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Sponsorship obligation to equivalent terms and conditions of employment – Impact of anticipated changed in the new financial year

Apr 10, 2023 | AUS | 0 comments

As the beginning of the new financial year approaches, mandatory superannuation payments are set to increase from 10.5% to 11% per annum. 

Further, sector-wide increases to industry awards rates are anticipated for example within the Healthcare sector and Food service sector. 

This presents a commonly missed pitfall for many businesses usitilising the Standard Business Sponsorship program or are party to a labour agreement with regard to ensuring equivalent terms and conditions of employment for a nominee. 

In anticipation of the changes, Standard Business Sponsors, or those party to a labour agreement, are required to review employment arrangements abide by their sponsorship obligation to ensure equivalent terms and conditions of employment are not breached. 

If you are a standard business sponsor:

  • the annual earnings of the employee must be at least the same as those stated on the nomination application when we approved the application
  • the employment conditions of the employee must not be less favourable than those of an equivalent Australian worker

By definition of the Fair Work Act 2009 (Cth), earnings do not include any superannuation or earnings that are not guaranteed, for example bonuses or unforeseen overtime. 

This only applies if the annual earnings of the employee is less than current threshold, AUD250,000 and to labour agreement sponsors unless otherwise stated in the labour agreement

This means, should superannuation as part of a total package of remuneration in the case of a maximum superannuation contribution, increases to earnings will decrease earnings as a result, in breach of sponsorship obligations. It is therefore important to ensure that any changes to earnings either remain the same or increase sufficiently based on the nominated earnings as stated in the nominated application. 

Equivalent terms and conditions of employment involve ensuring the nominee is paid at or above the Annual Market Salary Rate (AMSR). The AMSR is a benchmark market rate for full-time yearly rate of earnings, determined by  pay to equivalent Australian workers, enterprise agreements or industrial awards, remuneration survey, advice from employer associations job outlook data or advertisements for the last 6 months in the same location, remuneration survey or advice from unions or employer associations.

The nominee’s terms and conditions (or earnings) of their employment must be no less favourable than those provide to, or would be provided to, an equivalent Australian citizen or permanent resident, performing equivalent work in the person’s workplace at the same location.

Equivalent work can be distinguished from the nominee if there is a disparity of experience and an associated difference in earnings, common in many professional occupations. 

Terms and conditions of employment or annual earnings, must also be no less favourable than that was approved at the nomination stage, calculated at an hourly rate. This means, if the nominee is paid more in total based on the number of hours worked, obligations may still be breached if the hourly rate is less than the prior nomination application. 

Key Takeaways

In any case, sponsors or those party to a labour agreement, must ensure the earnings per hourly basis do not decrease below the stated amount in the nomination application. Further, terms and conditions of employment must be no less favourable to those offered to an equivalent Australian employee. Otherwise, the sponsor will be found to be in breach of their sponsorship obligations. If you are unsure with the above mentioned points raised in line with anticipated changes come new financial year, it is important to consult your immigration agent or solicitor to assist with interpretation of the migration regulations based on your circumstances, please contact (02) 91892988 or for further guidance.