1. US H1-B Visa crackdown: TCS, Infosys, Wipro, other IT firms set to face harsh headwinds

US H1-B Visa crackdown: TCS, Infosys, Wipro, other IT firms set to face harsh headwinds

The $150-billion domestic IT industry has been dealt a heavy body blow by the US, it largest market, with a new Bill introduced in the House of Representatives seeking to double the salaries of H-1B visa holders from the current level of $60,000 to $130,000.

By: | Bengaluru | Updated: February 1, 2017 7:00 AM
In addition, there is also a strong likelihood that US President Donald Trump would sign a separate executive order soon with further curbs on work visa programmes. (Reuters) In addition, there is also a strong likelihood that US President Donald Trump would sign a separate executive order soon with further curbs on work visa programmes. (Reuters)

The $150-billion domestic IT industry has been dealt a heavy body blow by the US, it largest market, with a new Bill introduced in the House of Representatives seeking to double the salaries of H-1B visa holders from the current level of $60,000 to $130,000. The latest move could severely impact the financials of Indian IT companies like Tata Consultancy Services, Infosys, Wipro and HCL Technologies that are heavily dependent on these H-1B visas to execute their contracts in the US.

In addition, there is also a strong likelihood that US President Donald Trump would sign a separate executive order soon with further curbs on work visa programmes. For the Indian IT industry, which is already faced with single-digit growth prospects, it could be the biggest reversal in nearly a decade.

Not surprisingly, the TCS stock slipped by as much as 4.58%, Infosys declined 2.01% and Wipro by 1.62%.

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The legislation, called the High-Skilled Integrity and Fairness Act of 2017, prioritises market-based allocation of visas to those companies willing to pay as much as 200%. It also proposes eliminating the “lowest pay” category.

The raised salary level — to more than $130,000 — is more than double the current H-1B minimum wage of $60,000, which was established in 1989 and has since remained unchanged. Indian IT firms will have to now use a combination of local hiring and more expensive H-1B visa workers and this could impact their margins by 200-300 basis points.

“My legislation refocuses the H-1B programme to its original intent — to seek out and find the best and brightest from around the world, and to supplement the US workforce with talented, highly-paid, and highly-skilled workers who help create jobs here in America, not replace them,” said US congressman Zoe Lofgren, who introduced the Bill.

h1b-visa

Ever since Trump took over as the US president, the Indian IT industry has been wary of the likely changes in the visa regulations like H-1B and L-1. Indian IT companies have generally been the largest recipient of the H-1B visas, attracting the attention of certain US lawmakers who view it as loss of jobs for Americans.

Nasscom, the Indian IT industry’s trade body, in a statement pointed out, “The Lofgren Bill contains provisions that may prove challenging for the Indian IT sector and will also leave loopholes that will nullify the objective of saving American jobs.” It also remarked that such Bills have to go through several legislative discussions before this can become a law.

Nasscom president R Chandrashekhar said, “Since the rationale for the administration and the legislative wing is to protect job opportunities for Americans, our strong suggestion is that they should carefully calibrate the conditions keeping in mind the skill shortage in the US. Raising wage levels for dependent companies alone will defeat the basic objective as non-dependent companies can continue to bring in skilled workers at lower wage levels, thereby nullifying the objective of protecting job opportunities for American nationals.”

On the likely impact of this new Bill, Angel Broking in its note said, “Depending upon the companies, they could easily witness around 60-70% rise in the salaries of the H-1B visa dependent workforce, and hence have significant impact on the net profit of the companies.”

V Balakrishnan, former Infosys board member and part of Exfinity private equity fund, remarked, “This move will only hurt US more as they are trying to become a closed economy in a globalised era.” However, he felt that Indian IT companies can transition to newer business models with margins getting affected only in the short term.

Alka Dhingra, assistant general manager, TeamLease Services, said, “The companies will now focus on sending only highly skilled candidates to the US, which will lead to a significant drop in hiring. Companies thus will have to transform their business model as how much of it can be delivered either through local resources or how much of it can be pushed digitally. With this move India will no longer be the choice of offshore hiring, however when it comes to local hiring in the US, companies will continue to pick up talent both laterally and freshers from campuses. Further, companies need to take steps to ensure that it has the right mix of resources and also leverage its near- shore and global centres to execute projects.”

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  1. Sundar BN
    Feb 1, 2017 at 3:56 pm
    Instead of going on site, they could simply become an off s dev center ?After all, this model is nothing new ?
    Reply

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