You must have seen the news of the hike in H-1B visa fee by the US making headlines recently. Ever wondered what the hullabaloo over the visa fee hike is all about?
The US is the biggest market for Indian IT companies. Of its total revenue of $98 billion in 2014-15, 62 per cent was from the US, according to industry body Nasscom. Hence, any increase in the visa fee is bad news for the industry as it would mean that Indian IT companies will have to cough up much more — millions of dollars more — while applying for H-1B visas.
Recently, US President Barack Obama signed the $1.8-trillion spending package, which, among other things, re-authorised the special fee on non-immigrant visas for companies that hire more than 50 per cent foreign workers in the US. The fee had expired on October 1.
The fee has also been doubled to $4,000 for H-1B and $4,500 for L-1 visas.
Special fee
The special fee on non-immigrant work visas was originally introduced in 2010 under the James Zadroga 9/11 Health and Compensation Act. It was named after a detective who died in the terror attack on the World Trade Centre and was used to fund the treatment of those whose health was impacted by the 9/11 attack.
The fee initially generated a lot of controversy in India because of its ‘50 per cent threshold’, as it is mostly Indian IT companies that cross the limit.
Impact
The big Indian IT companies have over 50 per cent their workforce at onsite locations filled by H-1B visa-holders. The fee that has been reauthorised now will cost the industry an additional $400 million a year, according to Nasscom’s estimate. For the $100-billion revenue generating Indian IT industry, the impact on margins may be 30-40 basis points. However, what is a bigger concern is that more and more countries are getting protectionist.
Switzerland for instance, did not increase the quota for highly skilled workers in 2016 after reducing it the previous year.
Now, there is talk that many senate members in the US are asking for a change in the US immigration Bill. The demand includes a cut in the number of available visas to 70,000 from 85,000, preference to candidates from US universities and requiring companies applying for H-1B visas to have at least 50 per cent of their US workforce as Americans. Such restrictions, if imposed, can have a far-reaching impact on Indian IT companies.
Already, the procedures to obtain H-1B visas are difficult. The rules of the US Citizenship and Immigration Service protect the US worker. With high educational requirements, employers who apply for H1B visas have also to submit the Labour Condition Application showing that they have complied with rules on wages. They also have to disclose the foreign worker’s rate of pay.
But why do Indian IT companies hire manpower from India? Many players insist that the lack of required skills among IT professionals in the US leaves them with little choice. Nasscom quotes several industry research reports that validate this. Research shows that 46 per cent of openings in STEM (science, technology, engineering and mathematics) go unfilled for more than a month in the US. If Indian companies are forced to make do with US manpower, they are likely to face a talent crunch for many of the skilled and senior positions.
At par
A recent Nasscom report shows that the allegation of Indians taking away the jobs of Americans does not really hold water. In 2014-15, the Indian IT industry has created jobs for 4,11,000 Americans. This is a jump from 280,000 in 2010-11 and 340,000 in 2012-13, an annual increase in job creation by 10 per cent. In the same period, the annual overall jobs growth in the US was less than 1.7 per cent.
Further, the report also highlights that the industry pays equal wages to US nationals as well as Indians going there on H1B visas. In 2013, while a US citizen was paid about $81,447 a year, an H1B visa holder was paid $81,022. The companies also incurred an additional $15,000 for visa and tickets for the individual and his spouse/family.