in Australia. Northern Territory employers must take this into consideration if they are seeking a salary concession for a position.
It is very important that once an employer has been granted a Labour Agreement and has started sponsoring overseas workers on Subclass 457 visas that the business continues to pay the overseas worker the market rate for the duration of their employment. This may mean that the Subclass 457 visas holder’s salary will need to be reviewed and increased in line with changes to the market rate from time to time. The sponsorship obligations are ongoing and serious penalties and administrative sanctions will apply if the business is found to have breached any of its obligations in relation to its employment of Subclass 457 visa holders.