Higher wages and monthly visa fees: What small businesses need to know about proposed migration changes

Minimum income thresholds for skilled migrants will rise nearly $20,000 and all temporary skilled workers will be granted a pathway to permanent residency by the end of 2023, Home Affairs Minister Clare O’Neil says, heralding a suite of immigration reforms certain to reverberate through the small business sector.

Speaking at the National Press Club on Thursday, O’Neil indicated the federal government will act on the findings of a significant review of Australia’s immigration settings, which determined the system is “broken” and out of step with the Australian economy.

Changes will begin as early as July 1, O’Neil said, when the federal government lifts the temporary skilled migration income threshold (TSMIT), the minimum wage payable to employee-sponsored workers, to $70,000.

The TSMIT has remained at $53,900 since 2013.

Think tanks like the Grattan Institute, and the Australian Council of Trade Unions, have long argued that figure is outdated.

With the vast majority of full-time jobs in Australia paying more than the current TSMIT, critics suggest a too-low figure could open Australia’s skilled migration system to lower-skilled migrants, while also exposing those same workers to wage exploitation upon arrival.

Adjusting the TSMIT to $70,000 will bring it into line with the Grattan Institute’s so-called ‘Goldilocks’ zone, O’Neil said.

“We call it essential to ensuring this program is what it says it is: a skilled worker program, not a guest worker program,” she added.

To further shift Australia’s migration system away from temporary workforces, O’Neil said that by the end of 2023, all Temporary Skills Shortage visa types will include a pathway to permanent residency.

Currently, those visa types generally expire after four years.

“We want to increase competition for permanent resident places and ensure we don’t leave more workers in limbo, bouncing from visa to visa,” O’Neil said.

Major changes to those visas will not expand the federal government’s existing permanent migration cap, she added, but “simply means that a group of temporary workers who had been denied even the opportunity to apply for permanent residency will be able to do so.”

More broadly, O’Neil heralded other impending reforms: the government intends to consolidate hundreds of different visa variants and scrap “rigid occupation lists incapable of adjusting fast enough” the needs of modern industries, like the tech sector.

“Large businesses with massive HR Departments find this system impossible to navigate,” she said.

“And small businesses have got Buckley’s Chance of being able to use it to fill a skills gap.”

A draft outline for Australia’s next-generation immigration strategy will carve those visa types into three streams, O’Neil revealed.

The first stream will focus on highly specific skillsets, offering a “fast, simple route” for niche workers to fill gaps in Australia’s workforce.

The second stream will cover a “mainstream temporary skilled pathway”, likely taking on the majority of skilled working visa applicants who expect to earn more than the updated TSMIT.

The final stream will cover workers entering Australia’s “essential” industries, and will be joined by a larger reform of Australia’s low-wage migration programs.

Getting those settings right is vital to combat what O’Neil described as exploitation of the student visa system, which unscrupulous employers use to usher labourers into low-paid work.

More worker mobility and monthly fees for small business

Plans to expand permanent pathways by the end of the year, the TSMIT increase, and the broader migration system amendments flagged by O’Neil are likely the first of many tweaks adopted by the federal government in response to the review.

Helmed by former Secretary of the Department of Prime Minister and Cabinet Dr Martin Parkinson, the 195-page review contains 38 potential reforms — many of which would have significant implications for the small business sector if enacted by the government.

It should be easier for temporary migrant workers to change employers, the review argues, with worker mobility forming a “central” tenet of Australia’s new migration scheme.

Those workers should be free to pursue new opportunities without the risk of their current employer simply cancelling their visas.

“Allowing mobility would provide greater agency to employees and significantly reduce the incentive for unscrupulous behaviour on the part of a minority of employers,” the report says.

“It may also strengthen the economic outcomes of the program as employees would be able to move in order to maximise their contribution to the labour market and achieve higher incomes.”

The review proposes a new payment model, ensuring workplaces that shoulder initial sponsorship costs aren’t left with the bill for a temporary worker who seeks employment elsewhere.

Instead of requiring employers to pay sponsorship fees and charges upfront, they could be charged on a monthly basis, the review states, “with liability resting with the then-current employer”.

This would also lower the initial cost hurdle, the review states, potentially making it most cost-effective for small businesses to seek temporary skilled workers.

It could also even the competition between small businesses and larger competitors in the war for top-tier talent.

If small employers can offer competitive wages and conditions to Temporary Skill Shortage visa-holders who initially worked for major companies, it follows that those workers would take advantage of heightened mobility to work for the smaller business instead.

That does not mean the overall cost of sponsorship should be lowered for small businesses, per se, the review argues.

Critics of the Skilling Australians Fund (SAF) levy — which the employers of permanent and temporary skilled migrants pay to bolster Australia’s domestic training and apprenticeship programs — argue it is an onerous cost on regional businesses, particularly SMEs.

Small businesses which recruit Temporary Skill Shortage visa-holders face an annual $1,200 SAF levy, rising to a $3,000 one-off fee for permanent employee sponsorships.

However, the review panel “does not accept the merits” of lowering the SAF.

It argues the levy could be even higher, but concedes such discussions are ultimately out of the review’s scope.

On the whole, streamlining the visa application process will help small businesses react to pressing requirements.

Visa processing “wait times can be damaging when small businesses are trying to fill a role quickly, in the context of a short-term labour shortage,” the review says.

Small business advocates issue warm response

Both the review and O’Neil’s initial reforms speak to some concerns of small business representatives, who fear the current immigration system requires a significant overhaul.

Visa processing times are a major concern for the hospitality industry during a skills shortage, said Suresh Manickam, CEO of the Restaurants & Catering Industry Association.

“Further, small businesses who bring migrant workers to Australia as part of a sponsorship scheme only for the employee to be poached by a competitor who now benefits from the significant investment of time and money on processing fees, accommodation and upskilling,” he told SmartCompany.

“This is a major deterrent when small businesses expend a significant impost to recruit, only for the benefits to be reaped by a head-hunting competitor.”

Expanding pathways to permanent residency is necessary to ensure Australia wins over the best international talent, he added.

“Australia’s multicultural hospitality context requires a diverse workforce.

“Expanded pathways to permanent migration allows for a more concrete plan to attract international skilled workers into the Australian workforce.”

The retail sector, another major facet of the small business economy, has also responded favourably to the review.

Paul Zahra, CEO of the Australian Retailers Association, said it has called for the federal government to expand permanent pathways in two successive pre-budget submissions.

“It’s been extremely difficult for retailers to compete in the global war for talent while Australia’s migration system has been hamstrung by so many restrictions, excessive costs and protracted waiting times,” he added.

The Australian Chamber of Commerce and Industry, which counts small business organisations among its members, says it will keep a close eye on how the TSMIT increase affects regional and rural enterprises.

However, “reforms to ensure small businesses have fair access to the migration system, with a reformed fee structure, will also be beneficial,” said CEO Andrew McKellar.