New H1B visa rules in US: Minimum wage hike may have little impact on firms

Indian IT service providers will have to focus on more local hiring if the Bill gets implemented

With the US Congress re-introducing a Bill to impose stringent laws for H-1B visa holders, Indian information technology (IT) services firms may have to look for higher local hiring there. The proposed new Bill would want workers holding H-1B visas — which are used by a large chunk of employees from Indian IT companies — to be paid a minimum of $100,000, up from $60,000 currently. The Bill, Protect and Grow American Jobs Act, will remove the Master’s degree exemption from H-1B visa norms.

Even if the Indian IT services providers see short-term impact on margins with the wage hike, they will have to focus on more local hiring if this bill gets implemented, say industry analysts. Indian firms are the largest users of H-1B and L-1 visas in the US.

While Donald Trump won the presidential elections over promises of bringing back jobs to the US, last month he said that his administration would not let H-1B visa holders replace the jobs of US citizens.

“The proposed Bill to hike the minimum wage for foreign workers in the US who hold H-1B visa from $60000 to $100,000 may not have a significant impact as they already pay between $75,000-80,000 to the employees with zero-two years of experience and for manager level with more than five years of experience the wage is usually above $100,000,” said Pareek Jain, head of HfS Research India.

For the Indian firms, the challenge would be more on increased local hiring. “Such wage hikes may hit their margins initially but going forward they will have to reconsider more local hiring,” added Jain.

On the contrary, entry-level engineering graduates or computer science graduates from the US would cost above $100,000. It may vary based on location. For example, in the Bay Area it may be highest and low in small cities in the US.

IT services firms have traditionally looked at cutting cost by employing Indians on site. Dinesh Goel, partner and India Head at ISG, a technology research firm, believes such radical moves may hurt the US economy. “Cost is one aspect. But I will be surprised if they are really radical. A stricter immigration law towards H-1B visas is likely to hurt the American economy, as the people working with foreign IT companies in the US holding H-1B visas are adding value to American companies.”

With the industry seeing a shift from traditional services to digital technology delivery, they will need more on-the-site deployment. “As a trend, the technology services sector is seeing more localisation and reduction in offshoring. So it will be wise to make such reforms gradually with the industry trend,” said Goel.