A Report says Strict H-1B visa rules hit margins of Indian IT companies

June 28, 2018
The Report

As per a report Strict H-1B work visa norms applied by USA, will put pressure on the cost of the Indian firms providing IT services. Additionally they will also impact on their margins owing to growth in compliance and increase in onsite hiring. Such impacts will be specific to the companies and relate to dependence on H-1B visa. These are the conclusions of rating agency I.C.R.A.

Gaurav Jain, V.P.  Corporate Sector Ratings, I.C.R.A. said that the changes have the capacity to disqualify some positions which presently have eligibility  for H-1B visas. Furthermore this will impede the flow of low-cost skilled labor from India. Additionally it directly impact on margins.  USA will also consider giving visas to the skilled or highly-paid beneficiaries.

A Report says Strict H-1B visa rules hit margins of Indian IT companies

The trends

I.C.R.A. also feels that this development will work in opposition to the Indian IT services sector, which depends on H-1B. The average wages are about 25 percent lower in comparison  to companies which do not depend on H-1B visas.

The definition of a firm of H-1B dependency is that, more than 15 percent of the  US full-time employees, exist on the H-1B visa.

Tough time for Indians

Jain also stated that giving H-1B visas  on the basis of high skill or compensation gives limited headroom to Indian companies in getting these visas. As a result, the increase in onsite hiring or increasing the compensation of applicants in H-1B visa will affect the margins of companies. Moreover it leads to being credit negative. The  government in USA also has a plan to  end the work authorization (H-4 visa) permanently, which is availed by spouses of H-1B visa holders.

I.C.R.A.feels that such revocation of visas will have an indirect and negative impact, on workers, who are presently serving in jobs on H-1B visas, or who seek these visas for their spouses, as working professionals.

Major firms are having a plan to increase their proportion of offshore work for reducing their dependence on these visas. The magnitude of these shifts will be marginal because only few services can resort to high off shoring like testing, or I.M.S. in comparison to others.

Overall, I.C.R.A. expects an increase in onshore hiring, mainly for entry-level programmers for maintaining a competitive cost structure. This will also lead to less dependence on H-1B visas for low-cost skilled labor.

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