Reducing salaries for visa holders – can you do it?

significant investor visas

Some employers may look at reducing employees’ salaries or bonuses in tough financial times as an alternative to terminating staff. However, there is a lot of uncertainty regarding whether it could be considered a breach of contract, or a violation of employee’s workplace rights.

Can you reduce an employee’s salary?

Firstly, you must ensure that any reduction complies with Australian employment laws.

In Australia, Awards, enterprise agreements and the National Employment Standards (NES) set minimum standards of pay. An employer cannot reduce an employee’s salary to less than the minimum weekly rate stated under that award. Employers should always review their employee’s employment contract before deciding to reduce pays.

Furthermore, some visas have conditions which must continue to be met:

For example, a 457 visa holder must be paid “market salary rate”. This means the base salary must be at least equal to the TSMIT (Temporary Skilled Migration Income Threshold) – currently $53,900. Also, the salary must be the market rate of an equivalent employee performing the same work in the same location as the visa holder, based on internal and/or external data.

457 visa holders employees to be paid above $250,000, the market rate rule does not apply. Where a 457 visa holder’s guaranteed earnings are to be reduced, the sponsoring employer must obtain approval from the Department of Immigration for the reduced salary rate.

Employers should always seek professional advice prior to any attempts to reduce pay. The Migration Agency can advise on the appropriate steps to take and whether or not you would be in breach of contract or the employee’s workplace rights. All reductions should be carefully considered, for support and advice please call us on (02) 8896 6056.

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