Do visa changes really affect tech startups?

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Do visa changes really affect tech startups?

The abolition of 457 visas has been met with an outcry, but why? We investigate what the skilled migration changes mean for businesses.

The way some people have been talking, you’d think the abolition of the 457 visa class meant companies could no longer bring skilled IT workers into the country. But is that really the case?

The Commonwealth Government made a big thing about abolishing the 457 visa – and in a strictly legal sense it has, making for good headlines in some parts of the media. The 457 visas were replaced by "completely new Temporary Skilled Shortage (TSS) visa", according to the government.

However, in reality, it could be more accurate to say that the skilled temporary migration program has been tweaked.

True, the list of occupations has been cut back, but adding or removing occupations from time to time is an essential part of a skilled migration program.

The idea is to attract people with skills that show an excess of demand over supply in the local employment market, though we do wonder about some occupations on the list. For example, given the number of Australian journalists that have been retrenched over the last few years, it's intriguing that journalists and editors are still on the list, being accepted them on the 'new' two-year temporary visa that does not allow for a transition to permanent residence.

The subclass 186 visa is apparently still available for employers who want to sponsor skilled people who want to move to Australia. That has at least two potential benefits for applicants: it's a permanent visa, and sponsoring employers must pay them "at least the same as an Australian in the same occupation in the same location”.

186s were only available to applicants under the age of 50, but the change to 45 years has been criticised by some tech companies on the basis that they need to recruit older people to fill their most senior positions, because Australian candidates don't have enough experience.

However, given the anecdotal evidence that many employers were reluctant to hire older workers for tech roles – or any other roles for that matter – it’s fair to wonder if the shortfall of experienced Australian IT talent is largely of the employers’ own making. For that matter, could Australian business have done a better job of staff development and training in general?

IT occupations no longer on the list

So which IT-related non-sales occupations were allowed for 457s but not for TSS?

A scan through the list reveals support and test engineers, support technicians, multimedia designers and web developers have been ruled out completely. Only around 100 web developers and 100 support technicians were reportedly granted 457s last year, suggesting that demand doesn't significantly exceed the local supply.

The following occupations are still in the list for two-year TSS visas: CIOs, computer networks and systems engineers, database administrators, developer/programmers, business analysts, customer support officers, ICT managers, project managers, quality assurance engineers, security specialists, support engineers, systems test engineers, trainers, multimedia specialists, network administrators, network analysts, systems administrators, systems analysts, technical writers and web designers.

So what other features of the TSS might be responsible for the outcry from some businesses and organisations?

  • "A minimum market salary rate which ensures that overseas workers cannot be engaged to undercut Australian workers"?
  • The "mandatory labour market testing"?
  • "A non-discriminatory workforce test to ensure employers are not actively discriminating against Australian workers"?
  • The "strengthened requirement for employers to contribute to training Australian workers"?

There are anecdotal suggestions that at least some employers have paid 457 holders relatively low wages, which they accept because of the value they place on having a path to permanent residence. It is notable that the Commonwealth Government is actually going to check that visa holders are paid at least the nominated salary, though as we have seen in the last year or so, some Australian employers aren't above forcing their workers into 'cash back' arrangements.

It's not yet clear what the "strengthened training requirement" will be, but it is currently that the equivalent of 1 percent of payroll is spent on training, and startups get a free pass during their first year as long as they have "an auditable plan" to meet the requirement. Since the employment of trainees and recent graduates counts towards this expenditure, it shouldn't be too hard to meet the criterion.

A startup’s view

We are sympathetic to the situation of small businesses and startups. If you only need one person in a particular role – whether that's in development, accounting or sales – you need someone who can actually do the job.

We heard from the co-founder of a startup who said finding and retaining affordable talent with the required experience is a real problem. The 457 visa program allowed the company to hire a foreign developer to kickstart the project, and when they tried to cultivate local tech talent it was poached by overseas companies.

He admitted that the company had not so far employed anyone in an occupation that has been removed from the list, but was reaching the stage where it will need to hire testers. (As noted above, support and test engineers have been dropped from the list of occupations, but ICT systems test engineers and software testers are still there. If you can explain the difference, please do so in the comments!)

So what he'd like to see as an offset for the more restrictive visa situation is government provided or government subsidised training for locals, otherwise startups will be even more likely to relocate overseas or at least use offshore outsourcing, he suggested.

Three key questions

We're left wondering about three things:

  1. How big are the IT skills shortages in Australia really? Are employers too choosy, insisting on, say, a 99 percent match between the position description and what an applicant has to offer, when a 95 percent match might be sufficient? If so, that gap could be closed quite quickly once the new hire starts working for the company.
  2. What should be done to ensure adequate skills transfer from workers on skills-based visas to the local workforce? If a business only needs one employee in a specific area, there's nobody for them to teach – and perhaps no immediate need within the company if the visa allows or can lead to permanent residence. So perhaps there's a place for some kind of training co-op where foreign workers can pass on their skills to employees of other companies. Your ace testing specialist might upskill my testers, my database administrator can work with other companies' trainees, and so on. Given the tendency of businesses to form local clusters – MYOB moved its development team to the inner Melbourne suburb of Richmond largely to suit employees' desire to tap into the meetups and related opportunities in an area that's home to many IT businesses – that shouldn't be too hard to organise. It would require government support for this to count towards the training requirement, though.
  3. How do we deal with the poaching of skilled staff? For decades, many Australian employers have seemed resistant to the idea of providing good training programs because they fear newly-skilled employees will be tempted away by another organisation that prefers to spend on salaries rather than training and development. During the first half of the 1990s, the Training Guarantee Scheme provided a short-term lift in training levels but after that – according to a 2002 report from the National Institute of Labour Studies – many employers pursued short-term self-interest by reducing their investment in training, hoping for a free ride on the efforts of others. This seems to be one of the more intractable problems, so we'd be interested to hear your suggestions.

Come to that, you're welcome to describe any problems you've had finding local staff with the skills you need in your business, and how you got around that. Or perhaps you've experienced the opposite problem: you've got relevant technical skills, but you've struggled to find suitable employment.

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