What the skilled migration shake-up means for business

The federal government is making some of the biggest reforms to Australia’s skilled migration program in decades. Those reforms bring big opportunities for corporate Australia, but also some risks, writes Brendan Coates, Grattan Institute economic policy program director.

The government’s migration strategy, released late last year, sets out a new vision for Australia’s migration program. It makes clear that skilled migration, especially permanent skilled migration, is about setting Australia up with the skills it needs for the long term, not tackling short-term skills shortages. That’s important, because a migration system that better selects skilled migrants can help lift our sluggish rate of productivity growth and close our forecast budget deficits by helping Australian firms secure the skilled talent they need.

Five key changes

The government is making five key changes. First, it is reforming the way employer-sponsored visas work in Australia, making it easier for Australian firms to secure scarce global talent. Existing permanent and temporary sponsored visas will be replaced with a new Skills in Demand sponsored visa, with three separate pathways depending on the salary a migrant will earn in Australia. Employers will be able to use the visas to sponsor workers for four years on a temporary visa, along with clearer pathways to sponsor a worker for a permanent visa.

At the top end is a Specialist Skills Pathway for employers bringing in foreign workers earning at least $135,000 a year. This new visa should give many employers the opportunity to attract top-end talent to Australia with much less red tape than previous sponsored visas.

The government has pledged that Specialist Skills Pathway visas will be approved in a median time of just seven days, and employers will not be required to match the sponsored job to a listed occupation deemed in shortage. Nor will employers be required to first advertise for a local candidate, a process known as labour market testing, before sponsoring a migrant for a particular job. This high-wage pathway will not be available for skilled trades workers.

In the middle, a Core Skills Pathway will be available for firms to sponsor migrants who will earn between $70,000–$135,000 a year. Employers will be restricted to sponsoring workers in occupations deemed to be in shortage, and will need to have first advertised for a local candidate.

At the bottom, an Essential Skills Pathway will offer firms a more regulated pathway to sponsor lower-paid workers with essential skills in nominated sectors such as aged care and childcare. It will be developed in coming months in consultation with unions, businesses and other stakeholders.

Changing jobs

Second, migrants on the new temporary Skills in Demand sponsored visa will now be able to switch employers to avoid mistreatment, or to take a better job. That means employers will no longer be able to take sponsored workers for granted, because their sponsored workers will have more options.

At the same time, the government will explore a model whereby fees paid by employers, such as the $7,200 Skilling Australians Fund levy, are incurred in small chunks at regular intervals, rather than being paid in full upfront, so that an employer isn’t left paying the full cost of sponsorship if one of their workers takes another job.

To facilitate job-switching and greater oversight of employers, the government will develop a public register of businesses that are approved to sponsor temporary migrants. The register will include the name of approved employers, how many temporary skilled workers they employ and what occupations they work in.

Selection process

Third, the government plans to change the way points-tested permanent visas are offered, by better aligning points on offer with migrant characteristics (such as migrants’ ages, experience and qualifications) that best predict migrants’ long-term economic contribution to Australia. And the skills of a migrant’s spouse will also be given greater weight. This is a potential game changer, because 75 per cent of all skilled visas are issued via the points test. But much depends on how the new policy is implemented. We should expect more details later in 2024.

Attracting entrepreneurs

Fourth, the government is considering a new Talent and Innovation visa to create a single, streamlined pathway to attract highly talented migrants such as high-performing entrepreneurs, major investors and global researchers. This visa would replace the Business Investment and Innovation Program — labelled an “abysmal failure” in a parliamentary inquiry — and the Global Talent visa.

Exploitation crackdown

Fifth, the government has pledged to crack down on the exploitation of migrant workers in Australia. Grattan Institute research shows that recent migrants are twice as likely as long-term residents to be underpaid, and up to 16 per cent of recent migrants are paid less than the national minimum wage.

Under new laws passed last December — Fair Work Legislation Amendment (Closing Loopholes) Act 2023 — employers who deliberately underpay workers can be jailed for up to 10 years. Fines for underpayment will be lifted to three times the value of the underpayment, or up to $7.8m for firms. Much larger fines will be levelled on businesses that engage in large-scale and systematic underpayment of their staff. Corporate directors need to be cognisant of these risks.