Accredited Employer Work Visa – New business issues, and the application of compliance for all

There is little doubt that the introduction of the Accredited Employer Work Visa (AEWV) by the previous government has caused some issues. While the stated intention was to protect migrants from exploitation, the opposite would appear to be the outcome. The media has been filled with stories of migrants exploited, mostly by larger companies, with unscrupulous agents taking payment for jobs, and employers claiming no involvement, yet unable to comply with their obligations. All the while, migrants remain with little hope, savings often spent on a future that never arrived.

As a result of the exploitation, Immigration New Zealand made one change to the process, as well as beginning to implement a post-accreditation check. This article will cover those two situations, hopefully providing employers with an easier pathway to employing migrants in the long term.

Gaining accreditation – The issue with new businesses or business sales

The process to gain accreditation was always meant to be simple and easy. While an expected timeframe of 10 working days was given, we've seen accreditation for some clients being granted within hours of our submitting it. An established business should be able, in most cases, but with some exceptions, gain accreditation quickly and simply.

However, new changes, brought in allegedly to help prevent exploitation, are creating delays for new businesses. An established business, one that was registered with the Companies Office more than 24 months before, will typically get accreditation with few questions asked. The fact that the company is registered seems to be enough for Immigration New Zealand to believe that the business will be able to pay any staff that are employed. There is no need to provide evidence of turnover, or really any evidence of operation. Registration of the company for a long enough time appears to be enough to get accreditation approved.

The issue arises for those who may not have such history. This is most common for either a new business or someone purchasing an existing business with a new entity.

For new businesses, created by the owner, there will be no history. They won't be able to show a company that has long existed, as the business will usually be newly registered.

For those buying an established business, the purchase of a business is typically a purchase of the assets, leaving any liabilities with the vendor. Such purchases made by an existing company won't be an issue, as the existing company will likely have a history that will allow for easier accreditation. For new companies, created solely to purchase the assets and to operate the business, accreditation can be problematic. While they are purchasing a going concern, Immigration New Zealand will not take that into consideration when looking at the ability to pay staff. Instead, they will apply the same criteria as they do to a new business with no history.

If those existing companies have staff who hold work visas, they will need to have their work visas transferred to the new employer. Before that occurs, the new employer, the purchasing business, needs to gain accreditation, and then run job checks. It is only at that point that the work visa holder can seek to transfer their visa to the new employer. Any delay in any of those processes could either delay the purchase of the business if the transfer of the visas is a condition of settlement or could leave a business without staff if the purchase occurs prior to the work visas being processed.

To help understand the Immigration New Zealand process, we believe it is worth mentioning that Immigration New Zealand is run in compliance with the Operational Manual. This is a set of rules that Immigration New Zealand must comply with. It sets out the requirements and obligations of applicants and employers in regard to applications for accreditation. Any reference in this article to a letter followed by a number, such as S5 or E2 is a reference to the operational manual. The operational manual can be found here https://www.immigration.govt.nz/opsmanual/

The reasoning for testing new businesses falls under WA2.10.1. This covers that a business must be a viable and genuinely operating business. WA2.10.1.b provides such basic tests, one of which must be met by any employer. The employer must:

1. have not made a loss (before depreciation and tax) over the last 24 months; or
2. have a positive cash flow for each of the last 6 months; or
3. have sufficient capital and/or external investment (for example funding from a founder, parent company, or trust) to ensure the employer’s business remains viable and ongoing; or
4. have a credible, minimum two-year plan (for example by having contracts for work) to ensure the employer’s business remains viable and ongoing.

The first of the tests is the reasoning behind Immigration New Zealand's approach to new business. They have taken an interpretation that a business that has not existed for 24 months cannot have not made a loss in that period. We disagree with that interpretation and believe it should be redrafted if that is what is expected, as a business that did not exist cannot have made a loss when it did not exist.

This leaves the other three tests. Businesses that have reached six months since incorporation, which can show a positive cash flow for each of those months, can usually gain accreditation. However, it takes six months to reach that point, six months in which the business cannot be accredited and therefore cannot have staff on AEWV or most of those on partnership work visas.

The final option, showing a two-year plan will be difficult for most businesses. Companies rarely have contracts of work that stretch out far enough. One client of ours, who purchased a 20-year-old business, with millions of dollars in contracts, was unable to meet this criterion in Immigration New Zealand's interpretation. They needed to turn work away, being unable to hire migrants and having already hired every citizen and resident that they could find.

These businesses must then show they have sufficient capital and/or external investment. This needs to be shown even for a company that has no need for it, such as one that is self-sustaining. Immigration New Zealand will no longer look at historical evidence of the business's pre-sale operations. They also will not consider that new staff will result in additional turnover, expecting current business profit to be able to cover the cost of any new staff, running on an expectation that staff may add nothing to turnover. For a business that has put all of its money into the purchase of a profitable operation, they have no need for additional capital or external investment but are expected to show it nonetheless.

Immigration New Zealand does allow one other possibility, in a cut-and-paste text that we've seen provided to all applicants despite their situation. It includes providing a forecast from a chartered accountant, with such a forecast from a bookkeeper not being acceptable. Such forecasts are based solely on input from the business owner and provide no guarantee as to the ongoing viability of the business. However, Immigration New Zealand sees these as being sufficient to meet the criteria. This provides another cost to the business, one that we believe provides no value and is difficult to get done as we approach the end of the financial year. This requirement, for a chartered accountant, is not part of the operational manual but comes from a list of options that we believe was drafted by someone with little experience working with startup businesses.

One further thing to mention as a side note, is that the applications do appear to be handled with some haste, with a cut-and-paste approach to responding to applications. There also appears, in many cases, little care or responsibility taken. On several applications we've provided a link to our client's website to show an online presence, only to be told that no online presence can be seen. For these clients, apart from the link provided, a search of Google would show a well-established business, some with dozens of reviews, or years of being online. On raising these issues, these mistakes appear to be ignored and just removed from the documentation, with no acknowledgments of the error in care.

Those looking at new businesses need to:

• Get the application for accreditation underway as soon as possible, as it may take some time to get processed. After it is processed, the job check process needs to be completed also for each of the different roles. It is only at that point that employees can apply for an AEWV for that company or seek a variation to move their employment to you.
• If you are purchasing an existing business that has migrant staff, you may want to look at making accreditation and job checks as part of the settlement conditions as, without them in place, those staff won't be able to work for you once the purchase occurs.
• Look at which of the criteria under WA2.10.1.b you meet. If the business is a subsidiary of a larger business, then you can probably argue that there is external investment available. If none are suitable then you'll need to look at a chartered accountant providing a report as to your future cashflow.
• Be aware that we are seeing issues with the handling of these applications, with the only reason given is that staff are overworked. Be cautious about any mistakes they may be making and let them know if they are making a mistake.
• You may want to ask for legal assistance with your accreditation and job check process, to help prevent any undue delays. McVeagh Fleming has the in-house skills to assist with the business structure, purchase of the going concern, and the accreditation and job skills processes.

Ongoing compliance – New obligations on employers that are now being checked

Another way that the AEWV process was to combat exploitation was through a new set of obligations that would be imposed on the employer. These are not general employment obligations that apply to all employers, but solely to those who are accredited and have migrant staff.

These are listed in WA2.10.5, Settlement support activities, and fall into four main categories:

• Providing information to migrants about the local community and services. This includes details on accommodation options, transportation options, the cost of living, how to access healthcare, the services of the Citizen Advice Bureau and other relevant community services and groups, and how to obtain an IRD number.
• Providing information to migrants on the industry they operate in such as industry training and qualification information and options. They also need to cover hazards and risks that relate to their specific job as well as the industry in general.
• Allowing the migrant to complete, during work hours, a set of online employee modules provided by Immigration New Zealand that detail employee rights.
• The employer, including any staff that hire or control staff, has to complete online employer modules, covering much of the same material as in the employee modules, giving employers more information on the correct management of employees and their rights.

All of these activities need to be completed in the first month of employment. Evidence of these must be provided on request.

We are now seeing those requests being made, with employers being selected at random to have to show their compliance. Those who aren't compliant risk having their workers visas cancelled, and having their accreditation removed for a set period of time. This would cripple most businesses, so compliance with these obligations is vital.  However, for many employers, these changes have not been properly communicated to them. They have gained accreditation and performed job checks or had an advisor or lawyer assist them with it and are not aware of the additional compliance requirements they have agreed to by applying.

This is why McVeagh Fleming provides our immigration employer clients with a set of documents that help the employer comply with their obligations. While employers need to add some industry-specific information, the document package provides much of the required information that employers need to provide to migrant staff. It also includes checklists that can record the completion of online modules, which can be then saved to the migrant's employment file.

Immigration New Zealand is expecting to check the compliance of 5-10% of accredited employers each year. We believe that a good employer, one who is prepared and has met their obligations, should be able to easily and quickly complete the compliance process, and our documents assist with that. Those that don't risk losing staff, which could make their business untenable.

Please let us know if we can assist your company, or your next business endeavour, with your structure, purchase, accreditation, and general immigration needs.

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