Now, Australia Tightens Work Visa To Restrict Skilled Immigration

15 Jul 2013

It isn't just the US that is creating difficulties for skilled immigrants. Australia is, and so is Canada. Australia has tightened its work visa programme that could hurt Indian IT companies, driving up costs for them and compelling local hiring in the near term.

The country's senate late last month made changes to the 457 visa programme (for skilled immigrants) that requires companies to prove that they have considered local hires and advertised in newspapers before sponsoring workers from outside of Australia.

Indian IT companies like Infosys, TCSBSE 2.38 % and Tech MahindraBSE -0.74 % (Satyam) have 8%-9% of their revenues coming from the region. The country's largest software exporter TCS services over 40 clients from Australia and New Zealand, including Telstra, Australian Gas Light Company, Qantas, Foxtel and Lloyds.

Infosys' Australian and New Zealand operations have over 2,000 people to deliver IT-enabled business solutions to clients. Infosys, which also services Telstra, is said to have recently won another small contract from the telecom company. Media reports have said Telstra has moved 170 jobs to Infosys. In 2009, Telstra awarded a $450-million application and development maintenance contract that was shared by InfosysBSE -1.74 % and EDS.

Many changes have been effected to 457 visas effective July 1 following a crackdown on visas issued in areas that don't seem to be experiencing skills shortages.

"While most employers are using the subclass 457 appropriately, there is a concern that certain employers in some industries are sourcing their skilled labour needs outside of Australia without first checking the availability of labour locally. While not unlawful, these actions are not in line with the principles of the subclass 457 program," says the Australia's Department of Immigration and Citizenship website.

"While the UK imposed a bond on Indian visitors, the Australian press has also been alleging the misuse of visa by one of the large Indian IT companies . While we have been expecting protectionist noises to go up given the tough employment scenarios in lot of local markets, this could impact execution ability and cost structures in the near term," wrote Surendra Goyal and Rishi Iyer of Citi Research in a recent note on Indian IT services.

Sajan Poovayya, managing partner in law firm Poovayya & Co, said the medium-term impact might be significant for the large IT players. "The changes proposed in the 457 regime will necessitate increased local hiring that will have a direct impact on costs. For players, who have significant US and Australian presence, a combination of the tight H-1 B and 457 regimes may add further stress to their bottomlines," he said.

Sajai Singh, partner in law firm J Sagar Associates, said the slow economic recovery has put pressure on governments to generate more local jobs. "I think the whole idea of body shopping is under scrutiny as hiring overseas employees had made locals redundant. This may force IT companies to rework their business model and increase their offshoring component," he said.

Canadian government too

The Canadian government too is taking steps to tighten the provisions of their programme to ensure that only genuine skill shortages are being filled by temporary overseas labour. In April, the government announced changes that will require employers to pay temporary foreign workers at the prevailing wage and have a plan to transition to a Canadian workforce over time.

Royal Bank of Canada faced criticisms after media reported on an outsourcing arrangement for technology services that affected some bank employees. Infosys CEO S D Shibulal on Friday said the immigration walls being raised by the US, Australia and Canada will compel Indian IT companies to make changes to deal with them.

Source: http://economictimes.indiatimes.com/news/nri/visa-and-immigration/now-australia-tightens-work-visa-to-restrict-skilled-immigration/articleshow/21077357.cms