Immigration Alerts

NEW ZEALAND | “Kiwis-First” Immigration Changes Will Increase Costs for Businesses… But Much Less Than Originally Feared

August 28, 2017

New Zealand Immigration Essential Skills Visa ESV

In response to recent record-high immigration levels in New Zealand, the government announced plans last April to pursue what they deemed a “Kiwis-First” plan to revise its employment-based immigration system. After extensive public comment and debate, significant changes to the Essential Skills Visa and Skilled Migrant Visa programs are being implemented today, August 28. While new income threshold requirements will undoubtedly increase costs for companies employing foreign labor in New Zealand, the changes are far less concerning for businesses than initially anticipated. However, companies with foreign employees should still take note of the changes they are significant.

Business Climate and Labor Market

New Zealand has long been recognized as one of the most business-friendly destinations in the Asian-Pacific region. With one the world’s best-performing developed economies and a stable legal and regulatory environment, New Zealand has steadily risen to 13th place of 138 countries on the World Economic Forum’s (WEF) annual Global Competiveness Index. In the more than 100 factors examined by the WEF study, it’s hard to find a single category where New Zealand does not rank in the top tierce. The economy is well-diversified between agriculture, manufacturing, and service sectors, and has even overcome its geographical isolation as an island in the far southern hemisphere to birth a growing tech industry. In looking for potential barriers to business, economists can generally only point to the island nation’s dependence on imports, the need for infrastructure improvements, and the relatively small labor pool.

Currently standing at 4.9 percent, the unemployment rate in New Zealand has averaged just under 6 percent over the last two decades. With most economists estimating full employment at unemployment between 4 and 5 percent, companies operating in New Zealand actually experience periodic labor shortages in some industries.

Recent Immigration Trends

However, these positive employment statistics did not prevent the public and some lawmakers from becoming alarmed when net immigration levels set consecutive record highs in 2015 and 2016, including a 14 percent increase in work permits issued in 2016. Beyond the relatively open immigration scheme, the high immigration levels were driven both by the country offering one of the world’s highest qualities of life and by the continuing demand for foreign labor on the part of companies in its growing economy.

In response, the government’s Immigration New Zealand began adjusting the employment-based eligible occupations lists and tightening standards on its temporary residence scheme in 2016. For more details, see our Immigration Dispatches of May 2, 2016 and October 31, 2016. Then in April of this year, New Zealand Immigration Minister Michael Woodhouse announced the government’s intent to pursue a new “Kiwis-First” immigration policy aimed at reducing the number of lower-skilled foreign workers receiving work visas in order to protect jobs for local workers. Proposed for implementation in August, extensive changes to both the temporary and permanent immigration streams were planned, including: the introduction of “remuneration bands” to both the temporary Essential Skills Visas (ESV) and Skilled Migrant Category (SMC), and new limits on visa validity and eligibility to sponsor dependent family members in the ESV category. See our Immigration Dispatch of May 1. While government officials denied any connection, many observers found it interesting that the announcement of New Zealand’s “Kiwis-First” plan followed just one day after the highly-publicized announcement of Australia’s major rewrite of its employment-based immigration system which was tagged “Australia-First.”

Since that time, the proposals have weathered extensive public debate, with business groups decrying the “skills shortage” and advocating their need for foreign labor and labor groups lamenting the stagnate wage growth of recent years. In support of labor, much of the “Kiwis-First” proposals are now set to take effect, but in response to objections by business interests, some aspects previously announced have been scaled back. Originally slated for an August 14 roll out, the changes were delayed until to August 28 to give lawmakers an opportunity to rethink and retool some of the more controversial proposals objected to by business groups.

Lawmakers adjusted April’s proposals in two significant ways. First, the proposal to set a high absolute minimum annual salary requirement of NZD $48,000 has now been softened into a more nuanced approach using both skill and remuneration levels. Secondly, the proposed one-year “stand-down,” or “cooling off,” period after every three-years of work authorization that was to apply to all foreign workers has been eliminated for highly skilled workers and will now apply only to lower-skilled workers. Granted the new higher income thresholds will significantly increase the costs for companies in New Zealand that rely on foreign talent; but the final legislation appears to Pro-Link GLOBAL to be a reasonable balancing of the needs of local workers and companies in what has become a highly-charged debate in much of the rest of the world.

What's Changed?

Essential Skills Visa (ESV) Changes

Effective today, August 28, New Zealand’s primary temporary work authorization route, the Essential Skills Visa (ESV) program, will be subject to “skill bands” based on remuneration and the Australian and New Zealand Standard Classification of Occupations (ANZSCO) occupation levels. The applicant’s skill band will then determine the length of the visa validity and eligibility to sponsor dependent family members for family visas. The new skill bands and corresponding visa validity and dependent sponsorship privileges are as follows:

  • Lower-Skilled Band – Defined as ANZSCO occupation levels 4 and 5 earning less than NZD $35.24 per hour (or $73,300 per year, based on 40 hours for 52 weeks) and ANZSCO levels 1, 2, and 3 earning less than $19.97 per hour ($41,538 per year). Applicants in this band will be eligible for visas with initial validity of one-year, renewable for up to three years. After three years, visa holders in this band will be required to serve a one-year “stand-down” period outside of New Zealand before they are eligible to apply for another ESV, or any other visa. Applicants in this band are not eligible to sponsor their dependent family members for dependent visas to accompany them. Family members desiring to accompany them will have to qualify for visit, work, or student visas independently.
  • Mid-Skilled Band – Defined as ANZSCO occupation levels 1, 2, and 3 earning between NZD $19.97 and $35.24 per hour (or between $41,538 and $73,300 annually). Applicants in this band will be eligible for visas with initial validity of three-years, renewable indefinitely, and will be eligible to sponsor dependent family members for visas.
  • Higher-Skilled Band – Defined as any occupation earning more than NZD $35.24 per hour (more than $73,300 annually). Applicants in this band will be eligible for visas with initial validity of five-years, renewable indefinitely, and will be eligible to sponsor dependent family members for visas.

The above applies to applications lodged on or after August 28, and current visa holders are unaffected by these changes. The changes from the previous scheme obviously affect Lower-Skilled workers to the highest degree. Companies employing foreign workers in this band may now face greater workforce turnover with employees’ stays capped at three years of work before they must leave the country for one year. They may also experience foreign recruitment difficulty with workers in this category unwilling to leave spouses and children in their home country.

Also, note that under this classification, occupations in the lower-skilled ANZSCO levels 4 and 5 cannot qualify for the Mid-Skilled band, regardless of salary. These occupations can only be classified as Higher-Skilled or Lower-Skilled, depending on whether their remuneration is above or below NZD $35.24 per hour. For a thorough explanation of the ANZSCO skill levels and occupation classifications, see the Australian Bureau of Statistics website here.

On a positive note for companies, the present reforms have brought no changes to the other substantive requirements under the ESV stream. Specifically, labor market testing requirements remain unchanged.

Skilled Migrant Category (SMC) Changes

Also effective August 28, the permanent residence Skilled Migrant Category (SMC) will also be subject to “remuneration bands” and additional changes in how points are awarded in its points-based system. The changes set minimum remuneration thresholds in order for applicants to be defined as skilled migrants and eligible under this category:

  • Applicants with occupations in ANZSCO levels 1, 2, or 3 must be paid a minimum of NZD $23.49 per hour (or $48,859 per year, based on 40 hours per week for 52 weeks); and
  • Applicants with occupations in ANZSCO levels 4 and 5 must be paid a minimum of NZD $35.24 per hour ($73,299 annually).

In addition, changes have been made to the points allocation method, including:

  • Introduction of points for high remuneration above NZD $23.49 per hour ($48,859 annually);
  • Increased points for skilled work experience, including 10 points for more than one-year of New Zealand work experience;
  • Increased points (to 70) for Master’s and Doctorate degrees;
  • Increased points (to 30) for applicants aged 30 to 39 years;
  • Introduction of points for the applicant’s spouse or partner holding a Bachelor’s or higher degree; and
  • Elimination of the current points for future growth areas, absolute skills shortages, and family ties in New Zealand.

A detailed summary of the criteria and points changes is available on the NZI website here. Note that there have been no changes made to the applications procedure, selection threshold, or to the health, character, or English language requirements. SMC applicants who received an invitation to apply and submitted their applications before August 28, but who are still awaiting application adjudication, will be evaluated under the previous rules in effect at the time of submission.

Other changes to the SMC stream include:

  • New “Job Search Visa” – In a positive change for foreign nationals, applicants without current employment or a university degree attained in New Zealand are still eligible for the SMC program if they otherwise meet the health, character, English, and other points-based standards. These applicants will be invited to apply for a temporary “job search visa” with a one-year validity.
  • Updated List of Qualifications Exempt from Assessment – Also effective August 28, the List of Qualifications Exempt from Assessment (Appendix 3) is also being updated. Applicants submitting expressions of interest under the SMC category after August 28 should check the updated list on the NZI website here.

Talent Work Visa – Employer Accreditation Changes

Also in effect August 28 are changes to employer accreditation rules under the Talent Work Visa program. Qualifying companies will now receive a two-year accreditation, rather than the current one-year. While the overall accreditation process and official requirements will not change, NZI has clarified some of the requirements. Most significantly, subsidiary companies can no longer be included under their parent companies’ accreditations; rather, the subsidiary company must apply and qualify for their own independent accreditation. NZI has also introduced follow-up audits of accredited companies to ensure that they are continuing to meet program standards.

Companies that rely on the Talent Work Visa program to supplement their hiring under the ESV stream should now expect greater scrutiny of their accreditation applications, as more companies are likely to be pursuing this option with the new tightened ESV standards.

How These Changes Affect You

Overall, the cost of doing business in New Zealand is going up for companies that rely on foreign labor and talent. The new higher remuneration thresholds will be particularly felt by those companies that utilize lower-paid, lower-skilled foreign labor. However, the August 28 changes are far less restricting than had been feared after the announcements in April. New Zealand continues to have significant demand for foreign workers to sustain its healthy economy. For companies doing business in New Zealand, the country continues to present attractive opportunities and remains one of the most inviting environments in the Asian-Pacific region for business.

While the corporate immigration rules have certainly tightened, taken as a whole, New Zealand’s immigration system is relatively open and has resisted the knee-jerk instinct toward isolationism that other countries seemingly pursue when seeing increasing immigration levels. For advice on these latest changes, or for information on potential opportunities for new business in New Zealand, companies are invited to reach out to their Pro-Link GLOBAL Immigration Specialists or our Client Services Team.

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Caveat Lector | Warning to Reader

This is provided as informational only and does not substitute for actual legal advice based on the specific circumstances of a matter. We would like to remind you that Immigration laws are fluid and can change at a moment's notice without any warning. Please reach out to your immigration specialist or your client relations manager at Pro-Link GLOBAL should you require any additional clarification. This alert was prepared by your Pro-Link GLOBAL Knowledge Management team. We worked with our PLG | KGNM New Zealand Office “Lily Kok Immigration Services Ltd.” to provide you this update.

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