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New rules for salary payments for sponsored employees
The Minimum Salary Level (MSL) which must be paid by sponsors of employees holding 457 visas will be increased from 1 August 2008. Failure to pay the appropriate MSL correctly will be considered a breach of sponsorship obligations and can result in severe penalties.
Employers who sponsor 457 visa holders need to meet a number of obligations, including paying at least the MSL or industrial instrument (eg award or collective agreement), whichever is the higher.
The new MSL that will apply from 1 August 2008 differs for those employees whose 457 visas are granted before 1 August 2008 and those whose 457 visas are granted from 1 August onwards.
New sponsored employees granted a 457 visa on or after 1 August 2008
The MSL that will apply to employees whose 457 visa is granted on or after 1 August 2008 is:
- $77,850 - where the English language exemption is claimed
- $59,480 - for Information and Communication Technology (ICT) employees
- $43,440 - for non-ICT employees
- $53,530 - for ICT employees approved to work under a regional concession
- $39,100 - for non-ICT employees approved to work under a regional concession
Employees whose 457 visa is approved before 1 August 2008
The MSL for all employees whose 457 visa was approved prior to 1 August 2008 will increase by 3.8%.
Effective 1 August 2008, MSL increases will apply retrospectively, meaning that sponsors will be required to pay any new MSL rates to all existing sponsored visa holders who may have been approved on the basis of a lower MSL.
Prior to 1 August 2008, MSL increases applied only to employees who were granted 457 visas after the promulgation of a new MSL.
Sponsors should check the visa approval notification for all 457 visa employees for the date of visa approval which determines the ‘MSL Instrument Period of Effect’ in the table below:
MSL Instrument
Period of Effect |
MSL Occupation Category |
MSL prior to 1 August 2008 |
MSL from 1 August 2008 |
11/02/2004 to 08/04/2005 |
Non-ICT |
$37,720 |
$39,150 |
ICT |
$46,620 |
$48,390 |
Regionally certified |
Industrial Award |
Industrial Award |
09/04/2005 to 02/05/2006 |
Non-ICT |
$39,100 |
$40,590 |
ICT |
$50,775 |
$52,700 |
Regionally certified |
Industrial Award |
Industrial Award |
03/05/2006 to 30/06/2006 |
Non-ICT |
$41,850 |
$43,440 |
ICT |
$57,300 |
$59,480 |
Regionally certified |
Industrial Award |
Industrial Award |
01/07/2006 to 31/07/2008 |
Non-ICT |
$41,850 |
$43,440 |
ICT |
$57,300 |
$59,480 |
Regionally certified (non-ICT) |
$37,665 |
$39,100 |
Regionally certified (ICT) |
$51,570 |
$53,530 |
English language exemption (from 10/09/2007 only) |
$75,000 |
$77,850 |
How must the MSL be paid?
From 1 August 2008 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. You cannot ‘average out’ the MSL on an annual basis.
The MSL is the 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).
What sponsors can do to ensure compliance with obligations
Sponsors need to check that the salary paid to 457 visa holders is in accordance with the above MSL rates, and 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 Minister for Immigration recently released a discussion paper on sponsorship undertakings for 457 and other visas. It is expected that legislation will be introduced later in 2008 to clarify and strengthen the obligation framework for all sponsors. A copy of the discussion paper can be found at: http://www.minister.immi.gov.au/media/media-releases/2008/ce08058.htm
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.
For further information visit our website or contact a member of the team.
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