CHAPTER 2


CHAPTER 2

Introduction

2.1        This chapter provides a summary of the key observations from the committee's inquiry thus far. In particular, it covers matters related to the 457, Working Holiday Maker (WHM) and student visa programs, and then summarises issues that will be explored further during the extension.

457 visa program

2.2        One of the key concerns with the 457 visa program is the impact the program has on employment opportunities for Australian permanent residents and citizens. Over the last two decades, these concerns have been addressed by adjusting the degree to which the 457 visa program is regulated. To a large extent, regulation of the 457 visa program has therefore involved a trade-off between the efficiency and productivity of the program versus the integrity and equity of the outcomes.

2.3        Submissions generally reflected this tension between the competing aims of efficiency and integrity, namely employers seeking to supplement their workforce with overseas workers in the most efficient and flexible manner, and unions seeking to protect the wages, conditions and job opportunities of Australian workers by requiring certain pre-conditions to be met prior to the hiring of overseas workers.

2.4        At the outset, however, the committee underscores the point that employees working under a temporary visa are subject to the same Australian workplace laws as Australian employees (and therefore issues of regulation and how compliance with those laws is enforced are a key aspect of this inquiry).

2.5        The committee notes a point made by several submitters, namely that the 457 visa program is uncapped and driven by employer demand for skilled temporary migrant labour.[1]

2.6        In addition to the overarching requirement for compliance with Australian workplace laws, further obligations are in place under the 457 visa program designed to safeguard both the 457 visa worker themselves and the wages, conditions and opportunities of Australian workers. The two key obligations placed on the employer (sponsor) are:

  • the employer pays their sponsored employee(s) the amount that was originally agreed under the terms of the sponsorship grant; and
  • the sponsored employee does the work for which they were originally nominated.[2]

2.7        The obligation to pay a 457 visa worker the amount agreed under the sponsorship agreement is underpinned by what the migration legislation terms the 'market salary rate' and the Temporary Skilled Migration Income Threshold (TSMIT).[3]

2.8        The 'market salary rate' requirement serves to ensure that Australian workers are protected from any adverse impact on wages and to protect skilled overseas workers from exploitation by ensuring they are not paid under the 'market salary rate'. The TSMIT is currently set at $53 900 per annum and represents an entry level salary point for the 457 visa program to ensure that visa holders earn sufficient money to be self-reliant in Australia.[4]

2.9        Given the concerns about the effect of the 457 visa program on employment opportunities for Australian permanent residents and citizens, the key issues raised by submitters about the 457 visa program included:

  • the importance of 457 visa workers to rural industries (particularly in the agriculture sector) that have struggled to attract domestic labour;[5]
  • the threshold up to which the 'market salary rate' is to be applied;[6]
  • the level and indexation of the TSMIT;[7]
  • the composition, flexibility, and regulation of the Consolidated Sponsored Occupation List (CSOL) from which occupations may be sponsored under the 457 visa program (including the make-up of the body responsible for compiling the CSOL), and the balance between permanent and temporary migration;[8]
  • the technical competency of foreign workers particularly in sectors where safety is paramount;[9]
  • the responsiveness of the 457 visa program to changes in domestic labour supply (in general, proponents such as employers and their organisations argued that the 457 program responded to changes in skills shortages in the domestic labour market, while critics such as unions argued that the responsiveness was not evident, particularly in a softening job market);[10] and
  • labour market testing as a means to ensure Australians have the first opportunity to apply for jobs (in general, employers criticised labour market testing as an excessive and unnecessary burden on employers, while unions supported labour market testing but criticised the requirements as lacking rigour).[11]

Working Holiday Maker visa program

2.10      The WHM program includes the Working Holiday (subclass 417) and Work and Holiday (subclass 462) visas. As at 31 March 2015, there were 160 275 WHM visa holders in Australia.[12]

2.11      Beginning in 1975, the WHM visa program allows young adults (18 to 30 years old) from eligible partner countries to work in Australia while having an extended holiday. It has consistently been seen as a cultural program 'facilitating the travel of young people to and from Australia to have a cultural experience, supplemented with a limited opportunity to work'.[13]

2.12      However, the WHM visa allows work for the full 12 months of the visa, with the sole restriction that a WHM visa holder cannot work for the same employer for more than six months.[14]

2.13      Furthermore, since 1 November 2005, a first-time WHM (subclass 417) visa holder who has carried out 88 days of 'specified work' (in agriculture, mining or construction) in regional Australia is eligible to apply for a second WHM visa.[15]

2.14      In terms of submissions and evidence from witnesses, several issues arose. Some submitters drew attention to the fact that WHMs and students are 'generally young, low skilled and with lower than average English language skills', do not enjoy the same regulatory protections as 457 visa workers, and typically work in low skill, casual occupations.[16]

2.15      Farmers and grower organisations drew attention to the difficulties in attracting suitable labour to rural and remote areas, particularly for short periods of time during the peak harvesting season. Farmers pointed out that WHMs were indispensable to picking produce in a timely fashion and meeting peaks in production.[17]

2.16      The Australian Council of Trade Unions pointed out that, given the large numbers of WHM visa holders in Australia, there appears to be a particular knowledge gap in relation to the number of WHM visa holders that exercise their work rights, the duration of their employment, the number of employers they work for, their rates of pay, and the locations, industries, and occupations they work in.[18]

2.17      Some submitters also noted that the work rights attached to the WHM visa did not appear to align with the ostensible status of the scheme as a genuine holiday visa with some work rights attached. [19]

2.18      Finally, it was observed that labour hire agencies in overseas countries line up full-time work for their nationals in Australia before those nationals even enter Australia.[20]

2.19      The exploitation of vulnerable migrant workers on WHM visas and the role of labour hire contractors and sub-contractors in the systematic abuse of the WHM visa program were brought to life in stark terms during the committee's inquiry.

2.20      The committee received evidence over several hearings about labour hire companies recruiting workers overseas in Hong Kong, Taiwan and South Korea. Recruitment typically occurred via Facebook advertisements containing information about work opportunities at certain meat processing plants in Australia.[21]

2.21      At the public hearing in Melbourne on 18 May 2015, temporary migrant workers on WHM visas that had worked in the horticulture sector at Covino farms in Victoria gave evidence about the underpayment of wages, payments in cash, a lack of proper record keeping, and deductions for accommodation in a share house.[22]

2.22      By way of comparison, the committee notes that the submission from the Migration Institute of Australia contrasted the vulnerability of many WHMs and students to the rights and protections accorded to Pacific Island workers employed by farmers under the strictly regulated Seasonal Worker visa program.[23]

2.23      At the public hearing in Sydney on 26 June 2015, temporary migrant workers on WHM visas gave evidence about how they were recruited by overseas labour hire companies and then employed by Australian-based labour hire companies (some of who had connections to the overseas companies) to work at meat processing plants including the Baiada plant in Beresfield, New South Wales (NSW).[24]

2.24      The migrant workers detailed a series of breaches of Australia's workplace laws including the deliberate and systemic underpayment of wages, long shifts of up to 18 hours without overtime payments, a lack of standard record-keeping such as wage slips, and false and misleading timesheets designed to conceal the actual hours worked by migrant visa holders. The workers also provided evidence about deductions for accommodation in sub-standard conditions in a share house. [25]

2.25      The committee also notes that Royal Bay, one of the labour hire companies contracting to Baiada, was found by the Fair Work Commission to have engaged in illegal sham contracting arrangements.[26]

2.26      Sham contracting typically occurs where the labour hire contractor seeks to claim that a worker is an independent contractor when they are in fact an employee, usually in an effort to avoid the responsibilities associated with having employees.[27]

2.27      The committee also notes that when the Fair Work Ombudsman (FWO) investigated the complex web of interlinked labour hire contractors and sub-contractors involved in the underpayment of wages to employees at Baiada's plants in NSW, the FWO reported that many of these labour hire companies de-registered or went into liquidation.[28]

2.28      Given the potential for labour hire companies to be wound up upon investigation and then re-form under a different guise, questions about illegal phoenix behaviour arise. This may impact upon the ability of workers on temporary visas to access their full entitlements.

International students

2.29      All eligible international students holding visa subclasses 570–576 are permitted to work 40 hours per fortnight during the course of their studies (under visa condition 8104).[29] As at 31 March 2015, there were 413 123 student visa holders in Australia.[30]

2.30      Some submitters noted the economic benefits that international students bring to Australia, including the contribution of education to export revenue, as well as the additional benefits that Australia derives from family and friends visiting those students in Australia.[31]

2.31      Although precise numbers are difficult to ascertain, it was estimated that in 2011, more than 200 000 international students were in paid work. However, the participation of international students in the Australian labour market has not been the subject of major policy discussion.[32]

2.32      The relative 'invisibility' of international students in the labour market was attributed to two factors. First, 'international students are typically seen as only consumers' of higher education. Second, the view of temporary migrant labour has been 'artificially restricted' to work performed by visa workers under dedicated temporary labour schemes such as the 457 visa program, 'rather than also including de facto temporary labour schemes like the international student programme and the Working Holiday Maker visas'.[33]

2.33      Following the revelations on Four Corners of international students working on temporary visas in 7-Eleven convenience stores across Australia being subject to the deliberate underpayment of wages, the committee held a public hearing in Melbourne to inquire further into these matters.

2.34      The committee took evidence from five former workers at 7-Eleven employed as international students on temporary visas and heard consistent evidence of widespread and systemic underpayment of wages and entitlements sometimes amounting to many tens of thousands of dollars per employee.[34]

2.35      Witnesses and submitters also gave evidence about the creation of misleading wage records when franchisees systematically manipulated the numbers of hours worked by visa workers and then entered this false data into the 7-Eleven head office payroll system.[35]

2.36      The evidence of underpayments and wage manipulation has been substantiated on several occasions over recent years, for example in court cases taken by the FWO against 7-Eleven franchisees, in enforceable undertakings between the FWO and franchisees, and as a result of raids on 7-Eleven premises undertaken by the FWO.[36]

2.37      More broadly, the committee received evidence that the regulatory design or conditions attached to various temporary visas create a level of dependence on an employer, and therefore, create a structural risk of non-compliance with workplace laws.[37]

2.38      Alongside structural risk sits the concept of poorly regulated labour markets. The committee received evidence that certain sectors of the economy such as hospitality are notorious for non-compliance with workplace laws and are governed by precarious work norms.[38]

2.39      In this regard, the committee notes that the extent of exploitation associated with the WHM and student visas in particular also raises questions about the degree to which the exploitation of temporary migrant workers is systemic rather than just an issue associated with a few rogue employers.

2.40      These matters will be addressed in depth in the committee's final report. At this stage, however, the committee makes several observations.

2.41      First, industry sectors differ widely in their labour market needs and certain industries such as horticulture have a genuine need for temporary labour.

2.42      Second, structural risks are not always realised and may be contained by a combination of adequate regulation, and effective compliance and enforcement.

2.43      Third, along with the evidence of exploitation, the committee also heard evidence of reputable employers and reputable labour hire companies. This reinforces the notion that adequate regulation, and effective compliance and enforcement not only benefit workers, but also benefit reputable employers by helping to weed out rogue operators.

2.44      Nevertheless, weeding out rogue operators will not necessarily address structural risk, and the committee will therefore give further consideration to a range of recommendations designed to address these matters.

2.45      Furthermore, effective enforcement and compliance depends on a combination of adequate resourcing of the regulator(s) and a sufficiently robust penalty regime.

2.46      The committee has received evidence on possible measures to more effectively address sham contracting, illegal phoenix behaviour, accessory liability, and the regulation of labour hire contractors.[39] The committee has also received evidence on the adequacy of regulator resourcing as well as potential gaps in the regulatory and compliance framework. The committee will consider recommendations around these issues.

Further matters

2.47      The committee may also consider matters arising from allegations that certain Australia Post contractors employing international students on temporary visas as post and parcel delivery drivers are underpaying them and employing them in contravention of their visa work restrictions.[40]

Senator Sue Lines
Chair

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