From 1 July 2009, there will be an increase of 4.1% to the Minimum Salary Level (MSL). This increase applies to all new and existing 457 visa holders and must be paid by sponsors to any 457 visa holders in their employ. Failure to pay the appropriate MSL correctly is a serious breach of sponsorship obligations and can result in severe penalties such as barring an employer from accessing 457 arrangements for a period of time, cancelling an employer's sponsorship approval or financial penalties.
The increase flags a warning for employers to review current salaries paid to all existing 457 visa holders so that, if necessary, appropriate adjustments are made. Employers hiring new staff on 457 visas need to be aware that they must pay at least the MSL as a base or 'cash' component, as well as a total remuneration package that reflects the average remuneration for the occupation in Australia. Our update of 2 April 2009,
Immigration roundup for employers, provides further details.
The MSL is the 'base' salary component (sometimes referred to as the 'cash' component) excluding superannuation, any allowances (such as Living Away from Home Allowance), bonuses or salary packaged items or deductions, other than:
- Pay As You Go (PAYG) tax withholding amounts; and
- amounts that are 100% tax deductible for the sponsored worker or otherwise exempt from Fringe Benefits Tax (FBT).
The new MSL rates from 1 July 2009 depend on the type of employee and when they were granted their visa.
The following tables provide more specific details on how the MSL applies:
Information and Communication Technology (ICT) employees
| On or after 1 July 2009 |
On or after 1 July 2009 |
------------------
|
$61,920 |
| Either On or after
1 July 2006
and before
1 July 2009
|
Or
Between 3 May 2006 and 30 June 2009
|
$59,480
|
$61,920 |
| Before 1 July 2006 |
Between 9 April 2005 and 2 May 2006
|
$52,700 |
$54,861 |
| Before 1 July 2006 |
Between 11 February 2004 and 8 April 2005 |
$48,390 |
$50,374 |
Non-Information and Communication Technology (ICT) employees
| On or after 1 July 2009 |
On or after 1 July 2009 |
------------------
|
$45,220 |
| Either On or after
1 July 2006
and before
1 July 2009
|
Or
Between 3 May 2006 and 30 June 2009
|
$43,440 |
$45,220 |
| Before 1 July 2006 |
Between 9 April 2005 and 2 May 2006
|
$52,700 |
$54,861 |
| Before 1 July 2006 |
Between 11 February 2004 and 8 April 2005 |
$48,390 |
$50,374 |
Certified Regional Employment arrangements (for regional employers)
These employees were granted a 457 visa on the basis that they are required to live and work in a specified regional area of Australia. Regional employers receive certain concessions in terms of the occupations which they can nominate and the salary they must pay to their regional 457 visa holders.
ICT |
On or after 1 July 2009 |
----------------------------- |
$55,725 |
| Between 1 July 2006 and 30 June 2009 |
$53,530 |
$55,725 |
| Before 1 July 2006 |
Industrial Award |
Industrial Award |
Non-ICT |
On or after 1 July 2009 |
----------------------------- |
$40,703 |
| Between 1 July 2006 and 30 June 2009 |
$39,100 |
$40,703 |
| Before 1 July 2006 |
Industrial Award |
Industrial Award |
English language exemption
Applicants who are nominated to work in trade occupations, or as chefs, and who do not meet the minimum English language ability requirement, will need to be paid a MSL of $81,040 from 1 July 2009. This applies to existing applicants who have been granted their visa on the basis of the English language exemption (effective from 10 September 2007), as well as to all new applicants claiming the exemption.
How must the MSL be paid?
The MSL in all cases is based on a 38 hour week. An employee cannot be paid for less than 38 hours. Where an employee works in excess of 38 hours, they must be paid at least the equivalent hourly rate for every hour. The MSL must be paid weekly, fortnightly or monthly, and therefore the equivalent MSL for hours worked in excess of 38 hours must also be paid weekly, fortnightly or monthly. The MSL cannot be 'averaged out' on an annual basis.
The methodology used for calculating the MSL is as follows:
Where the nominee works an average of 38 hours per week or less in a given period:
MSL = applicable base salary x no. of weeks worked in the given period
______________________________________________________
52.1775
Where the nominee works an average of more than 38 hours per week in a given period:
MSL = applicable base salary x no. of hours worked in the given period
______________________________________________________
1982.745
The applicable base salary is the MSL applicable from 1 July 2009 as shown in the above tables.
What sponsors can do to ensure compliance with obligations
Sponsors need to check that from 1 July 2009, the 'base' or 'cash' salary component paid to 457 visa holders will be in accordance with the above MSL rates, and that it is paid on a weekly, fortnightly or monthly basis in accordance with the number of actual hours worked in that period. Sponsors may need to implement a system of recording actual hours worked for 457 employees to avoid possible breaches of the MSL obligation.
Conclusion
The revised MSL from 1 July 2009 is likely to be overtaken by the requirement that all new and existing 457 visa holders will need to be paid a minimum salary based on the market rate, however defined. The requirement to pay market rates is likely to be implemented around mid-September 2009. Employers should factor this in now in relation to their existing and new 457 hires. Details of what will constitute 'market rate' will be made available as soon as they are known.
Hall & Wilcox's
Migration Services team offer strategic advice and practical assistance by registered migration agents. We provide advice and assistance with temporary and permanent visa applications for work, training or other purposes; develop risk strategies to ensure compliance with sponsorship obligations and immigration laws; and formulate appropriate HR policies and employment contracts for expatriate employees.