Essential Skills Work Visa changes – August 2017

As outlined in our previous article, Essential Skills Work Visa Changes, Immigration New Zealand (INZ) has introduced remuneration bands to determine the skill level of applicants, which is material to the type and length of work visa issued.  Refer to the previous article for detail about the changes.

The main risk that employers and their employees face in relation to this particular assessment is how the hourly rate in question is actually calculated by INZ.

As covered in our related article under the Skilled Migrant Category (SMC) changes, it is important for employers and employees alike to have a greater understanding of how INZ will be calculating the remuneration level to determine whether or not a person would be able to secure a work visa that is:

  • Higher–skilled ($35.24 per hour) up to 5-year visa term;
  • Mid-skilled ($19.97 to $35.24 per hour) up to 3-year visa term; or
  • Lower-skilled (less than $19.97 per hour) up to 12 month visa term (limited to maximum of 3 years).

Generally speaking, if the employment agreement specifies payment by salary, the payment per hour is calculated by dividing the annual salary by 52 weeks, followed by the number of hours that will be worked each week.  Importantly, however, if the employment agreement specifies payment other than by hour (including payment of salary) and the hours of work are “variable”, the immigration officer may request evidence of the range of hours to be worked to determine whether the variance in hours worked would result in the per-hour rate of pay being below the applicable remuneration threshold.

Hours of work per week will be considered “variable” if the employment agreement contains a provision allowing the employer to request or require the employee to work additional hours from time to time.  Where this is determined to be the case, or where the agreement otherwise specifies a range of hours, the maximum hours will be used to calculate whether the relevant payment threshold is met.

As most employers will understand, this has quite significant and far-reaching consequences for salaried employees and other employees where hours vary from time to time, rather than being completely fixed. We do not think INZ has considered this carefully. It is easy to imagine a professional service employee being engaged to work a standard 37.5 hours per week, but those hours would vary from 37.5 hours per week to 60 + hours per week based on work loads.  If the maximum variable hours of employment are taken, it would not take a substantial variation for the hourly rate to fall below the required threshold.

While INZ have subsequently clarified this part of the policy by advising that they are “not interested in going after” employers whose salaried staff work over contracted hours on occasion to complete urgent work (like lawyers for example), and they will disregard “sporadic increases in hours”, it is difficult to determine where the line will be drawn as the policy does not make that allowance.  They have advised that they will want to know range of hours “normally” expected for an employee, although for many busy professionals working 60+ hours per week would be common place.

It may well be that employment agreements and terms of employment need to be adjusted to align with this policy issue to avoid migrant employees being prejudiced by this application of policy.  It is important that employers are now aware of this particular issue, especially with existing employees who are already on employment agreements which may attract this unfortunate application of remuneration determination when they apply for an extension of their current work visa.

Apart from the hourly rate calculation, what else do INZ include and exclude from this calculation?

For the purposes of calculating an applicant’s remuneration over and above wage/salary, this includes:

  1. The agreed value of any reasonable deduction from the applicant’s salary from wages for goods or services; and
  2. In the case of accommodation provided in connection to the employment:
  • The agreed value of any reasonable deduction of the applicant’s salary or wages for that accommodation; or
  • If accommodation is provided by the employer, and there is no deduction from the applicant’s salary or wages for that accommodation, the market rental value of the accommodation provided; or
  • If an accommodation allowance is provided, the amount of that allowance.

In relation to remuneration that is excluded, this is simply referenced as “other employment-related allowances”, for example tool or uniform allowances, and importantly, bonuses which are dependent upon performance.  The latter is very important to note as we suspect a fair number of employers may be caught out by this particular policy requirement.  It may well be, in due course, that such bonus arrangements are negated in favour of a higher hourly rate and kpi’s around that performance to assist employers manage employee output.

A second important point to note is that subsequent visas will be issued based at the same skill level when an assessment has been undertaken in relation to the skill level of the employment prior to 28 August 2017.  In essence, if an applicant holds a work visa to be employed as a Retail Manager, the next assessment application will involve a thorough review of the Australian and New Zealand Standard Classification of Occupations (ANZSCO) for a Retail Manager; therefore a determination may be made that the person’s employment is more in line with the ANZSCO for a “Retail Supervisor” rather than a “Retail Manager”.

All existing work visa applicants and their employers therefore need to be aware, that a thorough assessment and possible re-categorisation of ANZSCO level applying to existing work visa holders will be applied in the future.  This poses significant risk to employees who hold visas which appear to be at a certain ANZSCO level allowing them to qualify for residency, whereas their next assessment (either under a visa extension or SMC application) may well be recalibrated in line with the more stricter skilled employment policy that is now being applied.

Whilst it seems on the face of it fairly straight forward to analyse an employee’s position in terms of the ANZSCO that applies and their rate of remuneration, it is material for employers and their migrant employees to note that there is now a significant recalibration of the skill assessment coming, and how the remuneration rates are actually calculated in practice.

We anticipate there will be significant resistance and ANZSCO re-calibration from INZ on claimed skill level, and many employees and employers will face difficulty obtaining temporary visas where the INZ hourly wage calculation differs from what is generally anticipated by the employer and employee concerned for the reasons specified above.

We are bracing ourselves for a flood of new instructions from employees and their employers who will no doubt encounter resistance from INZ in relation to securing temporary work visas under the existing policy, who up until now, may have believed the policy is quite streamlined and simple based on the title of the role and the rate of pay the person seems to be receiving.

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