Despite the relatively high cost of labour, it’s easy to see why Australia is an attractive market for foreign investors. Australia boasts an AAA rated economy, low risk business environment and a location that lends itself to fantastic exporting opportunities across Asia.

Recently, the Fair Work Ombudsman (Ombudsman) investigated a Singaporean investor, Reddot Brewhouse (Reddot) who underpaid its staff in an Australian venture.

Reddot established an Australian brewery for the purposes of exporting its boutique brews to the broader Asian market. Unfortunately for Reddot a bump in the road to success was met when the Ombudsman discovered that a welder employed by Reddot had been underpaid by $20,260 over the span of three months. What’s more, the underpaid employee emigrated from the Philippines for the role and was oblivious to the fact that he was engaged under a class of visa that was significantly different to what the employer originally promised. Instead of receiving a subclass 457 visa, the employee was granted a subclass 400 visa, which only permits a short stay for work that is not ongoing.

In a bid to encourage compliance with the Fair Work Act 2009 (FW Act), Reddot has been compelled to comply with enforceable undertakings which include obligations to:

• back pay unpaid penalties and unlawful deductions from the employee’s wages;
• implement systems and processes to ensure future compliance with workplace laws; and
• engage an external accounting professional to audit Reddot’s workplace practices.

So, what should foreign investors take away from the Ombudsman’s investigation into Reddot?

1. Foreign investors would do well to familiarise themselves with Australian workplace laws prior to entering the market. Even if an investor does not set up an Australian entity, it will be subject to the FW Act as foreign corporations are still classified as “national system employers”. In this instance, Reddot was lucky to have only been subject to enforceable undertakings as typically such breaches would result in steep penalties being imposed against the employer.
2. Importing labour into Australia will not absolve a foreign entity from its obligations under Australian workplace laws. Reddot’s owners stated in the course of investigation that Australia’s labour market was “too expensive”, leading them to import labour from overseas. However, visa holders are entitled to the protection of the National Employment Standards and visa sponsors such as Reddot are required by the Department of Immigration and Border Protection (Department) to pay an employee sponsored for a subclass 457 visa at least the safety net salary of $53,900p.a. to protect them against exploitation. This is known as the Temporary Skilled Migration Income Threshold (TSMIT). The TSMIT does not apply to other subclasses of temporary skilled visas such as the subclass 400 short stay visa. It is relevant to note, though, that employers are still required to demonstrate that employees will be paid in accordance with Australian market rates whilst working in Australia for periods that are 3 months or longer, in order to meet application criterion. Failure to do so will result in a visa application refusal.

Further, failure adhere to the prescribed salary levels after a visa has been granted will be considered a breach of the sponsorship obligations for Standard Business Sponsors. Additionally, underpayment of subclass 400 visa holders may also constitute a breach of the Migration Act 1958 (Cth) as well as the FW Act if such payments do not meet minimum standards as prescribed by a modern award, or minimum wage requirements at the least. Breaching sponsorship obligations, or investigations by the FWO could compromise an employer’s prospects of sponsorship and/or employment of foreign nationals.

Considering investing in Australian markets? Look no further than PCS to help you understand your obligations as an employer and assist you with your skilled migration needs.