Measuring Skills by Salary

For anyone that has investigated their options to make the move to New Zealand, as a skilled migrant, they will have most likely discovered that the amount you earn here, when you do secure a job offer, plays a very crucial role in whether or not you will secure a Visa or not.

Since 2017, the Government has used salary or more specifically an hourly wage to determine whether or not you qualify for a Visa and in many cases the degree of skill involved with your job and overall application. Salary levels have been used in previous Visa pathways and throughout time, but not to the same degree as the introduction of “minimums” and other thresholds in 2017.

For the most part, the threshold that applicants need to meet is benchmarked to our median wage, which of course increases on a yearly basis and is measured separately by Statistics New Zealand. This then means that the criteria for a Visa are never fixed as the salary (wage) level increases annually. Of course it could decrease as well, if the median wage reduced, but that is an unlikely outcome.

Median Wages

Many of our Work and Resident Visa categories are driven by a median wage requirement.

INZ were not shy about suggesting that a big part of this move was to make it easier for immigration officers to establish skill levels.

In the previous and current Skilled Migrant Category systems, salaries are used as both a minimum but also as an exemption. For example the minimum required for an applicant is the median wage or higher (currently $29.66 but set to increase in February 2024). Along with that your job needs to be at a particular skill level in ANZSCO and so the skill match still exists. However if you earn 1.5 times the median wage (or as a salary equivalent) then it doesn’t really matter what you do - skilled or not - which helped to solve some issues for INZ in assessing particular roles. In other cases and other categories if you earn twice the median wage (or equivalent salary) then you have a pathway to Residence over two years, regardless of the job and if it is three times the median, you can apply for Residence directly.

The main point is, that over time, the median wage or salary equivalent has become a proxy for determining applications, skill levels and providing faster pathways to Residence for higher income earners. There is logic in this of course, because ultimately the more you earn, the more likely your job is at a higher level of skill. But it doesn’t always work that way and it also creates plenty of headaches for applicants (and INZ alike).

Median Wage & Visas

The main point for applicants to understand (and they often miss) is that everything INZ does in relation to salary assessments is actually based on an hourly rate, and not the annual salary. This can get very confusing, very quickly, because even though the annual salary might be high, if the hours are equally high then hourly rate falls. This creates problems in terms of employment agreements, agreed hours and applicants falling short of the criteria, because they might worked a few extra hours here and there.

Median Wages

These change (increase) yearly - currently $29.66, but set to rise to $31.61 in February 2024.

The starting point for most applicants (to avoid any pitfalls) is to remember that INZ considers everything in relation to salary, by the hourly rate you earn. So let’s take the example of someone earning NZD$62,000.00 per annum to work as a Diesel Mechanic. In this case if the applicant was working for 40 hours per week, then their hourly rate would be $29.80 or just over the current median wage. However if that same applicant was to work for 42 hours in a given pay cycle, then their hourly rate would fall to $28.38 or just under the median income. When the rule require you to be earning the median wage over a two-year period, that one drop in the rate creates a problem.

Similarly for someone wanting to pursue the direct to Residence pathway based on earning three times the median wage, they would need a salary of just over $185,000.00 per annum. All good, until INZ discovers that they are working 45 hours per week. Many applicants miss this point, focusing on the salary level, rather than calculating the hourly rate.

It also gets more confusing because there are other Visa categories that have salary bands that don’t directly correlate to the median wage (ICT under the Green List for example). There are also other thresholds that dictate whether or not you can bring your children to NZ, because INZ wants to be satisfied that you can support them when they are here.

In short, you have to be very mindful of the salary requirements that apply to you, the hourly rate as the main criteria and ensure that you don’t inadvertently fall below that rate by working a few extra hours here and there. For someone on an hourly rate contract this isn’t normally an issue - however if you are on a salary with a 40 hour a week contract but provision for extra hours unpaid - things can get very complicated, very easily.

Salary - A Proxy for Skills?

The United Kingdom has just this week increased the salary required for a range of Visas and by some margin. This has caused quite a stir within that migration market, but no more than it creates here when we lift the median wage by a dollar or two. Their are some logical benefits to doing it this way - the chief one being that it makes it a lot easier for INZ to consider roles as being skilled, ensure migrants are not being exploited and ensure that their family members will be supported in NZ as well. However there are plenty of drawbacks as well.

There are plenty of jobs that are skilled, but sit at the margins of this salary level. That means that in order for employers to secure those skills from offshore (in the absence of local talent), they have to meet the median wage requirement. This has the flow on effect of raising salaries across the board, leading to artificial wage inflation. The more migrants you bring in, the more people having to meet this threshold and the more employers will have to supplement the incomes of other staff to ensure everyone is on a level-playing field.

It also undermines the more relevant assessment of skills and their value to the economy in ways that aren’t counted in dollars and cents. There are occupations we need to fill that pay less than the median, and we could potentially be missing out on many applicants as a result of having this bright-line salary test. Or, worse, the Government creates separate pathways for those applicants on an ad-hoc basis, which essentially undermines the point of having a salary level requirement in the first place. Raising and lowering the salary bar as a means to control volumes (which is what is happening in the UK and other locations) is also missing a point - the fact that the salary gauge may not accurately represent the skill needs we have.

It also becomes unwieldy to manage for an applicant. For example, someone aiming to secure Residence based on earning 1.5 times the median wage over three years, has to meet the median wage level at the start of the three years and then at the end of the three years (and it will have gone up) - so there will be a potentially sudden lift in salary at the end of three years just to meet the bar (assuming the applicant remembers or even knows this is the rule). If they changes jobs in between their new role has to meet the median at the time they change. If you are confused by that - then my point is proven.

Will it Last?

The new coalition Government (or partners to it) have discussed removing the median wage requirement for certain categories (the Skilled Migrant Category being one) and also looking at a freeze on the current median income requirement, potentially avoiding the next increase in February of 2024. Potentially good news for those looking to make the move here in the near future.

Will Wages Get the Boot?

There is discussion by the current Government to remove salary as a measure of skills…

However, I doubt we will lose salary requirements entirely and that is because if used correctly they are in fact useful.

Whilst I am not a supporter of using the ever-increasing median wage for all Visas, I do think that having minimum salaries is a way to manage the quality of applications we process. We could simply have a minimum required for Work Visas, and a minimum for Residence which must be met in order to apply. However in addition to that, the usual assessment of whether the position is paid a market rate should still be applied (and is relatively easy to assess). Those minimums can be reviewed periodically but not automatically adjusted as the median rate increases.

We can keep the high-salary thresholds in place to reward those that earn good incomes, because ultimately they represent increased value to the economy and are more likely to be more highly skilled. However I would standardize that, rather than having one level for one policy and another level for a different Visa category. Simplify it.

I would also reconsider whether relying on the hourly rate in the above criteria is crucial or at least a blind adherence to it. For the most part, those earning higher incomes tend to be salaried, rather than paid by the hour. Are we that worried if someone earning $185,000 a year works 40 or 45 hours and whether those extra hours make any substantial difference to their value as a migrant? We obviously dont want people working 80 hours a week for the bare minimum, but we can also be sensible about how we apply that assessment.

We will see changes to how this is all calculated as the new Government settles in, but those wont be easy to implement, given how entangled salary and the median wage calculations have become within our Visa system. However any move away from relying on this, and instead using it to supplement other assessment criteria would be welcome news.

For those in the process already or heading towards it, my advice is to make sure you know what requirements apply to you, the hourly rate you need to earn and how your contract or future contract stacks up against them - particularly if you are required to work here for a period of time before you apply for Residence. Of course we can help you work that all out, to ensure you are on the right track.

Until next week.