US President Donald Trump proposed new executive order aimed at strangulating work-visa programmes, including the H-1B and L1 visas. During his campaign, he vowed that the country would follow two simple rules: “Buy American and hire American”. Before going for the detail impact let just understand what is H-1B Visa, proposed changes in H-1B visas policy and how it can affect Indian IT companies looking to work in the US as mainly, the H-1B and L1 visas used by Indian IT professionals.
What is H1B Visa?
The H-1B is a non-immigrant employment based visa in the United States to allows U.S. employers to temporarily employ foreign workers in specialty occupations. An employer must offer a job and apply for your H1B visa petition with the US Immigration Department. If a foreign worker in H-1B status quits or is dismissed from the sponsoring employer, the worker must either apply for and be granted a change of status to another non-immigrant status, find another employer (subject to application for adjustment of status and/or change of visa), or leave the U.S.
H-1Bs are the most coveted work visas: In 2016, the US Citizenship and Immigration Services announced that they received 2,36,000 H-1B petitions within five days of opening the process, more than thrice the number of mandated cap of 65,000 in the general category.
Proposed Changes to H-1B Visa Policy
Different bills proposed by senators have lobbied for reforms in the H-1B and L-1 visa norms. Some of the proposed changes are:
- Doubling minimum salaries of H-1B visa holders to $130,000.
- Firms hiring H-1B visa holders need to make a “good faith” effort to recruit Americans first.
- Rather than computerized lottery system for H-1B visas, give preference to students educated in the US.
- Crack down on outsourcing companies that import workers for temporary training and then send them back home to do the same job.
- Remove ‘per country’ cap to ensure equal distribution for employment visas.
- Earmark 20% of H-1B visas for start-up and small employers.
- Prohibit spouses of H-1B visa holders from working in the US
- Prohibit companies with more than 50 employees from hiring additional H-1B employees if already half are H-1B or L-1 holders.
- Strict audit and vetting by Department of Labor to clamp down on fraud or misuse
How It Can Affect India
The biggest beneficiaries of H-1B visas are Indians, followed by the Chinese. In 2014, 70% of total H-1B petitions approved were from Indians. Nearly 86% of the H-1B visas issued for workers in computer and IT occupations go to Indian workers, according to a Computerworld analysis of government data obtained through a Freedom of Information Act request.
Indian outsourcing firms such as Infosys, Wipro, Tata Consultancy Services will be badly hit. In reaction to the news, stock prices of information technology companies fell by 9% on 31st Jan, 2017 in Indian Indices BSE, NSE). But also, this proposed new law that will effectively cut down the number of H-1B visa entrants into the US could actually turn out to be a blessing in disguise for India. Now more work will move offshore as US is set to face a talent crunch in specialized sectors which is a long-term advantage for the Indian IT industry.
Besides, it will drive Indian companies up in the value chain, as the kind of people who travel will be premium people, people who are consultants and highly experienced and skilled. There are an estimated one million jobs vacant in the US in the IT sector that American companies have not been able to fill with required & expected candidates, as they requires Skills and indirectly needed Indians. Either these jobs will remain unfilled or jobs will move out of the US. The net impact will drive up costs within the US, as they have a talent crunch.
Currently, visa norms state that those who earn at least $60,000 per year can get H-1B visas. But doubling of this minimum salary requirement to $1,30,000 means that the number of workers who go US will be lesser, as India won’t be able to send that many people at the doubled salary benchmark. The impact will be mainly on Indian and American companies.
And the potential effect of the H1B clampdown on business could probably lead US firms to put pressure on their government to not go ahead with the proposal. However, Indian IT companies may figure out their economics around these challenges to bring down the on-site work and even move to other geographies. But Indian IT industry are optimist that every time there is a change in US policies, Indian companies, Indian businesses have adapted and have converted into an advantage.
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