• Hannah Phillips

Businesses Required to Pay More to Address Skills Shortages

Declines in apprentice recruitment and low apprentice completion rates are costing Australian businesses.

Lack of skilled staff means many businesses are unable to accept orders or have significant delays in filling orders.

This threatens the jobs of other employees that depend on the business having skilled workers. Meanwhile, the Australian Government in recent years has cut its funding for vocational training and has created a Skilling Australian Fund to be bankrolled by the same Australian businesses that are suffering from a lack of skilled workers.

As part of its reform of temporary skilled worker visas from March this year the Australian Government abolished the requirement that businesses recruiting from overseas demonstrate that they spend at least 1 per cent of their payroll on training (including apprentices).

In many cases, businesses were paying significantly in excess of 1 per cent, often around 5 per cent of their payroll.

In its place the Government, with the support of the Opposition, passed legislation on 9 May that will charge businesses $8,000 upfront as a nomination contribution training charge (known as the training levy) for each overseas skilled worker they engage.

For businesses that already employ apprentices and spend at least 1 per cent of their payroll on training, this is seen another unnecessary cost impost.

The training levy is a good idea for those businesses that previously could not meet the 1 per cent of payroll training requirement. Instead of trying to fudge compliance with the 1 per cent requirement or poach skilled workers off others, these business now can import skilled workers and pay the training levy to help train Australians.

For these businesses, the levy is a good public policy outcome.

For the 35,000 or more Australian businesses that recruited from overseas and met the 1 per cent training requirement, the training levy means these businesses will continue to have a cost disadvantage compared to businesses that do not adequately spend on training.

For businesses that do train, the training levy is bad public policy as the Government applies a ‘one size fits all’ approach.

The Government should have provided an exemption for business that met the 1 per cent training requirement.

We expect universities recruit worldwide to ensure they have the best academics available in their field.

Despite the significant contribution of universities to the economy in terms of skills development, they will be charged a training levy of around $15 million per year.

Car dealerships have been importing overseas workers for their workshops for years due to significant shortages (around 16,500 motor mechanics and 2,500 diesel mechanics): the additional cost for them will be around $7 million per year.

Even more disappointing for the sectors that are forced to import large number of skilled workers, there is no guarantee that the levy paid by them will be returned in the form of additional training.

Indeed, the biggest challenge is that the Government has now placed a ‘price’ on obtaining skilled workers: $8,000.

Businesses that have historically recruited apprentices will question why it is costing them around $120,000 over four years in terms of apprentice wages, superannuation and supervision costs.

Since there is no guarantee that the apprentice will complete their apprenticeship or stay with their business, the benefits of employing apprentices are becoming more nostalgic, than economic.

The allure of only paying $8,000 for a training levy for an overseas skilled worker will be quite tempting.

Not surprising, it is expected that the training levy will cause many businesses to decrease their apprentice recruitment.

While it is hoped that the SAF may offset this, the training levy could worsen the current shortages and increase the need for overseas skilled workers.

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