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H1B Visa’s Impact on IT Firms

The recent overhauling of the H1B visa policy under the Trump Administration, has led to rising concerns and uncertainties on issuance of visas in the Indian IT industry.

For instance, the revised H1B visa guidelines prescribe for certain eligibility criteria like minimum educational qualifications, requirement of establishing that a particular position is a specialty occupation etc. The US Citizenship and Immigration Services had also recently clarified that an entry level computer programmer position would not generally qualify as a position in a “specialty occupation”. A position of “specialty occupation” requires higher education and would typically include scientist, engineers, skilled computer programmers, etc. The impact of these guidelines are, therefore, likely to be felt by entry-level IT recruits the hardest, many of whom travel to and are regularly outsourced to the US, for projects of US companies.

While the obvious intent is to make it difficult to replace US employees with foreign workers, it would require a fundamental strategy change for the Indian IT companies which may include raising salary levels, skillset mapping, focus on local hiring, shifting work to other offshore locations etc. Higher operational costs and shortage of skilled manpower for the Indian outsourcing industry could be another fallout, which may adversely impact the profit margins of the Indian IT companies.

The consequential impact of these changes would also be felt by US companies, who used to benefit from the services of these skilled IT workers (often available at much lower costs than their American counterparts).

In a related development, it appears that US President Donald Trump has recently signed an executive order directing the relevant government departments to suggest reforms to ensure that the visas are issued to the most-skilled or highest-paid applicants (as opposed to the earlier lottery system of visa allotments). Reportedly, the Trump Administration is of the view that the lottery system led to companies such as Tata Consultancy Services, Cognizant Technology Solutions and Infosys ending up with most of the allocated visas.

Further, it looks like this order may be followed up with laws that raise the minimum salary levels for positions under the H1B visa scheme, as a Bill introduced in the US Congress seeks to raise minimum salary wages from the existing $60,000 to $1,00,000 per year.

Therefore, it seems that to get preference in the H1B visa allotment, the concerned companies would not only need to establish the relevant position as a ‘specialty position’ requiring high level of skills, they may also need to increase their salary levels (impacting their profit margins and even the possible viability of outsourcing).

To further add to the woes of the Indian IT industry, it seems that other countries are also following in the footsteps of the US and adopting the protectionist approach followed by the Trump Administration. For instance, Australia seeks to replace its temporary working visa programme, which was used by companies to hire foreign workers (at lower costs) to meet their short-term work requirements, with a new visa scheme which is expected to contain a number of safeguards to prioritise Australian workers. In a similar vein, New Zealand is also seeking to make its visa requirements stricter in an attempt to manage the immigration numbers.

As of now, it’s a wait and watch game, to assess the actual impact that these recent changes in visa requirements would have on the IT industry, but uncertainties surrounding these changes are already being felt by the IT companies and altering the course of their future business strategies.

The above Article has also been published in BW Businessworld magazine: http://businessworld.in/article/H1B-Visa-s-Impact-On-IT-Firms/05-05-2017-117628/