All businesses face challenges using the 457 visa programme including implementation, compliance, and keeping up with the frequent legal changes. One major challenge for large organisations and corporate groups is how to deal with the corporate structure.
Organisations composed of multiple entities must first determining which entity should become the Business Sponsor. This decision is fundamental to meeting the criteria for approval as well as ongoing compliance obligations. Multiple factors influence the choice including the way in which the organisation handles payroll and training and the relationship between different entities within the group.
The Department’s approach to business entities
When an organisation applies to become Business Sponsors they must do so through an entity, be that a company, partnership, trust, or sole trader. The law states that sponsorship vests in a single entity or ‘ABN’. It is this entity which will hold responsibility for managing compliance under the Sponsorship Obligations and is liable for any breaches.
In small businesses with a single operating entity the choice is straightforward. Larger businesses with complex corporate structures must carefully consider their options before starting the process to become a Business Sponsor. The chosen entity must meet the relevant legal criteria at the time of application and must have the ability to meet the ongoing Sponsorship Obligations.
Choosing the right entity
For large businesses determining which entity will be the most effective vehicle for the sponsorship prior to applying is critical. This is because it is not possible to ‘shift’ the sponsorship to another entity after approval. An understanding of the compliance obligations, the make-up corporate structure, and planned sponsorship activities are all essential to this decision.
In cases where a large corporate group is composed of numerous entities the relationship between the various entities must be the first consideration. The 457 programme allows for staff who are sponsored by one entity to work for a ‘related’ or ‘associated’ entity as defined in the Corporations Act. Stakeholders must determine where visa holders will be employed in the business and the relationship between those entities involved prior to applying for the sponsorship. Failure to consider these facts could result in a situation where a 457 visa holder is not entitled for the relevant part of the business.
Making the right choice is further complicated by the requirement that the entity must meeting the Training Benchmark at the time of application and over the duration of the sponsorship. The entity must therefore have a payroll and training expenses. If this is not the case then it is unlikely to be approved as a sponsor. The entity must also spend sufficient funds on training to meet the benchmark at the time of application and over the sponsorship period. Working with a Registered Migration Agent can assist in determining the most appropriate entity to act as sponsor and minimise costs.
Changes to Corporate Structure
While it is not always possible to forecast change to the company structure stakeholders must maintain an awareness of any changes which may impact on the Business Sponsorship and 457 visa holders.
Where changes to the corporate structure mean that an entity no longer has an active payroll or training costs the business may need to apply for a new sponsorship under a different entity. Such a change would likely result in the business breaching its obligations. Where such a situation may arise it is best to consult a Registered Migration Agent to ensure the business does not breach its obligations. Such a change is also likely to effect 457 visa holders and their right to apply for employer sponsored Permanent Residency.
Where a sponsoring entity ceases to exist the Department must be notified and an alternative Sponsorship Agreement must be entered into prior to the entity ceasing. Depending on the nature of the changes to the corporate structure it may be necessary to transfer visa holders to the new sponsorship.
Careful management of this process is essential where these type of events occur. If poorly managed the business may breach its obligations and 457 visa holders may lose the possibility of applying for Permanent Residency.
Likewise, in the case of mergers and acquisitions, the status of sponsored visa holders needs to be managed carefully. Attention needs to be paid to the relationship between any new entities as well as considering consequences for visa holders.
These strategic assessments are in addition to other Sponsorship Obligations under the 457 programme such as notifications of changes to company structure, directors, and other requirements.
Managing the 457 visa programme in a large commercial entity is challenging and careful consideration needs to be paid to determining the initial approach. Changes to group structure can have profound and far reaching effects for the organisation and visa holders including the loss of their opportunity to apply for Permanent Residence. Stakeholders would be well advised to take a strategic approach to the long term management of the Business Sponsorship to prevent breaches of the Obligations and seek appropriate advice before any changes occur.