Capping H1B visas will hit tech outsourcing industry, global firms: Experts

Even though there’s no official word yet on the United States’ (US’) plans to cap H1B visas for countries that ask foreign companies to store data locally, the proposed move, if implemented, could have a far-fetching impact on the technology outsourcing industry as well as global firms who are heavily dependent on Indian talent.

Quoting senior Indian government officials, Reuters on Wednesday had reported that the US government is planning to cap H1B visas issued each year for different countries and the proposed annual quota for Indian companies could be between 10 and 15 per cent. Currently, there are no country-specific limits on H1B allotment.

India has, over the last year, been stressing on data localisation, or storing personal data of Indian citizens in servers placed in the country.

Indian IT industry body Nasscom said there has been no official confirmation from the US on lowering of H1B visa cap, and that it is awaiting further clarity on the matter.

“If US policy makes it more difficult to hire advanced tech workers, it will only weaken the US companies that depend on them to help fill their skills gaps, put jobs at risk, creating pressure to send technology services abroad,” said Nasscom president Debjani Ghosh. “In April 2019, the number of unfilled jobs stood at 7.5 million. Sixty seven per cent of these, or two in every three jobs, required specific technical skills. It is this very unmet technical requirement that skilled immigrants, including workers on H1B visas, have helped meet in the US.”

Most commonly used by techies to travel to the US as part of client side work, H1B visas have a cap of 65,000 for the general category and allow a further 20,000 people who have a US master's degree from an accredited institution.

Immigration lawyers see the US plans having a “devastating impact” on the Indian IT workforce, if it goes through. “Any numeric change in the per-country quota of visas should be decided by Congress as per statute. 

However, is possible to pass a temporary executive order or an agency policy change, to increase or decrease the cap for a finite period. But to make it permanent, it would generally have to be passes as a law by Congress,” said Poorvi Chothani, managing partner of immigration firm LawQuest.

Industry experts also see such moves as more of rhetoric at this point as US President Donald Trump faces re-election next year. “We have seen increasing scrutiny in approval of H1B visa applications in past years and this is going to rise as the US election approaches,” said Kris Lakshmikanth, founder of HR consultancy firm The Head Hunters India.

After Trump came to power, Indian IT companies faced a lot of issues in sending techies to onsite geographies for project work. Rejection of visa applications increased, reflecting the difficulty in obtaining work visa approval in the North American country.

For instance, the overall H1B approval rate fell to 79.5 per cent in the first half of the financial year 2018-19 (FY19), down from 81 per cent in the same period of FY18.  According to a JP Morgan report, the rejection rates of H1B visas filed by Infosys, Tata Consultancy Services and Cognizant have risen to 35, 33 and 39 per cent, respectively, as of April 2019, against 2, 4 and 4 per cent seen in 2015.

The visa rejection rate for India’s TWITCH providers (TCS, Wipro, Infosys, Tech Mahindra, Cognizant and HCL Technologies) between September 2018 and April 2019 has spiked to 36 per cent, the report said.

“Under Trump administration, there was no change in the legislative front as far as visa norms are concerned. Whatever change has happened, that are more procedural and compliance-related ones," said Pareekh Jain, an outsourcing advisor, and founder of Pareekh Consulting.

According to a CRISIL report, employees with H1B visa have been the core of Indian IT companies’ strategy as the wage cost comes around 20 per cent cheaper than the locals. “Employee expenses accounts for nearly 60-65 per cent of total operating cost for a Tier-I player and any increase in this cost will put pressure on margins.”

Sensing the protectionist moves of the US administration, Indian IT companies have already been building up employee pyramid by hiring more number of engineering graduates from colleges apart from inducting experienced hands. The top four IT firms of India currently have a localisation ratio of more than 60 per cent in the US as part of this initiative.

“Indian IT firms will get impacted but the 15% country cap, if introduced, will be more detrimental to US firms hiring Indian talent through the H-1B visa. Last year, Indian IT companies received a large number of continuing approvals for H-1B extensions/renewals that are not subject to the annual cap and are not covered in the proposed India-specific cap. US firms received maximum initial approvals, which means real damage from cut in India's H-1B approvals--from current 70% to 10 -15%-- will happen to US firms because they will have to make do with less skilled workers from the other countries.” Vivek Tandon, Founder and CEO of visa facilitation firm EB5 BRICS, said.

In the absence of an official communique from the US on the issue, confusion reigned among officials as well. However, one senior External Affairs Ministry official said the issue was brought up in a meeting that sought to outline the joint agenda of discussion for US Secretary of State Michael Pompeo's upcoming visit on June 25-27.

(Inputs from Subhayan Chakraborty)

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