The Government-imposed increase in wage and salary thresholds will come into effect from November 26, for both the Essential Skills Work Visa and the Skilled Migrant Residence Visa.
This increase has major implications for both migrants and employers. The inflation is based on new calculations of the “average” wage rate in relation to an increase in the cost of living, demonstrating the insanity of pay rate being a proxy for skill.
In a free labour market, supply and demand are supposed to determine wage/salary rates. But in the labour market for migrant workers, the Government is directly influencing wages under the guise of pay being a proxy for skill level.
The metric is artificial and arbitrary. It’s designed to make things easier for bureaucrats to manage but has become an overly complex system with unintended and major consequences for migrant employees and employers alike.
Implications for employers:
The new thresholds will increase pressure on staffing costs for employers in the healthcare, trade, and hospitality sectors if they wish to keep migrants whose wage/salary sits below these thresholds.
Recently some healthcare workers managed to get a pay increase to $24.65 – partly based on the pay parity case brought by care worker Kristine Bartlett. This put some migrants in the healthcare sector within reach of residence.
The threshold increases mean this residence is no longer a realistic reality. This could mean a loss of valuable human resources for employers as these workers either give up, move into other sectors, or leave the country, tired of being stuck on what seems like an endless round of work visas with no end in sight.
These issues will also impact employers in the hospitality sector. Pathways to residence for occupations in this sector that are more junior will now prove more difficult. A survey of wage rates nationally showed they varied considerably across the regions, but on average a senior chef de partie earned about $45,000, well below the cut-off level. If these valuable employees have no potential to attain residence, we will lose them.
The new thresholds will also introduce difficult pay parity issues for employers. The new wage rates that migrants require as dictated by Government policy are out of kilter with market increases across the board. Employers will not be able to simply pay migrants the extra required without also raising the wages of their local workers. How could they justify this to the local staff? Any pay disparity will engender a level of upward wage pressure for everyone. Many employers are not in a position to be able to raise wages across the board.
Implications for migrants:
Immigration New Zealand uses pay rates as part of the process of determining the skill level of a job. This determines the length of visa allocated and has flow-on impact for a migrant’s ability to bring family into New Zealand under this category.
Under the new rules:
For skill level 1-3 occupations you will need a pay rate of $21.25 to get a three-year work visa (up from $20.65)
For skill level 4 and 5 occupations you will need an hourly rate of $37.50 to secure a three-year visa (up from $36.44).
For example, a chef paid $21 an hour would currently be considered mid-skilled, and get a three-year visa. If the same person applies after 26 November, they will be considered low-skilled, and only get a one-year visa.
For residence purposes, the pay rates you need to have a job classified as skilled will increase from 26 November. If you are not being paid at least $25 for a ANZSCO skill level 1-3 role, the job won’t be considered skilled for visa purposes. The skilled remuneration threshold for ANZSCO skill level 4 and 5 occupations has also increased to $37.50 per hour. So, the minimum required salary threshold will be $52,000.
What will this mean in practice? Under the current rules, a person in a skill level 3 job (which includes many trades) who is paid, say, $24.50 per hour is regarded as in skilled employment and has a chance at residence. After 26 November, they will no longer be regarded as being in skilled employment and will lose that opportunity.
In addition, under the new rules, to get bonus points for an occupation with “high remuneration” you will need an hourly rate of $50.
How do you explain to a person that when they go to bed they are regarded as in skilled employment and eligible for residence, but when they wake up the job is not regarded as skilled employment?
How do you explain to somebody that when they go to bed they are eligible for a three-year work visa because their job is regarded as mid-skilled, but when they wake up they are only eligible for a one-year work visa because now their job is regarded as low-skilled?
Furthermore, how do you explain to employers that their staff will need a pay rise if you want to keep them?
In a time where employers are crying out for skilled migrants, these changes are an arbitrary and illogical hurdle against solving our skilled worker shortage. The changes also clearly demonstrate the lack of deep-thinking around implications of arbitrary measures of “scoring eligibility” used by Immigration New Zealand.
To see the full schedule of changes, click here.
If you’re wondering how this will affect your current Employer Assisted Work Visa, contact NZIL