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APRIL 2014

Visa subclass 457 Submission to the independent integrity review

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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.

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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

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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.

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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.

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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).

EMPLOYMENT BY INDUSTRIES (000s)

Nov

2012

Nov

2013

YoY

Change

YoY

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%

Table 1: Employment by tourism-related industry sectors

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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).

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

Figure 1: Top 20 industry sectors ranked by projected growth to November 2017 (‘000s)

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Table 2: Accumulated labour demand by occupation over the 2012-2015 period

Source: Deloitte Access Economics labour force model

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.

4 Deloitte Access Economics (2011) Australian Tourism Labour Force Report – Labour Force Profile (Part 1), p. iv, vii and xi

Demand for labour 2012-2015 (By Occupation)

Top 10 Occupations

Accumulated

demand for skilled

workers

Accumulated

demand for

workers

% of all

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%

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Table 3: Top 10 occupations by accumulated change in skilled and non-skilled labour demand

Source: Deloitte Access Economics labour force model

35% of total labour

demand

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.

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

Demand for labour 2012-2015 (By Occupation)

Top 10 Occupations

Accumulated non-skilled labour

demand

Accumulated skilled labour

shortage

Accumulated labour demand to be met

through alternate sources

Kitchenhands 5,526 1,302 6,828

Waiters 4,170 1,390 5,560

Café and Restaurant Managers 2,998 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

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Table 4: Top 15 occupations for primary applications granted in 2013-14 to 31 December 2013

nominated occupations for primary applications granted in 2013 - 14 to 31 December 2013

Source: Department of Immigration & Border Protection

Terms 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.

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

Top 15 occupations by primary applications granted in 2013-2014

Top 15 Occupations

2013-2014 to

31/12/13

2012-13 to

31/12/12

% Change

from

2012-13

2013-14

as % of

Total

351411 Cook 1,550 1,450 7.2% 5.7%

141111 Café or Restaurant Manager 1,200 760 58.6% 4.4%

261312 Developer Programmer 860 870 -1.5% 3.1%

225113 Marketing Specialist 780 810 -4.3% 2.8%

149212 Customer Service Manager 640 580 11.4% 2.4%

253111 General Medical Practitioner 640 810 -21.1% 2.3%

242111 University Lecturer 600 770 -21.7% 2.2%

261111 ICT Business Analyst 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%

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Of 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.

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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.

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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.

8 Payscale, Cook, Restaurant Salary, Australia http://www.payscale.com/research/AU/Job=Cook,_Restaurant/Salary

Recommendation

Review English language proficiency requirements under the 457 program, and lower

requirements for Cooks and Chefs to IELTS Level 4.

Recommendation

Remove the TSMIT requirement for hospitality workers under the 457 program and replace it

with the relevant industrial Award.

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ADMINISTRATION 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.

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

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.

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repatriation 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.

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

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.

Recommendation

R&CA supports the continuation of the Department’s outreach officer program.

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Terms 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.

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.

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.

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Addendum:

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.

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RESTAURANT & CATERING AUSTRALIA

PO Box 121

SURRY HILLS NSW 2010

T | 1300 722 878

F | 1300 722 396