As the draft US Immigration Bill targeting and the proposed immigration reforms have some vital provisions which may have a certain degree of impact on Indian IT companies. Indian IT services outsourcing companies happen to be the ones who send the maximum number of workers on H1B visa to the US. The proposed reforms and related provisions, if cleared by the Senate may impact the way these Indian IT companies do business in the US.
Some key insights based on the recommendations in the draft bill and their impact on businesses and professionals working in the US.
Cap & restriction on client site placement of H1 B and L1 visa holders.
For companies sending employees to the US on H1B Visa, the proposed bill seeks to limit the number of foreign workers (read Indian) these companies can bring to the US.
A company with more than 15 % of its workforce on H1B, would be prohibited from deploying H1B workers at client sites or contracting the services of these workers. Since most of the IT companies and businesses thriving on outsourcing engagements place their staff at client site, this provision would hit at the business model. US based firms with more than 15 % H1B workers will have to pay them US level wages. This clears makes a way for companies to hire locally, hitting at future outlook on cost competitiveness for the companies.
Employer (Read IT Companies / Sponsors) would not be able to place L1 workers at client sites in US, unless they were directly supervised and controlled by the sponsor company/employer. The client companies in such cases would need to confirm that they have not laid off any employee in the same area performing a similar job – as the worker being deployed by the sponsoring outsourcing company.
After 2016, there will also be a ban on firms employing more than 50 % for their workers on H & L visas. The proposed bill will require employers that have 30 – 50 % of their work force in the US to pay $ 5000 for every new foreign worker they hire, and this will increase in case the companies have more than 50 % foreigners comprising their workforce. The limits would be enforced in a phased manner over next three years.
The impact on Indian IT companies.
It has been a well known fact, that most IT companies have been sending temporary Indian workers to the US, and they are the ones responsible for utilizing most of the H1B visa quota every year. The notable amongst these companies being – TCS, Infosys, Wipro, Cognizant etc. The key reason for sending employees for projects etc. with their client sites, is the wage cost arbitrage considering the higher salaries that they would be required to pay in case they hire a US resident for the same job. At present most of these companies have over 70 – 75 % foreigners comprising their workforce.
One of the thoughts behind some of these provision may be to encourage these companies to hire local residents. However, this move may impact their costing and thereby profitability going forward. This may also impact the cost paid by the client companies. The model of outsourcing works on the concept of wage arbitrage, mostly delivered through getting the work done by relatively low paid skilled employees. In case the companies have to hire locally this basic premise gets lost.
Some good news for those who are already in the US or are on their way.
The good news however, is that the overall H1B quota is likely to increase as per the present recommendation – from 65000 to 110,000. Another, provision that might be relatively good news for those professionals who are in the US on H1B or who have been cleared , in case of existing H1B sponsor withdrawing the sponsorship or considering a loss of job etc. presently the employee needs to immediately return. As per the new proposed bill, the concerned employee with have a 30 day window to identify a new sponsor and get a new job.
For those who are already in the US or presently heading to the US on H1B, the provisions of the draft bill makes it relatively easier for them to get a green card and finally the US citizen ship. The new bill accelerates the process and the H1B visa holder will be able to directly apply for a green card rather than go through his/her employer for the same. As per the new provisions in the proposed bill, businesses would also be encouraged to sponsor workers for green cards.