Visa subclass 457 Submission to the independent integrity review - APRIL 2014
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Visa subclass 457 Submission to the independent integrity review APRIL 2014 Page 1
Restaurant & Catering Australia Restaurant & Catering Australia (R&CA) is the national association representing the interests of 35,000 restaurants, cafes and catering businesses across Australia. R&CA delivers tangible outcomes to small businesses within the hospitality industry by influencing the policy decisions and regulations that impact the sector’s operating environment. R&CA is committed to ensuring the industry is recognised as one of excellence, professionalism, profitability and sustainability. This includes advocating the broader social and economic contribution of the sector to industry and government stakeholders, as well as highlighting the value of the restaurant experience to the public. Page 2
Contents Executive Summary____________________________________________________________________________________ 4 Recommendations _____________________________________________________________________________________ 5 Current Landscape _____________________________________________________________________________________ 6 EMPLOYMENT IN THE SECTOR .........................................................................................................................6 LABOUR SHORTAGES AND EMPLOYMENT GROWTH IN THE SECTOR ........................................7 Terms of Reference 1 ________________________________________________________________________________ 10 LEVELS OF NON-COMPLIANCE AND INDUSTRY DATA..................................................................... 10 Terms of Reference 2 and 3 _________________________________________________________________________ 12 ENGLISH LANGUAGE TESTING ...................................................................................................................... 12 TEMPORARY SKILLED MIGRATION INCOME THRESHOLD (TSMIT) ............................................. 13 ADMINISTRATION OF THE INDUSTRY TRAINING FUND ................................................................. 14 REPATRIATION COSTS........................................................................................................................................ 14 IMMIGRATION OUTREACH OFFICERS........................................................................................................ 15 Terms of Reference 4 ________________________________________________________________________________ 16 FAIR WORK OMBUDSMAN ............................................................................................................................... 16 COOPERATION BETWEEN THE DEPARTMENT & THE ATO .............................................................. 16 Addendum: Restaurant & Catering Industry Labour Agreement ____________________________________ 17 Page 3
Executive Summary Restaurants, cafes and hospitality providers are an important part of Australia’s $128 billion visitor economy. There are over 35,000 café, restaurant and catering businesses in Australia, contributing to 666,300 jobs, and delivering $19.1 billion in earnings to the economy. As the Asian Century unfolds, and Australia moves towards a more service-based economy, the prevalence of employment in the tourism and hospitality sector will grow. Deloitte highlights that tourism will be one of the major growth drivers from now to 2033, with this sector to grow more than 10% faster than global gross domestic product. Yet the industry currently suffers from a significant shortage of skilled and unskilled labour, constricting growth and productivity. There is currently a shortfall of 35,800 workers in the sector, with this gap expected to increase to 56,600 jobs by 2017. In addition, employment growth in cafes, restaurants and takeaway food services is projected to grow by more than 42,700 jobs or 8.1% to November 2017. This rate of growth is expected to be higher than any other sector in the Australian economy. The inability to meet future growth projections with an appropriate level of skilled workers will impact the productivity and growth of Australia’s largest export services sector, as well as the national economy as a whole. While attempts are being made to increase local workforce participation through the Vocational Education and Training (VET) system, and programs to engage the underemployed, these programs alone will not be sufficient to fill chronic vacancies that have long plagued the sector. The 457 visa program is therefore a critical mechanism in addressing labour shortages in the tourism and hospitality sector. Australia requires a robust and efficient visa system to address the need for skilled labour and improve business productivity, while protecting the interests of overseas workers entering the country. English language requirements, abuse of repatriation costs, and the TSMIT continue to be the biggest issues facing operators engaged in the 457 visa program. Questions have also arisen over the administration and management of the Industry Training Fund in collecting employer contributions. Addressing these issues will significantly improve the administrative burden and cost to businesses in using the program. R&CA is also pursuing a Restaurant & Catering Industry Labour Agreement to streamline access to skilled overseas workers, which has reached a critical point for the sector. Page 4
Recommendations
TERMS OF REFERENCE 1
Develop a robust research base to determine the level of industry non-compliance.
TERMS OF REFERENCE 2 & 3
Review English language proficiency requirements under the 457 program, and lower
requirements for Cooks and Chefs to IELTS Level 4.
Remove the TSMIT requirement for hospitality workers under the 457 program and replace
it with the relevant industrial Award.
Designate the management and operation of the Industry Training Fund to an appropriate
government agency to ensure compliance, and clarify RTO obligations in processing
employer contributions.
Provide greater power to the Department of Immigration and Border Protection’s Sponsor
Monitoring Area to investigate abuse of repatriation costs by overseas workers, providing
greater certainty to operators.
R&CA supports the continuation of the Department’s outreach officer program.
TERMS OF REFERENCE 4
The Fair Work Ombudsman remains the most appropriate agency to manage and investigate
issues of non-compliance, and should continue to have carriage of these issues.
Improve reporting activities between the Department of Immigration and Border
Protection and the Australian Tax Office in relation to 457 visa applicants.
ADDENDUM
Support the progression of the Restaurant & Catering Industry Labour Agreement in
streamlining business access to workers under the 457 visa program.
Page 5
Current Landscape
EMPLOYMENT IN THE SECTOR
The food and beverage services sector is the single largest employer across all tourism-related sectors
of the visitor economy. While the Tourism Satellite Account indicates the visitor economy directly and
indirectly employs over a million people, a closer examination of employment data reveals the sectors
contribution to the economy as a whole is much larger, with the food and beverage service sector
responsible for 666,300 jobs across Australia (See Table 1).
Table 1: Employment by tourism-related industry sectors
Nov Nov YoY YoY
EMPLOYMENT BY INDUSTRIES (000s) 2012 2013 Change Change
Tourism Characteristic Industries 1,736.0 1,736.2 -19.8% -1.1%
Accommodation 106.3 105.7 -0.6% -0.6%
Food & Beverage Services 678.5 666.3 -12.2% -1.8%
Road Transport 244.9 234.1 -10.9% -4.4 %
Rail Transport 43.2 47.1 3.9% 9.2%
Air and space transport 53.6 51.7 -1.9% -3.5%
Water Transport 8.4 12.8 4.4% 52.7%
Other Transport 7.1 11.6 4.5% 63.1%
Sport and recreation activities 108.3 101.5 -6.7% -6.2%
Creative and performing arts activities 40.4 38.6 -1.9% -4.6%
Heritage activities 26.0 31.1 5.1% 19.6%
Gambling activities 31.3 29.6 -1.7% -5.5%
Administrative services 190.9 190.3 -0.6% -0.3%
Property operators and real estate services 147.8 152.2 4.3% 2.9%
Rental and hiring services 49.3 43.8 -5.5% -11.2%
Tourism Connected Industries 2,023.1 2,066.6 43.5% 2.2%
Food retailing 375.7 394.3 18.6% 5.0%
Fuel retailing 35.9 36.5 0.7% 1.8%
Motor Vehicle and parts retailing 28.9 28.0 -0.8% -2.8%
Other store-based retailing 665.4 678.9 13.6% 2.0%
Non-store and commission-based retailing 19.3 24.4 5.2% 26.8%
Primary and secondary educations 533.4 528.3 -5.0% -0.9%
Tertiary education 239.2 229.1 -10.1% -4.2%
Adult, community and other education 125.5 146.9 21.4% 17.0%
All Tourism Related Industries 3,759.1 3,782.8 23.7% 0.6%
All Australian Industries 11,548.9 11,635.2 86.3% 0.7%
Page 6
LABOUR SHORTAGES AND EMPLOYMENT GROWTH IN THE SECTOR Deloitte’s Positioning for Prosperity? Catching the next wave report highlights that tourism will be one of the major growth drivers from now to 2033, with this sector to grow more than 10% faster than global gross domestic product1. In addition, Service Skills Australia Tourism, Travel and Hospitality Environmental Scan 2014 highlights that strong domestic demand and a growing tourism base is expected to lead to phenomenal employment growth in the café, restaurant and takeaway food sector over the next five years2. The Department of Education, Employment and Workplace Relations (DEEWR) forecasts that employment growth in this sector will exceed any other in the Australian economy, with expected growth of 42,700 workers, or an increase of 8.1%3 (See Figure 1). Figure 1: Top 20 industry sectors ranked by projected growth to November 2017 (‘000s) 1 Deloitte (2013) Positioning for prosperity? Catching the next wave October Preview 2013 2 Service Skills Australia (2013) Tourism, Travel and Hospitality Environmental Scan 2014 – DRAFT, p.21 3 DEEWR (2012) Employment Outlook to 2017, p.3-4 Page 7
However, the Deloitte Access Economics Australian Tourism Labour Force Report 2011 indicates the
sector is currently experiencing a vacancy rate of approximately 9%, equivalent to 35,800 jobs. This
vacancy rate is considerably higher than the national average of 2%. The number of vacant jobs in the
sector is expected to increase to 56,000 by 2015 if no market intervention occurs. Of the 56,000
shortfall in jobs, it is estimated that 46% of these jobs will be skilled positions (25,760 workers), while
the remaining 54% of job shortages (30,748 workers) will be for unskilled labour4.
The Deloitte Access Economics report highlights that kitchenhands, waiters, café and restaurant
managers, and chefs will be the most in-demand occupations within the sector by 2015. By 2015, the
demand for kitchenhands, waiters, and café and restaurant managers is expected to account for
approximately one-third of all demand for workers within the tourism sector (Table 2). This is confirmed
by R&CA’s own 2014 Benchmarking Survey that found that 60.8% of operators currently have vacancies,
with 22.3% experiencing extreme difficulty finding staff. Cooks, chefs, managers and supervisors were
identified as the most in-demand positions.
Table 2: Accumulated labour demand by occupation over the 2012-2015 period
Demand for labour 2012-2015 (By Occupation)
Accumulated Accumulated
Top 10 Occupations demand for skilled demand for % of all
workers workers demand
Kitchenhands 1,839 7,364 13%
Waiters 2,110 6,280 11%
Café and Restaurant Managers 3,114 6,112 11%
Chefs 3,492 4,855 9%
Cooks 1,658 4,305 8%
Bar Attendants and Baristas 1,360 4,033 7%
Housekeepers 899 2,498 4%
Automobile Drivers 1,226 2,476 4%
Tourism and Travel Advisers 1,531 2,173 4%
Hotel and Motel Managers 1,072 2,170 4%
Subtotal top 10 occupations 18,301 42,268 75%
Total 25,927 56,676 100%
Source: Deloitte Access Economics labour force model
4 Deloitte Access Economics (2011) Australian Tourism Labour Force Report – Labour Force Profile (Part 1), p. iv, vii and xi
Page 8
When comparing tourism labour demand (Table 2) with projections of supply by occupation,
kitchenhands, waiters, and café and restaurant managers are expected to experience the greatest
shortfall in unskilled labour, accounting for 41% or 12,700 workers (Table 2). In terms of skilled workers,
Chefs, Café and Restaurant Managers, and Waiters are expected to experience the greatest shortfalls,
representing 36% or 5,400 workers.
Table 3: Top 10 occupations by accumulated change in skilled and non-skilled labour demand
Demand for labour 2012-2015 (By Occupation)
Accumulated non- Accumulated Accumulated labour
Top 10 Occupations skilled labour skilled labour demand to be met
demand shortage through alternate sources
Kitchenhands 5,526 1,302 6,828
Waiters 4,170 1,390 5,560
35% of total labour
Café and Restaurant Managers 2,998 demand 1,952 4,949
Chefs 1,363 2,118 3,480
Cooks 2,647 899 3,547
Bar Attendants and Baristas 2,673 849 3,522
Housekeepers 1,599 564 2,164
Automobile Drivers 1,251 678 1,929
Tourism and Travel Advisers 642 1,090 1,732
Hotel and Motel Managers 1,098 679 1,776
Subtotal top 10 occupations 23,967 10,519 35,487
Total 30,784 15,033 45,782
Source: Deloitte Access Economics labour force model
In addition, research by the Centre for the Economics of Education and Training suggests that from
2006-2016, Australia will require an additional 2.5 million people with VET qualifications, 1.7 million of
which will need to be qualified at Certificate III level or above5.
As a result of existing shortages and the expected employment growth of the sector, operators are
increasingly reliant on temporary skilled migration to fill vacancies. The availability of labour under the
457 program is essential to the continued growth of the tourism and hospitality sector in Australia.
5 Business Council of Australia (2007) Restoring our Edge in Education, p8
Page 9Terms of Reference 1
LEVELS OF NON-COMPLIANCE AND INDUSTRY DATA
In 2013-2014, there were 3,280 applications granted for cooks, chefs, and restaurant managers under the
457 program. Cooks and restaurant managers represented the largest number of primary applications
granted over the 2013-2014 period6. In addition, these positions ranked in the top five occupations for
skilled migrants to the Australian Capital Territory, New South Wales, and Western Australia, with cooks
and restaurant managers representing the top two occupations most in demand in Queensland7.
Table 4: Top 15 occupations for primary applications granted in 2013-14 to 31 December 2013
nominated Top 15 occupations by primary applications granted in 2013-2014
occupations
for % Change 2013-14
Top 15 Occupations 2013-2014 to 2012-13 to from as % of
primary 31/12/13 31/12/12 2012-13 Total
applications
351411 Cook
granted 1,550 1,450 7.2% 5.7%
in 141111 Café or Restaurant Manager 1,200 760 58.6% 4.4%
2013
261312 Developer Programmer 860 870 -1.5% 3.1%
- 225113 Marketing Specialist 780 810 -4.3% 2.8%
14149212 Customer Service Manager 640 580 11.4% 2.4%
to
253111 General Medical Practitioner 640 810 -21.1% 2.3%
31
242111 University Lecturer
December 600 770 -21.7% 2.2%
261111 ICT Business Analyst
2013 570 610 -6.6% 2.1%
312512 Mechanic Engineering Technician 560 650 -12.6% 2.1%
221111 Accountant (General) 550 610 -9.9% 2.0%
131112 Sales and Marketing Manager 540 510 6.1% 2.0%
351311 Chef 530 530 0.4% 2.0%
224711 Management Consultant 520 660 -21.0% 1.9%
261313 Software Engineer 470 520 -9.2% 1.7%
511112 Program or Project Administrator 440 1,200 -63.1% 1.6%
Other Occupations 16,860 24,600 -31.5% 61.7%
Total 27,330 35,930 -23.9% 100.0%
Source: Department of Immigration & Border Protection
6 Department of Immigration & Border Protection Subclass 457 quarterly report quarter ending at 31 December 2013, p13
7 Department of Immigration & Border Protection Subclass 457 quarterly report quarter ending at 31 December 2013
Page 10Of these applications, R&CA believes there to be a minimal level of non-compliance among operators using the 457 program. However, the association is aware that past reviews have found a minimal number of non-compliant operators (approximately 15 operators representing 0.1% of applications). This figure has been used extensively as the basis for decisions regarding the sector’s use of the 457 program. R&CA is also cognisant that issues arising from the exploitation of the VET system - whereby international students completed hospitality courses with non-compliant training organisations - has also contributed to the perception of ‘rorting’ in the sector, despite the two issues being unrelated. R&CA argues that the data used to determine non-compliance is flawed, with the actual level of non- compliance being very minimal compared to total number of applications received and processed. R&CA advocates that a more robust and transparent research base needs to be used to examine the level of industry non-compliance, and to guide decisions regarding the 457 program. In addition, R&CA believes that labour market testing makes little or no difference to the proportion of non-compliance in the sector. It is more likely that the level of non-compliance will reduce as the number of visa grants reduce. Recommendation Develop a more robust research base to determine the level of industry non-compliance. Page 11
Terms of Reference 2 and 3 In examining the existing requirements of the 457 program, the cost to employers, and the need to maintain the integrity of the program, R&CA has made the following observations regarding the program: ENGLISH LANGUAGE TESTING English language testing continues to be one of the biggest issues affecting the use of the 457 program by tourism and hospitality operators. R&CA contend that language requirements across different positions and skill levels are not the same, and should therefore be determined on a case-by-case basis. R&CA contend that the level of language proficiency should reflect the level of skill required by the occupation. In a majority of ethnic restaurants, the language spoken in the kitchen is the language of the cuisine. While R&CA understands English proficiency is used to determine an applicant’s ability to participate in Australian life as well as adhere to OH&S requirements, the association believes this can be demonstrated by means other than English competency. However, where positions are required to interact with customers i.e. Waiters, restaurant managers and supervisors, R&CA believes ensuring a level of English proficiency is appropriate, at a level of IELTS 4.5 or above. Furthermore, there is evidence to suggest internationally the same weight is not given to English proficiency. For example, in Canada only a basic level of proficiency is required. Applicants are awarded points based on their ability to listen, speak, read and write. In this case, basic proficiency is defined as ‘can communicate’ in a very limited way. In New Zealand, in order to gain residency under the Skilled Migrant Category (albeit not temporary entry such as a 457 visa) a minimum standard of English is required. If the applicant is able to demonstrate they are in current ongoing employment, they are provided with an exemption. The association understands that in Australia IELTS Level 4 is equivalent to ‘basic competence’ where the English ability is limited to familiar situations and the applicant may have frequent problems in understanding and expression. R&CA believe English language requirements for Cooks and Chefs should be lowered to IELTS Level 4, to better reflect the level of English proficiency required to do their job effectively. Page 12
Recommendation
Review English language proficiency requirements under the 457 program, and lower
requirements for Cooks and Chefs to IELTS Level 4.
TEMPORARY SKILLED MIGRATION INCOME THRESHOLD (TSMIT)
R&CA recognises the TSMIT was designed to ensure overseas workers relocating to Australia can cover
the cost of re-establishing themselves here in the country. It is understood this figure related to the
indicative funds required to support a family in Australia, as opposed to just an individual. As a result, the
TSMIT is often higher than the minimum salary paid to most Australian workers for the same position,
creating a wage differential between Australian and overseas workers. This is particularly true for lower-
skilled hospitality positions such as Cooks where the average pay is around $48,0008. In some instances,
this has resulted in Australian workers attempting to re-negotiate greater rates of pay to match the
salary paid to their overseas colleagues under TSMIT, despite employers meeting their obligations under
the Award for that position.
In addition, many restaurant operators are unaware they can meet the requirements of the TSMIT
through a mix of hours across the operating hours of the business. This could be better communicated
to applicants, particularly those who do not engage in the program due to the belief they cannot provide
guaranteed earnings.
R&CA believes the TSMIT should be removed to reduce the distortion between the salaries of
Australian and overseas workers. Instead, the industry minimum (under the relevant Award), should be
used.
Recommendation
Remove the TSMIT requirement for hospitality workers under the 457 program and replace it
with the relevant industrial Award.
8 Payscale, Cook, Restaurant Salary, Australia http://www.payscale.com/research/AU/Job=Cook,_Restaurant/Salary
Page 13ADMINISTRATION OF THE INDUSTRY TRAINING FUND
R&CA supports the existence of the Industry Training Fund (the fund) as a means of providing training
opportunities for Australians. Where an employer cannot demonstrate meeting training benchmarks, the
fund is an appropriate mechanism for up-skilling working Australians.
As a Registered Training Organisation (RTO), R&CA collects and processes contributions to the fund. It
has been brought to the attention of the association, however, that RTOs such as TAFE offer a 15%
commission to migration agents to process their clients’ contributions with their organisation. As a
result, migration agents have begun a process of bargaining or seeking out ‘the best deal’ from RTOs for
processing contributions to the fund.
R&CA does not offer a commission on these payments; as the association believes 100% of the
contribution should be made to the fund. The ability of other RTOs to offer a commission on fund
contributions calls into question whether 100% of the contributions are indeed being made to the fund.
It also creates imbalance between RTOs certified to collect the payments.
The current operation of the Industry Training Fund lacks governance, with no designated agency
responsible for the management or oversight of the fund. As a result, there are instances where sponsor
requirements are not met, as well as attempts to extort the system. The operation of the fund must be
designated to an appropriate government agency, with clarification provided around the structure and
obligations of RTOs responsible for processing employer contributions.
Recommendation
Designate the management and operation of the Industry Training Fund to an appropriate
government agency to ensure compliance, and clarify RTO obligations in processing employer
contributions.
REPATRIATION COSTS
R&CA is aware that employers have a responsibility under the 457 program to pay repatriation costs for
overseas workers coming to Australia. Employers are required to pay a one way return airfare for the
457 visa holder and their family at the end of their visa if the request is made in writing.
R&CA has been made aware of instances, however, where workers on 457 visas have threatened to
leave their current place of employment if the employer fails to pay airfares for the worker to return
home to visit family either as part of a holiday and/or leisure trip. This differs significantly from
Page 14repatriation costs where the employer is paying for the worker and their family to return home at the
end of their visa.
Due to the significant difficulty in finding staff and the cost and time associated in finding appropriate
candidates, some employers agree to pay these costs out of fear of losing the employee. This however
creates is an imbalance in the bargaining power between employer and employee, particularly after the
worker has commenced employment.
While the relevant state or territory industrial relations legislation applies to 457 holders in terms of
workplace conduct, the instances sited above highlight attempts to exploit the 457 visa system. The
requirements and instances where repatriation costs are to be met need to be strengthened to provide
greater certainty to operators. This is particularly important given the initial investment costs borne by
the employer in lodging a 457 visa application, which are not recuperated should the employee decide to
leave.
Recommendation
Provide greater power to the Department of Immigration and Border Protection’s Sponsor
Monitoring Area to investigate abuse of repatriation costs by overseas workers, providing
greater certainty to operators.
IMMIGRATION OUTREACH OFFICERS
R&CA fully supports the Department of Immigration and Border Protection’s (DIBP) outreach officer
program. R&CA members derive significant value from this program, as they are able to access timely
and accurate advice on their requirements under the 457 program. R&CA receives up to 30 calls and
enquiries regarding the 457 program a week, with a majority of the enquiries focusing on employer
obligations, how changes to business structures affect their obligations, as well as how to migrate
employees to permanent residency (186 and 187 visas). Outreach officers also provide the association
with a barometer as to the current issues members face navigating the 457 program. R&CA strongly
supports the continuation of this program.
Recommendation
R&CA supports the continuation of the Department’s outreach officer program.
Page 15Terms of Reference 4
FAIR WORK OMBUDSMAN
R&CA believe the Fair Work Ombudsman is the most appropriate agency to manage and investigate
issues of non-compliance. This organisation should continue to be appropriately resourced, with sector-
specific points of contact for employees seeking advice concerning their terms of employment.
Recommendation
The Fair Work Ombudsman remains the most appropriate agency to manage and investigate
issues of non-compliance, and should continue to have carriage of these issues.
COOPERATION BETWEEN THE DEPARTMENT & THE ATO
R&CA believes cooperation between DIBP and the Australian Tax Office (ATO) could be improved,
particularly in terms of reporting Tax File Numbers and Australian Business Numbers of overseas
workers and businesses involved in the 457 program. Third party reporting between both agencies
would significantly reduce the administrative burden on smaller operators, as well as improve the
accuracy of information being reported to the ATO.
Recommendation
Improve reporting activities between the Department of Immigration and Border Protection
and the Australian Tax Office in relation to 457 visa applicants.
Page 16Addendum:
Restaurant & Catering Industry Labour Agreement
As a result of chronic labour shortages affecting the tourism and hospitality sector and the issues
raised in this submission, R&CA are actively pursuing the formalisation of a Restaurant & Catering
Industry Labour Agreement with the Australian Government. R&CA see significant need and benefit in
providing tourism and hospitality operators with a streamlined mechanism to access skilled labour.
R&CA propose that the agreement cover the positions of cooks, chefs, café or restaurant managers,
and waiters. In addition, R&CA are pursuing the inclusion of Trade Waiters (i.e. waiters that have
completed a Certificate III trade qualification). This recently re-created designation would be included
at Skill Level 3 (not 4 as is the current prerequisite for Waiters).
The agreement would include a range of sponsor and industry-led obligations including labour market
testing, training benchmarks and re-placement obligations should sponsors encounter financial
difficulty. It is proposed the agreement will be trialed among a pilot group of operators to allow
amendments to be made prior to the agreement becoming fully operational.
Recommendation
Support the progression of the Restaurant & Catering Industry Labour Agreement in
streamlining business access to workers under the 457 visa program.
Page 17RESTAURANT & CATERING AUSTRALIA
PO Box 121
SURRY HILLS NSW 2010
T | 1300 722 878
F | 1300 722 396
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