Fair Work Ombudsman Natalie James recently issued a warning to businesses who employ workers on a 457 visa, saying minimum wage rates apply to everyone in Australia, including visa-holders, and they are not negotiable.

Her comments follow a recent spate of cases before the Ombudsman involving overseas workers who have been underpaid or asked to pay back the employer for the costs of their sponsorship.

Businesses that employ 457 visa-holders must adhere to a number of obligations, both when seeking sponsorship approval and throughout the term of the employment of the visa holder. These obligations help protect overseas skilled workers from exploitation, and ensure that local labour wages are not being undercut.

Let’s look in more detail at two of the sponsor obligations that have been the subject of recent court action.

A Sponsor Must Ensure Equivalent Terms and Conditions of Employment

Standard business sponsors must ensure that the terms and conditions of employment for the person sponsored are no less favourable than those that are provided (or would be provided) to an Australian performing equivalent work in the same location.

Sponsors also need to ensure that the terms and conditions are no less favourable than what they advised would be provided to the employee at the time of sponsor nomination.

(Note: this obligation does not apply to a sponsor if the annual earnings of their sponsored visa holder are equal to or greater than $250,000.)

What It Means

Terms and conditions of employment include protections such as maximum hours that can be worked, minimum wage rates, leave entitlements and termination procedures.

Even if an employer provides a 457 visa-holder with a specific employment contract (either written or verbal), that contract cannot provide for less than the legal minimum set out in:

  • The National Employment Standards (NES)
  • Awards, enterprise agreements or other registered agreements that may apply.

For example: Even though a 457 visa-holder may originate from a country where wages for their particular role are lower than those paid in Australia, this does not mean they can be paid at that lower rate. Employees in Australia are entitled to receive the minimum wage as set out in their relevant Award.

Case Study

On 4th August 2016, a Brisbane Court ordered a mother-and-son business team to pay a total of $196,000 in penalties and back-pay, after they were found to have deliberately exploited vulnerable overseas staff.

Café owners A-Hsueh Lai and Chang Ming Liu paid female staff from Taiwan, Hong Kong and Korea as little as $10 an hour to work in their Japanese Sakuraya café, located in the Brisbane suburb of Eight Mile Plains. Under the Fast Food Industry Award, the employees were entitled to receive more than $18 for ordinary hours and penalty rates ranging from $21-$50 for weekend, weeknight and public holiday work.

In addition to underpayment, the employees, whose main duties included making specialty teas, were often promised higher pay rates if they passed ‘tea-making tests’ set by their employer. If they failed, their wages were docked for the cost of the drinks made during the tests.

Lai and Liu told the Court that the employees had never complained about being paid $10 an hour, and that, as Taiwanese nationals, they did not fully understand their obligations to employees in Australia.

The Fair Work Ombudsman had previously apprised Liu of his workplace obligations following complaints from other employees of an associated entity of the business dating back to 2012. When the Ombudsman again approached Lai and Liu to rectify the underpayment of staff, the mother and son refused, forcing the Ombudsman to take legal action.

Ombudsman James said she was “increasingly concerned about the number of matters where visa-holders are being underpaid by culturally and linguistically diverse (CALD) business owners”. She also noted that the fact that employees did not complain about being underpaid was no excuse, particularly in this case where the employer had received a prior warning about minimum wage responsibilities.

This case is also interesting because even though the café owners admitted to their mistakes, they were still ordered to pay the costs of travel and accommodation for witnesses brought out for the trial, despite the fact it did not proceed. According to Ms James, the FWO went to “considerable expense” to pay for travel and accommodation for overseas witnesses. By imposing costs of over $12,000 against the respondents, Ms James said the Court recognised the unreasonable act of making admissions at the 11th-hour.

A Sponsor Must Not Recover From, Transfer or Charge Certain Costs to Another Person

Business sponsors are not permitted to take any action that would result in the transfer or charging of costs to another person, such as a sponsored visa holder or their family members, including costs relating to:

  • Recruitment
  • Becoming a sponsor

This obligation ends when the business ceases to be an approved sponsor or it no longer has a sponsored visa holder.

What It Means

While the cost of employing an overseas worker may be high, these costs must be borne by the employer, and not passed back to the employee.

The following costs must also be paid by the business sponsor:

  • Cost of sponsorship and nomination charges;
  • Migration agent costs associated with the lodgement of sponsorship and nomination applications;
  • Administrative costs and any sundry costs an employer incurs when they conduct recruitment exercises;
  • Recruitment agent fees;
  • Migration agent fees;
  • The cost of job advertising;
  • Screening of candidates, short listing, interviews and reference checks;
  • Salaries of recruitment or human resource staff;
  • The cost of outsourcing background checks, police checks and psychological testing where they relate to an employer determining an applicant’s suitability for the position;
  • Training of new staff;
  • Responding to queries for prospective candidates, and advising unsuccessful applicants; and
  • Travel costs for the sponsor to interview and/or meet the applicant either overseas or in Australia.

Case Study

The owner of a Gold Coast carwash café business is set to face court this month over allegations an overseas worker was forced to pay back more than $21,000 in wages.

The employee, a Korean national, was engaged on an annual salary of $49,330 but was allegedly required to pay a portion of her wages back to her employer in cash every week. The Fair Work Ombudsman has lodged a case against business owner, Richard Sang Kyun Kim, and manager Chao ‘Tommy’ Liu. In Court, the Ombudsman says it will allege that the business operated the cash-back scheme to try to make it appear that the worker was being paid correctly. In addition, the Ombudsman will allege employment records supplied to the Fair Work inspectors were false and misleading because they did not show the cash back payments.

The Korean 457 visa-holder approached the Ombudsman after Fair Work inspectors commenced their inquiries into a separate matter of alleged underpayments, this time to employees on 417 working holiday visas. The Korean worker said she felt “compelled” to make the cash-back payments because she was concerned her employer would cease to sponsor her 457 visa if she did not.

The business appears to have exploited the fact that the 457 visa-holder had limited knowledge of the rules relating to her sponsorship.


Cases like these are sadly quite common. According to the Fair Work Ombudsman, in 2015-16, a total of $3.85 million in underpaid wages and entitlements was returned to 2132 employees as a result of their employers entering into Enforceable Undertakings with the Ombudsman.

The behaviour is also reflective of the findings of the Ombudsman’s three-year national hospitality industry and restaurant industry campaigns, during which over 2000 restaurants, cafes, bars and accommodation houses were audited. The campaign revealed only a 52% compliance rate with workplace laws.

“We all have a part to play in compliance. There are many opportunities for us as employers, employees, government agencies and workplace advisers to draw on our mutual interests to see employers do the right thing, avoid a nasty back-payment bill, ensure a level playing field for all business and to build a culture of compliance,” said Ombudsman James.