News Flash

Sponsoring overseas workers? Critical information on training benchmarks

05-Oct-2017

If you are a business sponsoring overseas workers under either the Temporary Work (skilled) visa (Subclass 457) or the Direct Entry Stream of the Employer Nomination Scheme (ENS) (Subclass 186), you must meet certain training requirements (also known as training benchmarks).

You will also need to be aware of the impact of recent policy changes, some of which came into effect on 1 July 2017, and others due to apply from March 2018.

What are training benchmarks, and to whom do they apply?

If your business has been operating in Australia for more than 12 months, you must prove that you have contributed to the training of Australian citizens and permanent residents by meeting certain training benchmarks.

There are two types of training benchmarks. Businesses must meet the requirements of one or the other:

·        Training Benchmark A: Recent expenditure (ie. expenditure made in the previous financial year or previous 12 months) to the equivalent of at least 2% of the payroll of the business payments to an industry training fund that operates in the same industry as the business.

Evidenced by a receipt for the payment or a letter from the relevant fund.

OR

·        Training Benchmark B: Recent expenditure (ie. expenditure made in the previous financial year or previous 12 months) to the equivalent of at least 1% of the payroll of the business in the provision of training to employees of the business.

Evidenced by a receipt for the payment(s) or a contract for employment of the relevant individual for whom salary payments are counted towards meeting the benchmark.

If you are a business that has been operating in Australia for less than 12 months, you must demonstrate an auditable plan for achieving these benchmarks. 

Details on what types of expenditures can count towards training benchmarks can be found in these policy documents:

·        IMMI 17/045: Training Benchmarks for the Subclass 457 program

·        IMMI 17/074: Training Benchmarks for the ENS Direct Entry Stream

 

Employers should note that meeting Training Benchmark A or B is an ongoing obligation; they must ensure they are meeting the training requirements during the entire term of their sponsorship.

 

What changes came into effect on 1 July?

On 1 July 2017, new policy changes came into effect that will impact applications lodged on or after this date. (Standard Business Sponsors (SBS) and ENS Direct Entry applications lodged prior to 1 July 2017 will be assessed under previous policies). 

Essentially, the changes give a clearer definition of what ‘payroll’ means and clarified what counts as ‘acceptable expenditure’.

What does ‘payroll’ mean?

‘Payroll’ means either:

a.      The total amount of the two payments specified below:

i.        Any wages, remuneration, salary, commission, bonuses, allowances, superannuation contributions or eligible termination payments, defined as wages in payroll tax legislation for the relevant State/Territory, that the business has paid to their employees during the same period; and

ii.       Payments made to contractors or subcontractors during the same period if work provided by the contractor is related to the service/product provided by the business, regardless of whether such payments are included for payroll tax purposes or not; 

OR

b.      If the business does not pay either of the types of payments specified above:

i.        The total monetary values of the director's salaries, fees and drawn payments; or

ii.       The actual profit of the business.

What types of expenditures count?

For Training Benchmark A

Expenditures that can be counted include payments made to:

·        An industry training fund, e.g., a statutory authority responsible for providing funding for training of eligible workers in certain industries;

·        A fund managed by a recognized industry body that provides training opportunities in their industry and quarantines contributions to the fund for training purposes only; or

·        A recognised scholarship fund operated by an Australian university or TAFE college only. 

Expenditures that can’t be counted are payments made to:

·        Training funds operated by Registered Training Organizations (RTOs) or private individuals; or

·        Funds that allocate a percentage or part of the contributions received to commissions or offer refunds for failed immigration applications. 

For Training Benchmark B

Expenditures that can be counted include:

·        Payments for Australian employees to undertake a formal course of study, including any reasonable and necessary associated costs;

·        Payments to RTOs to deliver face-to-face training to Australian employees that will contribute to an Australian Qualifications Framework qualification;

·        Purchase of an eLearning platform or standalone training software;

·        Payments to cover the salary of Australian employees engaged by the business as apprentices or trainees under a formal training contract, or recent university graduates (must have completed within the previous two years) who are  participating in a formal, structured graduate program for up to two years or completing a professional year following their graduation;

·        The salary of a person whose sole role is to provide training to Australian employees; and

·        Expenditure to attend conferences for continuing professional development. 

Expenditures that can’t be counted include:

·        On the job training that is not otherwise identified above as applicable expenditure;

·        Induction training;

·        Training undertaken by persons who are principals in the business or their family members;

·        Staff salaries apportioned to time spent undertaking online or other training courses;

·        Membership fees;

·        Purchase of books, journals or magazine subscriptions; and

·        Attending conferences for purposes other than continuing professional development.

 

What changes are coming in March 2018? 

From March 2018, Training Benchmarks A and B will be scrapped. Instead, employers sponsoring overseas workers under the new Temporary Skill Shortage (TSS) visa, the ENS (Subclass 186) visa or the Regional Sponsored Migration Scheme (RSMS) (Subclass 187) visa will be required to pay a contribution towards the new Skilling Australians Fund (SAF). 

Businesses with turnover of less than $10 million per year will be required to:

·        make an upfront payment of $1,200 per visa per year for each employee on a TSS visa

·        a one-off payment of $3,000 for each employee being sponsored for an ENS visa or RSMS visa. 

Businesses with turnover of $10 million or more per year will be required to:

·        make an upfront payment of $1,800 per visa year for each employee on a TSS visa

·        a one-off payment of $5,000 for each employee being sponsored for an ENS visa or RSMS visa. 

The SAF levy will be collected by DIBP as part of the nomination application process. In practice, this means employers sponsoring workers under the TSS visa will need to specify how long the employment period will be, and this will be used to calculate the required fee. 

Further information on the SAF can be found here. 

 

Any tips for dealing with benchmarks? 

What happens if I fail to meet the training benchmarks? 

As training benchmarks are a key part of a business’ sponsorship obligations, the consequences for failing to meet them can be severe for both the employer and sponsored employee. 

A breach of training requirements could stop an employer from applying for a further Standard Business Sponsorship term, preventing the hiring of further overseas workers. For employees already holding 457 visas, a breach could result in losing their ability to apply for permanent residency, as nomination requirements would not have been met. 

Good record-keeping is key to avoiding any potential problems. Businesses should ensure they have accurate records of all training expenditure, including any contributions made to training funds, or relevant invoices, receipts, training costs and training-related salaries. 

How should I prepare for the new policy changes? 

Policy changes that came into effect from 1 July 2017 represent a narrowing of what can be counted as ‘acceptable expenditure’. Employers should review their existing training expenditures and ensure they comply with the new guidelines. 

In addition, the costs that will be imposed when the SAF levy comes in March 2018 are substantial. Employers should consider whether to fast-track employees’ temporary or permanent visa applications before the new contribution requirement kicks in. 

Businesses should be prepared to provide accurate records of levy payments (possibly through documents such as annual tax returns or Business Activity Statements). To determine the contribution amount and to prove compliance with sponsorship obligations, businesses will likely need details around annual turnover, number of TSS visa holders and any employee terminations. 

Abacus Visa provides tailored immigration assistance to businesses currently sponsoring, or looking to sponsor, overseas workers. Feel free to contact us today for more information.

 

Sources: DIBP, LEGENDCom