The Market Rate Requirement for Australian 457 Visa Applications
Written By Madalina Philips
Tue, Sep 20, 2016
One aspect of preparing a 457 visa application that can cause confusion is the requirement that the sponsoring company must demonstrate that their nominee will be paid at a level no less favourable than an equivalent Australian employee, or what is known in immigration jargon as the Market Rates Test. While paying someone no less favourably sounds simple enough, complications can arise:
▪ Where there is no equivalent Australian employee
▪ Where the ‘equivalent’ Australian employee has much more experience and therefore commands a higher level of remuneration
▪ Where the sponsored worker may be offered a remuneration package with a base pay lower than the equivalent Australian worker but which includes include allowances or payments in kind (for example, assistance with accommodation).
The situation can also appear confusing because of the twin aspect of the test as applied by the immigration department. The first part is that the remuneration must be no less favourable than will be paid to an equivalent Australian. Another way of saying this is that the sponsored employee must be paid at the going market rate. But there is a second part, which is, that the market rate cannot be less than a threshold set by the immigration department known as the Temporary Skilled Migration Income Threshold (TSMIT). The TSMIT is subject to change periodically. Any changes can also result in confusion as companies may be unsure whether they need to increase remuneration if/when the TSMIT rises.
Finally, there can be confusion over what can and cannot be included as remuneration when putting forward remuneration figures to the immigration department as part of a 457 Nomination. It is important to get these figures right as they may be subject to monitoring.
The following material delves into this issue in greater detail. Please don’t hesitate to contact TSS Immigration on 03 9421 1020 if you would like to discuss any aspect of the below.
Market Salary and the Temporary Skilled Migration Income Threshold (TSMIT)
The Temporary Skilled Migration Income Threshold (TSMIT) is an important consideration when determining the Market Salary for a 457-visa application.
Currently, the TSMIT is set at $53,900 exclusive of superannuation. In practice, this effectively operates as a minimum remuneration for a 457 visa.
The rules in relation to the TSMIT are:
▪ The market salary for the nominated position must be greater than the TSMIT. If the market salary for the position is lower than the TSMIT, the employer won’t be able to sponsor an overseas worker for the position under the 457-visa programme.
▪ The employer cannot pay an overseas worker above the market salary rate just to meet the TSMIT.
Terms and conditions of employment no less favourable
As noted above, in addition to the TSMIT effectively setting a minimum salary requirement, the sponsoring employer must demonstrate that the salary on offer meets the ‘market rate’ for the role. Specifically, when nominating an employee for a 457 visa, the employer must demonstrate that the terms and conditions of employment on offer are no less favourable than an Australian citizen or permanent resident would receive in the same role.
If the employer already has an Australian citizen or permanent resident that is working in the same location and role as the nominated occupation, then this can be shown by providing a copy of a payslip or the contract of an Australian citizen or permanent resident that is working in the same position and location as your nominated role.
The employer can remove all forms of personal identification from the equivalent Australian’s contract. If the Australian employee’s contract is a bit old and the salary has increased since the contract was issued, then the employer should include a statement which confirms the current salary.
The application form for a 457 Nomination asks the employer/sponsor to declare their nominee’s base salary. But it also asks the employer/sponsor to provide a figure of the employee’s guaranteed annual earnings – or GAE – and it is the GAE that forms the basis for determining whether a nominee will be paid no less favourably than an equivalent Australian worker.
Please note is it not necessary to demonstrate that the market rate is met if the nominated remuneration package is over $250,000 (Regulation 2.72(10AB))
What can and cannot be included as remuneration
‘Earnings’ is defined in Regulation 2.57A, which is based directly on the definition of earnings in s332 of the Fair Work Act 2009. Essentially, it limits ‘earnings’ to amounts that are guaranteed. This is why the term “guaranteed annual earnings” (GAE) is used when describing the salary components in a 457 Nomination.
The market salary rate provisions thus allow for salary packaging - with a person’s earnings including their wages, amounts applied or dealt with on their behalf or as they direct, and the agreed value of non-monetary benefits.
Non-monetary benefits are benefits other than an entitlement to a payment of money to which the person is entitled in return for the performance of work, or for which a reasonable money value has been agreed by the person and their employer.
Benefits such as a car allowance can be taken into consideration, but items whose value cannot be estimated ahead of time, such as reimbursements, cannot be counted.
Where there is no equivalent Australian employee
If the sponsoring employer does not employ an Australian citizen or permanent resident in the same role, the employer can show external market rate evidence to demonstrate that the offered salary is equivalent to what other Australians are getting in the same occupation and, where possible, in the same location (area/region) as the nominated position.
Generally, evidence of this type can be found on the Internet, for example:
▪ Job vacancy advertisements placed on Seek, Indeed, CareerOne, Gumtree;
▪ Australian Bureau of Statistics earnings data;
▪ Market salary survey data such as Hays Salary guides;
▪ Australian government’s Job Outlook data (see www.joboutlook.gov.au);
▪ Applicable enterprise agreements in the local region;
Data of this type might provide a range for the Australian market salary rate for a particular role (e.g. $60,000 to $90,000 per annum). If the base salary falls within this range or is above it, then the market rate requirement is generally met.
Where the ‘equivalent’ Australian employee has much more experience and therefore commands a higher level of remuneration;
The ‘no less favourable’ requirement is exactly as it reads. There is no point putting forward a comparative pay slip for an ‘equivalent’ Australian worker if the Australian worker receives a larger salary on the basis of their skills, experience and responsibilities.
Where the sponsored worker may be offered a remuneration package with a base pay lower than the equivalent Australian worker but which includes include allowances or payments in kind (for example, assistance with accommodation)
As what is being compared is the Guaranteed Annual Earnings (GAE), it is possible to nominate someone with a lower base salary than a comparable Australian worker if the total remuneration package (subject to the rules of Regulation 2.57A discussed above) provides a situation which is no less favourable.
One caveat on this, however, is that the non-monetary benefits would need to be such that they could also apply to an Australian. For example, if the nominated remuneration is based on an award, and the award does not contain a provision for use of a motor vehicle, it may not be allowed to include it in a nominated GAE.
When the TSMIT rises
An increase in the TSMIT does not affect employees who have already been granted a 457 visa. However, related Market Rates test is, effectively, an ongoing condition. In other words, if a visa sponsor increases the salary of the equivalent Australian worker by which the nominated level of remuneration was set, the visa sponsor is then also obligated to increase the salary of the 457 visa-holder.
Planning for the future
The Minister for Immigration and Border Protection initiated a review of the TSMIT in 2015, which was due by the end of April 2016 but has not yet been released. If and when it is released, it might be anticipated that one result will be an increase to the TSMIT. Accordingly, if a business has a need to sponsor employees at or about the current TSMIT, they may want to consider lodging those nominations as soon as possible.
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