Indian outsourcers face higher H-1B fees if new US immigration law is passed

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The so-called 'Gang of Eight' has released its draft immigration reform bill and it seems that one of the main losers may be Indian outsourcing companies which have, in recent years, become major players in the global outsourcing of services revolution. Six of the ten leading services outsourcing companies globally are Indian.

The Gang of Eight are eight senators, four Republicans and four Democrats, who have been collaborating on a bipartisan immigration reform bill since January when President Obama said that he intended to see immigration reform passed in 2013. They have clearly been busy. The draft is 844 pages long and proposes changes to every area of the US immigration system.

The temporary work visa system is no exception. Among the changes proposed in The Border Security, Economic Opportunity and Immigration Modernization Act of 2013 are

  • An increase in the number of H-1B 'specialty occupation' visas for graduates from 65,000 annually to 110,000 annually with immediate effect and with a possibility that it might rise as high as 180,000 annually. The number of visas granted will be based on the "Highly Skilled Jobs Index". This will take into account demand for H-1Bs and unemployment levels in the US.
  • The removal of any cap on the number of H-1B visas granted to graduates with advanced degrees such as master's degrees.
  • A change in the rules to grant work permits to the spouses of H-1B visa holders.

US tech firms give bill cautious welcome

These changes have led the US tech sector to give the draft Act a cautious welcome though senior industry figures have said they will wait to digest the detail before giving unqualified support.

However, there are also changes that are, according to the Gang of Eight, intended to crack down on 'H-1B dependent employers'. This seems to refer to international outsourcing companies, many from India, which have, in recent years taken the lion's share of H-1B visas. According to Ron Hira, a professor of public policy at Rochester Institute of Technology, 'the top 10 recipients in the last fiscal year were all offshore outsourcers. And they got 40,000 of the 85,000 [H-1B] visas – which is astonishing'.

One firm, Cognizant received 9,000 H-1B visas last year. Cognizant was founded in the UK and is based in the US but the three firms that come next in the list, Infosys, Wipro and Tata Consulting are all Indian firms.

There have been complaints from US IT workers that the outsourcing firms

  • Pay their employees rates of pay significantly below the going rate in the US thereby securing an unfair competitive advantage
  • Take the jobs of US workers then ship the work offshore to India and other, lower-wage economies.

New measures will hit 'H-1B dependent firms'

The Gang of Eight bill will introduce the following measures, if it becomes law:
  • There will be a new Department of Labor website where all jobs must be advertised for 130 days to US workers before being offered to foreign workers
  • There will be increased investigation of pay rates for H-1B workers to ensure that they are truly equivalent to those for US workers as is required. There will also be a system of punishments for breach of the rules.
  • There will be measures to discourage firms from relying on H-1B visas at the expense of US workers as follows
    • Firms with over 50 staff of which over 30% - 50% are foreign temporary workers will pay a supplemental fee of $5,000 per additional foreign temporary worker
    • Firms with over 50 staff of which over 50% are foreign temporary workers will pay a supplemental fee of $10,000 per worker
    • Firms with 75% or more foreign temporary staff in fiscal year 2014 will not be allowed to hire any more foreign workers at all. This level will fall to 65% in 2015 and to 50% in 2016.

No Indian outsourcing firms have commented on the draft Act since it was released on Tuesday 16th April. Earlier in April, Dean Garfield of the Information Technology Industry Council, an industry organisation of which Cognizant is a member, told US web news organisation NPR 'There's a lot of anti-India sentiment in many of the criticisms and articles around this that I think are completely unfounded and unnecessary.' He said 'Some of the companies…are providing services that bring greater efficiencies….what's wrong with that?' Mr Garfield said that H-1B employers are required to pay 'prevailing wages' so cannot hire foreign staff on lower wages but admitted that there was, at present no effective regime to check that the rules are obeyed.

Indian government reacts angrily

The Indian government has reacted angrily to suggestions that the temporary work visa regime could be changed. JS Sayanarayana, The Secretary of the Department of Electronics and Information Technology told Indian paper The Economic Times 'Free movement of skilled professionals for temporary work is a trade-related matter and should not be linked to immigration. It is important that trade relations between India and the US align to the long-term strategic agenda that supports growth in both markets'.

Before the draft bill was released, the Indian IT industry body Nasscom told The Economic Times that attempts to make Indian firms pay their staff more would be 'discriminatory' against Indian companies. Som Mittal, the president of Nasscom said that he thought such a move would be 'discriminatory in nature, specifically targeted at Indian companies and putting them at a competitive disadvantage against their US-based competitors'.

The Indian ambassador to the US also spoke out against the changes, before the draft bill was released. Nirupama Rao said 'Without these visa holders, US businesses and consumers would not benefit from the services they have come to rely on. Jobs would not be created and, in fact, could go elsewhere.' is a specialist visa consultancy with nearly twenty-five years of experience dealing with visa applications. We are OISC registered. We can help with a wide range of visa applications to the UK or your country of choice. Please feel free to contact us for further details.