Tight H-1B visa laws trigger commotion in the IT sector

In response to the rallying cry “Buy American, Hire American”, both US and Indian IT companies are struggling to attain the state of stabilisation. The Donald Trump government has tightened the H-1B visa laws and policies that resulted in the rejection of nearly 13,177 visa rejections in top 30 tech firms including Indian IT firms during 2018 (source: Economic Times). Moreover, the US introduced a new amendment made effective in April that favours foreign workers with advanced US degree holders, leaving Indian workers at a disadvantage. However, the American employers have already begun realising the need for highly-skilled Indian talents, although some of the top-notch American employers expanded their H-1B visa workforce, unlike Indian firms. Statistics show that Indians account for over 70% of the total 85,000 H-1B visas that the US grants every year. While Indian IT companies with US operations hire these professionals, a majority of them are recruited by the US-based giants.

Spike in employee costs

The regulatory framework for H-1B visa that allows non-Americans to get employed by American IT companies has just got a lot tougher to qualify for Indian IT professionals. First of all, a foreign worker needs to have an advanced-level degree from a US-based university and institution only to become eligible for employment in the US. That’s a plus point for the American IT professionals as it will give them an upper hand over arch-rival Indian IT workers, but it’s the employers that have to bear with the burden of it. The Indian firms, which usually hire workers with a bachelor’s degree, have to fill offsite jobs with local hiring, which costs more than sending an H-1B visa worker to the US.

Similarly, American IT firms lose easy access to cheap yet skilled Indian labour when the States has a shortage of tech talent. The employee expenses account for 60-65 percent of total operating costs for a business. And, according to the report from CRISIL, employee expenses grew up to 17 percent from 6 percent in 2018 where the cost per employee rose to 9 percent from 3 percent in FY19.

Rise to H-1B visa frauds

The approval process of H-1B visa is more complex and strict now due to the US government’s proactive measures against any manipulation. Undoubtedly, the policy is meant for reducing the unemployment rate in the IT sector of the US, it will trigger frauds as well. Where a giant player can afford the expenses, the MSME’s might not, which may lead to more of H-1B visa frauds. The offsite-onsite employee mix ratio for Indian IT companies is 80:20; on the other hand, it’s the US-based companies that are largely dependent on H-1B workers. As both sides that have H-1B visa as the core strategy are bound to get affected by these revised norms, the companies will be looking for alternative ways because Indian labour costs around 20 percent less than the US-based. The IT staffing companies are also under pressure as the rate of visa rejection has gone too high. And so, anyone can try manipulating H-1B visa requirements and falsifying the information in order to supply cheaper labour to US firms. Recently, four Indian-Americans were arrested in the US under the charge of H-1B visa fraud because of this crackdown on the H-1B visa programme. This has just hit the headlines; nobody knows the exact number of ongoing scams. And so, extra initiatives are required to put a full stop to such fraudulent cases, which are expected to increase manifold in the time to come.

Protection against the dead loss

As the newly reformed H-1B system is vulnerable to fraudulent activities, the United States Citizenship and Immigration Services (USCIS) as well as the IT sector has to take extra caution. At present when America is in a race with China to become hi-tech, the hiring managers on the hunt of skilled talent and technical expertise at lower wages deliberately customise their job posts to exclude the American workers from the eligibility criteria. Moreover, the candidates themselves can arrange for fraudulent US degrees, as we commonly see. All in all, there emerges the need for an increased investigation, verification of the visa applications, which, in turn, will increase the paperwork and attorney fees. While this may appear as an additional burden to the employers, this is a necessity in the presently changing scenario.

By Abhishek Agarwal, Senior Vice President, Judge Group