L-1 visa rejections threat onsite deals of IT cos

Written by Rachana Khanzode | Mumbai | Updated: Jul 13 2009, 06:42am hrs
The Indian IT companies could end up losing some onsite contracts with the L-1 visa rejection rates witnessing a sharp uptick off late. There has been a spate of visa rejections, not just for fresh L-1 visas, but also for extension of existing L-1 visas (an easy process earlier), a CLSA Asia-Pacific Markets, India market strategy, IT services report points out. CLSA Asia-Pacific Markets is one of the Asias leading, independent brokage and investment group.

The report also adds that though the proposed restrictive visa bill in US is yet to make any headway, visa policy in US seems to be veering towards greater oversight and imposition. It also talks about the rejection of transfer of H-1 visas resulting in loss of business. Recently, a top-tier Indian Tech won a couple of clients on SharePoint, who wanted to work in an onsite-only mode. Since very few people were travel ready, the company hired H-1 visa holders from other firms. However, the H-1 visa transfer of these newly hired employees was rejected resulting in lost business for the vendor, it adds.

FE spoke to a number of industry veterans who refused to come on quote since it meant revealing loss of clients or business, but pointed out that that increased rejection of L-1 visas could trigger an impact on the companys onsite projects that require sending individuals immediately on a project. Though the loss to individual companies couldnt be quantified, onsite contracts tend to provide almost 45-55% of the revenues with billing rates at $ 55-65 per hour.

However, Ganesh Natarajan, global CEO at Zensar Technologies, says, There are delays in processing of L-1 visas from usual time frame of a week to four weeks and this could slow down the projects. Sanjay Kamlani, CEO of a legal outsourcing firm, Pangea3, says, We have witnessed some rejections in B-1 and L-1 visas but there is no impacts due to the same. Also L-1 visas are non immigrant visas available to employees of an international company with offices in both a home country and the United States and one year of work experience. H-1 visas are non-immigrant visas that allow US employers to temporarily employ foreign workers in specialty occupations. The L-1 rejections comes at a time when companies are avoiding going ahead with H-1B visas, as L-1 provides more benefits in terms of taxes and retaining of employees. Industry sources view, that though the US has been talking about various protectionists measures, H-1B brings in taxes that could help the US economy. However, according to US Citizenship and Immigration Services (USCIS) for FY 2010, of the 65,000 H1-B visas quotas, only 44,500 visas have been used.

Usually, when an employee is sent on L-1 visa, there is an exemption of taxes on the salary, according to the employees location in the US, for about 11-12 months. Locations like Califonia and Boston attract the largest tax rate of about 30%, while on the H-1B visa the employee is taxable from day one. Also, unlike an H-1B visa holder, an L-1 visa holder cannot switch to another firm, thus enabling the IT corporates to retain their employees.

Also, though employers currently need to pay H-1B employees according to the US prevailing wage structure, there is no such provision for L-1 workers. Thus the benefits of L-1 visas had pushed IT companies to go for it as an alternative to H-1B visas.