Linking skills with visas: why the UK must not repeat Australia’s mistakes

In our last blog on this topic, we looked at the Government’s announcement that it would publish a White Paper which will set out its plans to link the ability to sponsor migrant workers to training “people here in our country.” The White Paper is now imminent.
 

As is often the case with immigration policy, the Government (and the Prime Minister when in opposition) looked to Australia for inspiration or as Sir Keir put it “learning from the Australian approach.”

This blog will look at Australia’s attempts to get sponsoring employers to train or upskill locals as a condition of being able to sponsor migrant workers, to examine why that policy failed and what lessons can be learned.

Should visa policy be linked to skills policy?

Before looking at the Australian experience, it is worth asking whether linking skills and visa policy is achievable, particularly bearing in mind previous Governments’ failure to address skills shortages in many sectors. 

In its report of June 2024,  Migration to the UK after Brexit – Policy, Politics and Public Opinion UK in A Changing Europe provided the following insight:

“Labour has argued that employers should only be able to recruit internationally when they have plans to recruit and train in the UK, arguing that the latter should, at least over time, reduce the need for the former. However, there’s little evidence that this trade-off holds. In the private sector, and in sectors where output and demand can adjust as labour supply changes, both migration and increased domestic labour supply lead to increased labour demand. The UK has had over the past 25 years numerous strategies for training and workforce development. None have succeeded, but there is little evidence that this has anything to do with migration.  Instead, the culprits are poor planning, insufficient investment (from both government and business) and excessive short-termism (ditto). Remedying these issues should indeed be a priority for a new government.”

Protectionism - The Resident Labour Market Test

Before turning to skills policy, let’s first look at how the UK has in the past tried to protect the domestic labour force and to reassure native workers that they would have a first crack at any UK jobs on offer. For many years, the UK Home Office (and before it the Overseas Labour Service in the Department for Education and Employment) operated a Resident Labour Market Test (RLMT) for long-term sponsored visas under the Work Permit Scheme and the Tier 2 scheme. Sponsoring employers were required to demonstrate that a “settled worker” (i.e. British or permanent resident) could not fill the vacancy and that a specific role had been advertised for 4 weeks. Evidence that this requirement was met would need to be provided when requesting a Work Permit or Certificate of Sponsorship. Certain highly paid roles were exempt, as were students graduating in the UK, PhD level roles and those on the Shortage Occupation List.

When reviewing the operation of the RLMT in 2018 as part of its review of the post Brexit immigration system, the MAC made the following comments:

“Many countries have a similar provision, designed to provide reassurance to voters that settled workers have the first opportunity to fill any vacancy. We are sceptical about how effective the RLMT is in doing this though evaluation is hard because the criterion is subjective. We think it likely that the bureaucratic costs of the RLMT outweigh any economic benefit.”

In addition to throwing “sand in the machine” (as one former Migration Advisory Committee Chair has called it), the RLMT was also the main disincentive (before the costs of sponsorship increased dramatically) to UK employers considering non-settled candidates, often requiring employers who typically use multiple channels to recruit (including personal networks, social media etc) and to have to artificially re-create the advertising and recruitment process to show that there were no suitable local candidates. On the Home Office side, a small number of applications were refused where a successful foreign candidate was said not to in fact meet the advertised criteria for the role, but it was clear that the Home Office stepping into the shoes of the recruitment officer was not a sustainable or desirable position.

Will requiring sponsoring employers to commit to training reduce migration?

One of the stated aims in commissioning a White Paper was to look at ways of reducing net migration. The November 2024 Social Market Foundation report argues that linking Skills and visa policy as a way of reducing migration is doomed to failure particularly in light to the UK Government growth agenda:

“Growth is the Labour government’s number one stated mission. And jobs are stated to be at the heart of its “modern Industrial Strategy”, which is focused on scaling up “eight growth-driving sectors”, earmarked for their high growth potential. Any material success in doing so is likely to increase – not decrease – the UK economy’s demand for immigration, regardless of any success in increasing the supply of domestic skills.

This is because increasing the local skills base, and jobs, in those higher growth sectors would increase the amount and types of work done in those sectors in the UK, with the result that the size of those sectors increases and therefore may also need immigrant workers to support their larger size. As jobs are created, the increased numbers of workers in those sectors will themselves also consume more goods and services which may in turn require significant numbers of immigrant workers to help provide those goods and services. It is therefore hard to make a convincing case for the Labour government being able to hit both its growth target – up – and its work immigration target – down.”

However, the SMF does see that such a policy, framed in such a way as to characterise migrants as complementary rather than in competition with UK workers, could be a political success in that it could be broadly popular.

Why workforce training plans may not be fair

There is a concern that focussing on workforce training plans would simply be t a bureaucratic lever to control the numbers and that it will inevitably favour big businesses that have existing training programmes and dedicated training support and penalise SME’s and start-ups that don’t have HR teams or don’t have the resources to pay for training on top of very high visa and associated costs. This is already evident in the way that the Apprenticeship Levy is being used - many large (and highly profitable) employers in professional and legal services are using the apprenticeship levy to train the lawyers and accountants of tomorrow. This is being addressed in reforms to the apprenticeships, but shows how well-resourced business can use programmes not necessarily intended for them where they would have happened anyway in the absence of a levy (the so called “deadweight cost”).

Fairness and a level playing field must therefore be a central to the way in which any policy is designed.

“Learning from the Australian approach”: The “Training Benchmarks” experiment

Sir Keir Starmer said that we should learn from the Australian approach. Australia has often been held up asan example of a successful points-based migration system.  But the Australian experience of linking skills and visa policy was an unmitigated failure. Linking the ability to sponsor foreign workers to firms’ commitment to training (known as “training benchmarks”) failed. Australia no longer has such a system in place.  Rather, the training benchmarks system was replaced with the Skilling Australians Fund (SAF) – an additional sponsor charge remarkably similar to the UK’s Immigration Skills Charge.

So what happened Down Under? From 14 September 2009, Australian employers applying for approval as a sponsor had to demonstrate:

• a commitment to providing training under a formal training policy or policies for its employees;
   
• the AUD$ amount that the sponsor had spent over the past 12 months (and in the most recent financial year) on the training of its local Australian employees;
   
• a commitment, by the business, to maintain training expenditure in each fiscal year, to that level, for the term of approval as a sponsor which was usually 5 years;
   
• if relevant, that despite the sponsor having made redundancies (and/or reduced work hours) during the past 12 months that a larger number of Australians had been recruited by the sponsor during the same period;
   
• that the sponsor had a commitment to employing Australians and that its recruitment policies are non-discriminatory; and
   
• that the sponsorship of temporary work visa employees was not to displace or replace Australian staff.

Sponsors were required to meet “training benchmarks” on expenditure according to whether they had lawfully operated their businesses in Australia for less than or more than 12 months.  In order to satisfy the ‘Training Benchmark’, business sponsors of temporary overseas workers were required to spend either 1% of their annual gross payroll on training their Australian workers (Training Benchmark B) or contribute 2%t to an approved training fund (Training Benchmark A).

Examples of expenditure the could count towards the 1% of gross payroll training benchmark included:

• paying for a formal course of study for the business’s employees who are Australian citizens and Australian permanent residents or for TAFE (vocational/technical colleges) or University students, as part of the organisational training strategy.
   
• funding a scholarship in a formal course of study approved under the Australian Qualifications Framework for the business’s employees who are Australian citizens and Australian permanent residents or, for TAFE or University students, as part of the organisational training strategy.
   
• employment of apprentices, trainees or recent graduates on an ongoing basis in numbers proportionate to the size of the business.

Examples of expenditure that could not count towards this benchmark included training that was:

• confined to only one or a few aspects of the business’ broader operations, unless the training was in the primary business activity.
   
• only undertaken by persons who were not Australian citizens or permanent residents.
   
• only relating to a very low skill level having regard to the characteristic and size of the business.

Why did the Training Benchmarks policy fail?

Successive Australian reports noted the inadequacy and difficulty of assessing the training benchmarks.  The Azarias review in 2014 found that “there was little support by either sponsors or labour representatives for the current training benchmarks, whose success in achieving the desired outcomes was repeatedly questioned, and whose application was considered to be overly complex.” The review recommended the training benchmarks be abolished and replaced by an annual training contribution. Importantly it also recommended that “funds raised through the training contribution be dedicated to this training role and that the government reports annually on how these monies are spent by the Department of Industry”.

The main reasons that the Benchmarks were abandoned were:

• Lack of accountability and transparency: The Training Benchmarks system was difficult to monitor and enforce, making it unclear whether employers were genuinely investing in meaningful training outcomes. As the Department of Home Affairs, 2017 Discussion Paper on Skilled Migration Reform noted “There were concerns about employers meeting the letter of the law rather than the spirit, with minimal benefit to Australian workers.”
   
• Inconsistency in application: Employers used different interpretations of what constituted "acceptable" training. Some used low-quality or unrelated training programs to meet the requirement, undermining the policy's intent.
   
• Administrative complexity: The system created significant administrative burdens for both employers and government, with audits and document verification requiring extensive resources.
   
• Better Policy Alignment: The SAF Levy aimed to centralise and streamline funding into government-approved vocational education and training (VET) initiatives, seeking to ensure direct benefit to the workforce.

The Skilling Australians Fund (SAF) Levy

In August 2018 the training benchmarks were abolished and replaced with a requirement that employers who wished to nominate a foreign worker for a temporary or permanent skilled visa now had to pay a ‘nomination training contribution charge’, to the Skilling Australians Fund (SAF). In many ways, the SAF is similar to the Immigration Skills Charge. It requires employers to pay a fixed levy when nominating workers for Subclass 482, 494, 186, and 187 visas:

• $1,200 per year for small businesses (less than $10 million turnover)
   
• $1,800 per year for larger businesses

This levy is collected and directed into the Skilling Australians Fund, which supports:

• Apprenticeships and traineeships
   
• Nationally endorsed training programs
   
• Upskilling of the domestic workforce

The SAF has not been without its problems particularly with regard to the impact on SME sponsors.  The amount of the SAF and the extremely limited refund provisions led to a significant reduction in the number of sponsored temporary workers particularly in small to medium businesses that could no longer afford to pay the SAF. In addition, there are a few other inequities in the structure of the SAF that have prompted strong recommendations to change the timing of payment of the SAF as well as the need for an instalment payment system to be introduced under the current Australian Labour government which so far appear to have not been taken up for consideration.

Conclusion

There are enormous challenges in bringing visa and skills policy together. Of the four bodies that will contribute to the joined-up policy effort (the Migration Advisory Committee (MAC), Skills England, Industrial Strategy Council, and Department of Work and Pensions) two (Skills England and the Industrial Strategy Council) are still being set up.

The UK abandoned the Resident Labour Market Test (RLMT) in 2020 when it introduced its new liberal post-Brexit immigration system, at the recommendation of the MAC, who advised that while it was “important to have protection against employers using migrants to under-cut UK-born workers” in their view the best protection is a robust approach to salary thresholds and the Immigration Skills Charge and not the RLMT.”  Salary thresholds were significantly increased in April 2024 in light of unprecedented net migration figures, recently revised to even higher levels for the year ending June 2023 and still tracking above 700,000 per year for year ended June 2024.

There are concerns that UK business with overseas offices are now locating jobs outside the UK due to these high minimum salary levels for visa sponsorship and the high cost of visa fees, the IHS and ISC. The fact  (and it is a fact)  that the UK is now the most expensive place to recruit migrant workers is creating a barrier to the very growth the Government wants and sending a message that the UK is not open for business, not a place to set up a European HQ or a place for corporate expansion.

So if the Government wants to give itself some breathing space to look at any loosening of visa policy to help the growth agenda, then as well as seeing the net migration figures fall (which they are predicted to do naturally after the 2022 and 2023 surge), clear and well-publicised reassurance that the immigration system has a link to local upskilling and that employers who sponsor migrants must commit to training is probably now more important than ever.  

Linking the skills agenda to migration is inherently difficult - for example, if visa related levies on sponsoring businesses are relied on to fund domestic skills training, what happens over time as (if the policy works as intended) less migrant workers come in and the funds are therefore reduced? Or if there is an economic downturn, meaning less demand for foreign workers and therefore lower levies? Or if a new government policy dramatically tightens employment-based migration? It is clear that, as immigration policy is an area which has the potential to be highly unstable, in that it that can be changed very quickly through delegated legislation by Governments keen to pander to voters, visa-related levies can only therefore be part of the mix of funding for a sustainable long-term skills policy.

But first, as we said in our last blog the Government must ringfence the Immigration Skills Charge for what it was intended to do. Then the Government can try and find a workable policy that doesn’t create inequalities between SME’s and large corporates and that genuinely increases training opportunities and upskilling. And finally, the Government must properly evaluate what the policy outcomes are and be open about whether the policy is working in achieving whatever objectives it sets out in its White Paper.

further information

If you have any questions, please contact Nicolas Rollason in our Immigration team.

 

About the author

Nick Rollason is a partner and head of Business Immigration. He advises on all areas of UK immigration and nationality law and has particular expertise in providing strategic advice to businesses on their global immigration needs.