Changes to Essential Skills work visas – effective 27 July 2020

A few weeks ago, when the Minister of Immigration was discussing some proposed changes that included a move away from the Australian and New Zealand Standard Classification of Occupations (ANZSCO), he was quoted as saying: “If you value your migrant workers, show us the money”. Well, he clearly meant what he said. What he missed though is that a simplification of the process will lead to processing headaches at Skilled Migrant Category (SMC) stage and also a higher level of fraud/gaming associated with an apparent simplified number-crunching exercise.

While there are a few positive takeaways for a move away from, what can be, quite complex and difficult ANZSCO assessments to assess skill level for a work visa under the Essential Skills policy, the new policy is also not that straight forward once you peel away the outer layers.

Remuneration – median wage determination

Under the current policy, Immigration New Zealand (INZ) follows a combined approach in using ANZSCO and the remuneration level of an employment position  to determine whether or not the position is “lower-skilled”, “mid-skilled” or “high-skilled”. That determination then sets what policy parameters apply under the Essential Skills policy to that particular visa request and determines, amongst other things, the duration of the visa granted.

From 27 July 2020, ANZSCO will no longer be used to assess the skill level of a role, instead, the employee’s remuneration will be compared against the median wage to determine:

  • what Labour Market Test requirements will apply to that visa request;
  • the duration of the visa granted; and
  • the availability and type of visa that partners/dependent children of those applicants can secure.

Those below the median wage will have tougher policy requirements applied and those at or over will have less stringent and more favorable policy requirements applied.

Below median wage vs at or above median wage

The table below provides a convenient summary of the main policy aspects that apply under the new policy:

Below median wageAt or above the median wage
Applied labour market testEmployer needs to engage with MSD and provide a Skills Match Report, in addition to make genuine attempts to hire New Zealanders, including advertising for the role and considering New ZealandersEmployer does not need to engage with MSD to provide a Skills Match Report, however the employer will continue to need to make genuine attempts to hire New Zealanders, including advertising for the role and considering New Zealanders
Visa durationMaximum duration of each visa is 6 months for the next 18 months (i.e. from 10 July 2020 – 10 January 2022)Maximum duration of each visa is 3 years
Maximum combined duration of all work visas in jobs paying below the median wage is 3 years at which time holders of this visa will be subject to a stand down period of 12 monthsNo maximum combined duration – not subject to stand down.
Visas for family ordinarily reside in New Zealand (excluding offshore based applicants due to border closure)Support visitor visas for partners (partners can apply for a work visa in their own right)Support visitor or work visas for partners
Support visitor or student visas for dependent children (subject to meeting the minimum income threshold of $43,322.76 per annum)Support visitor or student visas for dependent children

Determining remuneration level – salaried employees beware

The median wage in New Zealand is currently $25.50 per hour. The way INZ will calculate what the effective “remuneration” is in comparison to the median wage will be by use of a simple hourly rate calculation, based on the hours of employment specified in the employment agreement.

The calculation is simple for waged employees but for salaried employees it is more complex. If the employment agreement provides a salary, then the remuneration rate per hour is calculated by dividing the annual salary by 52 weeks, followed by the number of hours to be worked each week (as stipulated in the employment agreement) as a starting point.

This also sounds simple, but, here is the rub. Most employment agreements that remunerate based on a salary contain a provision allowing the employer to request or require the employee to work additional hours from time to time. If this condition is in the employment agreement, an immigration officer may request evidence from the employer of the range of hours actually to be worked in order to calculate the effective hourly remuneration rate.

While employers may believe it would be reasonable for INZ to assess the average weekly hours to make the determination, the maximum hours that could be worked will be used to calculate the remuneration rate. This is a subtle yet fundamental policy aspect that all employers and their migrant employees must be aware of. It is foreseeable that many applicants on the face of it may have an employment agreement which suggests that they are paid above the median wage, however, following further assessment from INZ it may well be that they are re-classified under the median wage based on the actual hours to be worked.

Applied labour market test

The applied Labour Market Test is, more or less, the same as the current “lower-skilled”, “mid-skilled” and “higher-skilled” policy. Moving forward, below median wage means that for all applications a Skills Match Report will be required from MSD, in addition to demonstrating that the employer has made a genuine attempt to hire a suitably qualified and/or experienced New Zealand citizen or resident who is available or readily trainable for the position on offer.

In relation to the above median wage policy, the employer does not need to engage with MSD however the same (advertising) Labour Market Test will be necessary.

Over the next 6-12 months the applied Labour Market Test will, in our view, be difficult to meet irrespective of whether an individual is above or below the median wage due to the significant increase (and ongoing increase) in unemployment that cascade across the income bands.

Of particular concern are individuals who perhaps are at or just over median wage where INZ assess the actual remuneration and re-classify that role as below median wage during processing. The difficulty there is that INZ cannot approve the application unless a Skills Match Report is provided and due to the amount of time they take this will create a fair bit of pressure for an employer and their employee if INZ request a Skills Match Report during processing.

Applications that strike this particular issue will need to managed very carefully in order for sufficient time to be provided to the employer to secure the Skills Match Report from MSD before INZ are placed in a position to decide the application, because without that in the current environment they will most likely move to decline.

Visa duration

The policy is quite clear that under a normal environment below median wage, individuals can be issued a visa up to 12 months in duration, and those above median wage up to three years.

It should be noted however that INZ are only issuing six month visas for the next 18 months (from 10 July 2020 -10 January 2022) for below median wage earners to assist their view and understanding of the unfolding labour market.

It should also be noted that for those earning under median wage, the maximum time they can spend in New Zealand on an Essential Skills work visa, both pre and post this policy, is three years, until they are then subject to a 12 month offshore stand-down.

For those employees who have been issued “lower-skilled’ visas under the current policy and will continue to be issued work visas for roles below median wage moving forward, the maximum of three year duration of their stay in New Zealand still applies.

In practice however, we are of the view that a large number of individuals currently classified as “lower-skilled” due to the connection (drawback) to the applicable ANZSCO description may well now move to a new visa that is at or above median wage.

Family visas

Individuals employed below median wage will be able to support their partners and children for visitor visas, and as long as they meet the minimum income threshold of $43,322.76 per annum, they can also support either visitor or domestic student visas for their children.

On the other side of the ledger, work visa holders under the Essential Skills policy who are paid at or above the median wage are able to support visitor or open partnership-based work visas for their partners and are also able to secure visitor or domestic student visas for their dependent children.

It’s important to note however that there is a less known positive transitional policy at play here too. The current partner of the holder of an Essential Skills work visa who has been assessed as being paid below median wage (post 27 July) or lower-skilled if the visa application is made before 27 July, may be granted an open partnership-based work visa if that individual:

  • Held a visa on the basis of their relationship to an Essential Skills work visa holder on 28 August 2017; and
  • Their supporting partner who is the Essential Skills work visa holder has not been required to spend one year outside New Zealand (i.e. subject to the stand down period).

In addition, the same policy applies if the partner:

  • Previously held a student visa; and
  • Was eligible to support a partner for a work visa at the time they held the student visa; and
  • Held a post-study work visa based on that student visa; and
  • Supported the applicant for a visa based on their relationship while holding a post-study work visa.

Yes, it is a little complex, although the thought trigger here is that if the partner of the main applicant did enjoy the benefit of holding either an open partnership-based work visa or a student visa previously, then advice should be sought as to whether or not they are lawfully entitled to continue to hold an open partnership-based work visa rather than the visitor visa on offer for positions moving forward post 27 July.

We are of the view that INZ processing officers will automatically default to the grant of visitor visas, so this area will need to be watched carefully for those applying to make sure that those entitled to an open partnership-based work visa are not simply issued a visitor visa instead in error.

Is this the end of ANZSCO?

No. While it appears that INZ are simply dispensing with ANZSCO under the Essential Skills work visa policy, this is technically not correct. The policy still requires INZ officers to consider the ANZSCO provided by the employer to make sure that the applicant who is being supported holds appropriate qualifications and experience required for that particular role.

In addition, the ANZSCO provided will be reviewed to make sure that the ANZSCO nominated is a genuine fitting ANZSCO for that role. This is important because INZ have identified a risk that some employers could embellish the actual ANZSCO and use a higher skill position to make it easier to demonstrate a satisfactory Labour Market Test.

In essence, INZ will still be considering the ANZSCO to make sure that it a genuine fit for the employment position and employers are not “gaming” the application process to make it easier for them to meet the Labour Market Test.

What About Skilled Migrant Category residence applications?

The ANZSCO will still be used in SMC applications and that is where we think the issue really lies. Under the current policy INZ push back and assess ANZSCOs very carefully under Essential Skills work visa applications to make sure it is a correct fit, as this makes it easier when assessing the role under an SMC application because a first tier assessment and credibility check in relation to the nominated ANZSCO has already been undertaken.

This will no longer apply (to a significant extent), and therefore we believe that a lot of migrant employees will be caught out by the fact that they are able to secure a work visa above the median wage model and apply for residence under the SMC based on that (assumed) assessment, only to discover quite significant resistance when INZ start considering the ANZSCO and suggest the ANZSCO picked for the temporary visa application was not correct.

We are anticipating therefore that there will be quite significant processing and eligibility issues moving forward for SMC applications for those migrant employees (or their employers) who have failed to assess the ANZSCO correctly at temporary visa stage….but that will all start to unfold in around 18 months time as that’s how long it is talking INZ currently to start looking at lodged SMC applications.

What does all this really mean?

Put simply, we are looking at an attempt to simplify the temporary visa process. It should, in theory, allow for much quicker decision making in Essential Skills work visa applications, although in practice we believe there will be quite a bit of resistance and a lot of issues for individuals who are at or just above median wage when INZ start verifying the hours of employment and re-adjust the remuneration calculation accordingly. That particular policy is going to catch out a lot of migrant employees and their employers; to an extent that we do feel that most likely an adjustment to this policy will be required to make it work in practice.

For those who are employed in the professional service sector where standard employment agreements are provided based on a 37.5 hour week, with a requirement that additional hours are required to work more from time to time, be careful. The actual hours undertaken under those employment agreements will be quite significant (particularly for more junior professional advisers); and those individuals are the ones that are set to lose once INZ start contacting HR Managers and requesting evidence of the actual hours that person is working per week irrespective of what it provides in their employment agreement. On that subject it would not also be too difficult in some instances for extreme hours of work for individuals also to be at breach of the minimum wage requirements, therefore the application process could then take a very rough turn for the worst.

While we see the benefit in trying to simplify the process, simplification also allows for greater levels of fraud and “gaming”. We believe therefore that the application of this policy will essentially amount to a cat and mouse game over the next 12 months with good migrant employees and employers suffering the consequences of over-assessment due to the “gamers” out there who undoubtedly will see this as an opportunity to secure easy work visas based simply on an increased rate of pay.

How can we help?

If you require assistance or guidance with an application, whether you are a migrant employee or employer, please reach out to us as soon as possible to stay ahead of changes to immigration policies .

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