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Hidden Impacts of Eliminating the 457 Visa on Businesses

In a recent article, we reviewed the decision by the Australian government to replace the 457 work visa with the new, more restrictive TSS visa.  At first glance, this seems to primarily affect hopeful foreign workers who wish to work in Australia, but can’t meet the new TSS requirements.  While this is true, there are also equal, hidden impacts that may directly affect Australian businesses that rely on foreign skilled workers.

The Hi-Tech Effect

The tech industry is probably the one that stands to lose the most with the recent 457 visa changes, especially newer companies trying to manage costs as well as locate skilled IT workers (software programmers received the most 457 visas in 2016).  

It is well known that tech workers from some countries are highly trained and eager to work, thereby allowing emerging IT firms to source the needed skills from foreign locations.  As one CEO of a leading startup commented, “…abolishing the 457 visa could drive companies to setup in Europe or the US.”  

This may not be as viable a solution as it appears, as both the US and UK have recently made similar moves in curtailing the award of work visas to entry-level or inexperienced workers of all types.  The term used by the Australian Prime Minister “Australian Jobs for Australian’s First” has an uncanny similarity to the “America First’ slogan that propelled President Trump to his victory in the US, and is the framework for current immigration reform.

The abolishment of the 457 visa seems to be part of a trend in developed countries that are worried that foreign labor is taking jobs from local citizens, but the economic effects may go far beyond what was intended and actually harm overall job growth.

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Impact: Loss of Top Executive or Technical Talent

The 457 visa was the primary means that companies would bring in executive talent to Australia, and although existing 457 visa holders are safe for now, new recruits would have to meet the TSS criteria. So, although the intention of the visa change was touted as a way to preserve jobs for residents, its broad reach could limit access to talent that is simply not available within the Australian professional ranks.

Rachel Magill is the principal and co-founder of immigration services firm, Australis Immigration Strategies. The business provides a comprehensive suite of Australian immigration services for both businesses and individuals. She shares her thoughts: 

“It (Eliminating 457 Visas) could have a very real impact on our capacity to attract the best and brightest internationally. Given our relative geographic remoteness, the incentive for highly skilled migrants to relocate for a maximum of four years without a permanent residence pathway is likely to be a strong disincentive to make the move. 

The exclusion of senior management and academic positions in particular will almost certainly have a negative impact on the Government’s purported program of innovation.”

Here is a summary of some the issues now facing companies that need to recruit top executive or technical talent:

  • Top Talent Not Available Locally in Some Industries (retail, tech, etc.)
  • The TSS Age Limit is Now 45 (mature, experienced execs cant apply)
  • Most Executives Come From the UK, US and other Developed Economies (so the Australian economy loses access to skilled foreign management talent)
  • The 457 Was Used Primarily for Short Term Entry and a Means to Access Citizenship for Executives (not as a long-term work visa option)

These realities of the TSS visa demonstrate how a change in work visa rules can create effects that go far beyond the original motive for reform.

 

Impact: Two Year Work Experience Requirement for All TSS Visas – Even PhDs

One main difference between the 457 and new TSS is a two-year work experience requirement.  That may seem like a reasonable rule that would limit entry level workers, but it also could eliminate specialized PhD researchers in the health and medical fields. 

Because many of these high-level graduates gain their expertise in the academic setting in pursuit of their doctorate, they are technically excluded from taking a position by the TSS requirements (unless they completed a course of study in Australia and qualify for another visa type).

Impact: Caveats on Certain Occupations Will Affect Startups and Small Businesses

One of the main impacts of the new TSS visa will be on startups, and not just from a cost standpoint.  Due to a ‘caveat’ in the law that states some executives, managers and marketing specialists can only be sponsored by companies with more than a AUD $1million turnover, and more than five employees.  That is a tough hurdle to clear for new companies breaking into an industry, that still need skilled workers or managers to move forward.

Also, for the IT sector there is more bad news, as some essential positions have been removed from the eligible occupations list, including web developers and certain support technicians and engineers.  Even if they are eligible, they will still have to have the required two years of work experience.  This puts the burden on companies to offer positions that ‘fit’ the new eligible list of occupations, and to make sure that applicants have relevant experience.

On the issue of caveats, Rachel, who has over ten years of experience in immigration law, adds:

“Some of the caveats appear reasonable and in line with a tightening of the program. Clarifying that accountants cannot be working in clerical or bookkeeping positions is one such example. The caveats relating to businesses needing at least five employees and one million dollars turnover for certain occupations are problematic though. This is without question going to hurt start-ups.

It is also not clear whether businesses in the start-up phase in Australia who have a significant global presence will also be captured by this limiting policy.” 

Potential Unintended Consequences

New laws that in some way limit the ability of businesses to hire the talent they need can have far reaching economic effects.  When governments impose reactive work visa rules based on unemployment or perceived job displacement, they risk harming the very companies that can generate job growth across all sectors.

One of the complaints about the new TSS visa restrictions is a lack the requisite skill sets inside Australia to allow companies to advance their products and services.  If this has a chilling effect on a company’s business growth, there are few potential consequences, including:

  1. Fewer startups, especially in the tech sector, where innovation and highly skilled workers are essential to break into the software and applications arena.
  2. Australia becomes less attractive to foreign startups who might have been drawn to the business environment prior to this change, but will realize they cannot staff operations from the talent pool of local residents.
  3. Increased use of remote workers for some roles, who can either be hired locally in their home country or as independent contractors.
  4. Loss of tax revenue and decreased economic growth as restricted businesses choose to relocate offshore.

Remote Hires as a Solution to Tightening Work Permissions

If this protectionist trend continues in countries such as Australia, the US and their European counterparts, entrepreneurs will find new solutions to fill key positions.  One of the obvious strategies is to simply hire remote workers located abroad, and avoid the entire work visa process.  This step can be used for a variety of roles that lend themselves to online or project based work, including many of the new TSS prohibited occupations.

The Shield GEO Solution

Adept business leaders will find a way to hire the workers they need, despite immigration legislation and policies designed to close the door at the border.  For this reason, outsourced employment solutions are gaining in popularity, and offer a company flexibility in hiring staff.

Through the use of international employment firms such as Shield GEO, one or more workers can be brought on board, payrolled and contracted in their home country via a local employer of record.  There is no need for the foreign company to incorporate, and if the new hire is a resident they can be employed almost instantly.

The added advantage in hiring residents is that wages, skills and experience levels are not subject to work visa criteria (only local labor and wage standards), opening up a global pool of talent for many different business types.  Multinationals can’t afford to ignore changes in immigration policy, but can take comfort that there are efficient solutions available for locating and hiring talent.

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