The Cost of Sponsoring Foreign Workers

From 1 March 2018, a new training levy is set to make sponsoring foreign workers significantly more expensive for most Australian businesses:

The ‘Skilling Australian Fund (SAF) Levy’ will replace the current ‘Training Benchmark’ and will be imposed on employers looking to sponsor overseas employees.

Under the current ‘Training Benchmark’ employers have had to either spend at least 2% of the payroll of the business to an industry training fund, or spend at least 1% of the payroll of the business in training their own (Australian or Permanent Resident) employees

The Training Benchmark requirement applies to the so-called ‘457 visa’, i. e. to businesses  sponsoring foreign workers for a Temporary Work (Skilled) subclass 457 visa for up to 4 years.

It also applies where a 457-visa holder progresses to permanent visa– the Employer Nomination Scheme (ENS) subclass 186 visa, or the Regional Sponsored Migration Scheme (RSMS) subclass 187 visa, via the ‘Temporary Resident Transition Stream’.

As of 1 March 2018 new applications for employer sponsored visas will no longer be assessed against the Training Benchmark; instead they will incur the new SAF levy.

The SAF levy will be payable, irrespective of how much money the business has already spent on training. Employers are prohibited by law to pass on the SAF levy to the sponsored employee;

The visa subclasses affected are:

  • The Temporary Skills Shortage (TSS) visa, available for 2-4 years. The TSS will replace the current ‘Temporary Work (Skilled) visa subclass 457. The Department of Immigration and Border Protection is yet to release further details about the TSS
  • The Employer Nomination Scheme (ENS) subclass 186 visa (both the ‘Direct Entry’ Stream and the ‘Temporary Resident Transition’ Streams)
  • The Regional Sponsored Migration Scheme (RSMS) subclass 187 visa: The ‘Temporary Resident Transition’ Stream only

 How high is the SAF levy to sponsor an employee from March 2018?

The answer depends on business turnover and the type of visa:

Businesses with an annual turnover of less than $10 million:

  • For a temporary visa (TSS): must make an upfront payment of $1,200 per year for each employee on a TSS visa
  • For a permanent visa (ENS or RSMS): must make a one-off payment of $3,000 for each employee being sponsored for a permanent ENS visa (in either Stream), and permanent RSMS visa (Temporary Resident Transition Stream only) .

Businesses with an annual turnover of $10 million or more:

  • For a temporary visa (TSS): must make an upfront payment of $1,800 per year for each employee on a TSS visa
  • For a permanent visa (ENS or RSMS): must make a one-off payment of $5,000 for each employee being sponsored for a permanent ENS visa (in either Stream), and permanent RSMS visa (‘Temporary Resident Transition’ Stream only) .

The Department of Immigration and Border Protection (DIBP) has indicated, that it plans to charge the SAF levy ‘upfront’. DIBP has further advised that it will refund the SAF levy in very limited circumstances only.

DIBP has remained silent on the question of what requirements will apply in relation to current 457 visa holders, whose visa expires after the new SAF levy comes into effect.

Despite the remaining uncertainties, there can be no doubt that the cost of sponsoring foreign workers will rise sharply from 1 March 2018 for most businesses, in particular for businesses who have been meeting their Training Benchmark obligations.

Employers, however, who have failed to meet their current Training Benchmark obligations may benefit from delaying further sponsorships until the SAF levy comes into effect: Depending on the size of the business payroll (which determines the amount payable under the current ‘Training Benchmark’ requirement), the fixed-amount SAF levy could emerge as the cheaper option, available if the next employer sponsored visa application is submitted on or after 1 March 2018.

The changes outlined above are just around the corner.

In order to plan ahead and make informed decisions, employers may well wish to explore their best option now:

Some businesses may benefit if they can bring forward permanent visa applications form 457 visa holders who may be eligible (for a permanent employer sponsored visa) prior to March 2018.

Other businesses may benefit from expert advice based on their payroll expenses.

In either case, the potential savings could be significant!

For professional advice and to discuss your specific circumstances, contact advice@isa.com.au

by Ully Fritsch