Friday, May 31, 2013

What the H1B Visa Proposals Mean for Indian IT Firms

What the H1B Visa Proposals Mean for Indian IT Firms

by N.S. Ramnath 
Thursday, May 30, 2013 | 11:13:09 PM

Some of the proposals related to H1B visas in the US Senate’s comprehensive immigration bill have triggered a sense of panic among Indian IT services companies. If passed, the IT companies fear they will have to spend more, sacrifice margins and perhaps even lose the competitive advantage. Nasscom, the lobbying body of software companies in India, has argued that the proposals are discriminatory and go against the idea of free markets. Its officials hint about a trade war between India and the US over this issue. The truth, as always, is more complex. 

Changes to the bill
The proposed bill spans about 800 pages and is the result of endless negotiations by lobbying groups. It has just been introduced in the US Senate, and, to become a legislation, needs clearances by different committees, 100 members of the Senate, 435 members of the House of Representatives, and finally the president. This means that there could be amendments to the bill.

Dents in profits
Indian IT companies are worried, not without reason. The proposals will increase visa expenses by three to five times. At present, an H1B visa costs $2,500. Companies might have to pay higher wages to H1B visa employees, and, over time, employ at least one local person for every H1B visa holder. Hiring locally increases wage bills and introduces inflexibility in terms of utilisation rates. Wipro CEO TK Kurien said the procedural impact could slow down companies. Kotak Securities reckons the new regulations would hit margins by at least 1.85 percent in five years on account of local hiring and another 1.5 to 2 percent on account of onsite utilisation rates. In all, it could have an impact of 3 to 4 percent over five years.

Comment by Anumakonda Jagadeesh

The proposed changes in the issuing of H-1B visas, the highly sought after US work permits, will badly affect the Indian IT firms which depend heavily on these work visas.

If the employer has 50 or more employees, and more than 30 per cent but less than 50% are H-1B or L-1 employees (who do not have a green card petition pending), the employer will need to pay a $5,000 fee per additional worker in either of these two statuses, the outline of the bill said.

In case the employer has 50 or more employees and more than 50 per cent of these workers are H-1B or L-1 employees who do not have a green card petition pending, then the companies will have to pay a $10,000 fee per additional worker in either of these two statuses.

As such, large Indian IT companies like TCS, Wipro and Infosys will have to pay $10,000 for each additional H-1B employee they would be hiring.

Such a thing will not be for companies like IBM, Intel or Microsoft who are based in the US and majority of their employee are American nationals.

In case of companies like TCS, Wipro and Infosys, which are headquartered in India having large off-site offices back home and depend on a small strength in the US, will be affected by such a provision.

The great H1B visa farce
There is something profoundly strange about Nirupama Rao’s recent attempt to assert—as a solution to the existential threat that now faces the Indian IT industry— that Indian IT companies are good and honest U.S citizens that play ‘a vibrant role in American communities’.

Desperate times call for desperate measures, however. As Indian Ambassador to the U.S, Ms. Rao’s recent editorial in American newspaper USA Today tries to highlight how a ‘win-win situation’ is still possible, even in the face of impending crisis.

And crisis it is indeed. In a curious turn of events, the American market is now the valuable one, with the U.S Government threatening to squeeze entry vis-à-vis the flow of H1B1 visas it grants.

Nevertheless, Ms. Rao’s arguments are highly misguided, and underneath her silver words, there is naught but dross. She is undoubtedly guided by an elementary principle of dialectics—that sometimes, the opposition between maintaining the old and changing things does not cover the entire field. Or, in simpler terms, that the only way to retain the ‘old’ is by changing things radically.

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Comment by Anumakonda Jagadeesh

Yes. IT giants of Indian Origin will be affected by these provisions.

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