H-1B Reforms And Its Impact On India

Published : Jun 08, 2017 12:14 pm | By: M D Sridharan

With the Trump administration initiating a slew of Visa reforms, it would be a cause of concern for the Indian IT industry.

 

Ever since the Donald Trump administration announced a slew of measures to crack down on work visa abuse and tightened its grip over the process for H-1B visas, the Indian IT industry began to feel the tremors. H1-B is a non-immigrant visa that allows US companies to employ foreign workers in speciality occupations that require theoretical or technical expertise. HI-B visas are issued for skilled workforce from other countries for a specific period to understand customer requirements and to implement and test solutions.

Introducing H-1B reforms and monitoring outsourcing companies has been one of the main election campaign issues for Donald Trump. Trump has been advocating stringent measures to curb visa abuse and has alleged that companies are importing low-wage workers on the work visas and pledged to protect jobs for Americans.

Now that he has assumed office as the US President, Trump administration has announced overhauling immigration and checking abuses of the visa programmes that undercut the American worker. Trump administration has geared up to prioritize the jobs, wages and security of the Americans. Trump has been vociferously advocating companies to invest and hire more in the US. As a result new immigration controls and visa reforms have been introduced.

H-1B Overhaul

The United States Citizenship and Immigration Services (USCIS) clearly states: “The H-1B visa programme should help U.S. companies recruit highly-skilled foreign nationals when there is a shortage of qualified workers in the country. Yet, too many American workers who are as qualified, willing, and deserving to work in these fields have been ignored or unfairly disadvantaged. Protecting American workers by combating fraud in our employment-based immigration programmes is a priority for USCIS”.

Aimed at curbing visa abuse Trump administration has doubled the minimum wage of H-1B visa holders to $130,000 from the existing USD 60,000 which was established in 1989 and since then has remained unchanged. A legislation - The High-Skilled Integrity and Fairness Act of 2017 - has been introduced to this effect. Besides, it has also eliminated the two year Master's Degree exemption for H1 B visas.

The USCIS, responsible for selecting 85,000 H-IB beneficiaries, has clarified purportedly for administrative reasons, that computer programmers with two-year degrees do not qualify as speciality occupation as defined by the programme. The fact that a person may be employed as a computer programmer and may use information technology skills and knowledge to help an enterprise achieve its goals in the course of his or her job is not sufficient to establish the position as a speciality occupation. Instead, a petitioner must provide other evidence to establish that the particular position is one in a speciality occupation as defined”.

Protecting US Jobs

Curbing abuse of the H1-B visas will protect American jobs. Moreover, the existing practice of H1 B visas being allocated by random lottery has been withdrawn as it does not provide any priority to companies that pay workers more, Besides, increasing the minimum salary of H-1B visa holders to  a level on par with the average American salary, will make it a level playing field.  Under the new bill employers will have to first offer a vacant position to an equally or better qualified American worker before seeking an H-1B or L-1 visa holder. Moreover, it will ensure that visas are available for companies who truly need them.

The Trump administration has also issued a warning to US companies against the misuse of H1-B Visas which results in discrimination against US workers. Under the new rules USCIS has planned to  not only restrict  H-1B and L1 visas but also to conduct random and unannounced inspection nationwide on sites who have a high ratio of H-1B workers as compared to U.S. workers, especially the body shops that contract workers for big IT firms.

The Department of Labor (DOL) and the Department of Homeland Security (DHS) will investigate fraud and abuse as well as to increase penalties for companies that violate the bill’s requirements. Such a process would encourage US companies to hire qualified American workers and prevent them from using foreign workers as a source of cheap labour.

Now, Trump administration will also prioritize the top foreign students who have studied in the U.S. These would include advanced degree holders, those earning a “high wage,” and those with “valuable skills.” In essence the new visa reforms puts an end to the existing system that awards visas randomly, without regard for skill or wage to a merit-based system.

Impact on Indian IT

Around 85,000 visas are being awarded each year.  According to the US Labor Department, the top three H-1B occupations are computer systems analysts, application software developers and computer programmers — and those three account for roughly half of the department’s H-1B certifications. Critics have been openly pointing out that many technology companies, primarily in the US and India, have relied on these H1- B visas to bring skilled employees to US.  For decades these companies are taking the H1B visa route to hire temporary foreign workers on low salaries to displace local American workers on higher salaries.

The overhauling of popular H-1B visa has proved to be “challenging" for the Indian IT sector.  While the visa reforms are being introduced to protect the interests of Americans against the influx of foreign workers in the US job market, the US protectionism has spelt more trouble for Indian IT majors.

India’s major IT companies such as Tata Consultancy Services Ltd., Wipro Ltd. and Infosys, have been exploiting the loopholes to fill lower-level IT jobs with foreign workers, often at lower pay over the years. It is learned that Indian IT companies use nearly 70% of H1 B visas for hiring tens of thousands of employees each year. Besides, thousands of Indian students and professionals have used these visas to emigrate to the US. Statistics reveal that Indian IT companies have collectively facilitated the immigration of more than 500,000 Indians to the US since 1990.

 

It is no secret that Indian IT majors derive more than half of their revenues from the US. Overall, the new visa rules will make the operating environment for Indian IT companies more costly as Indian companies could easily witness around 60-70 per cent rise in salaries of the H-1B visa dependent workforce. The increase in minimum wages will have cost implications for Indian IT firms which could severely impact on the net profit. An increase in cost per professional that may force Indian IT companies to hire more locals and may have a negative impact on profitability of companies that are visa-reliant. With the reforms strictly banning an entry-level computer programmer position under the "specialty" skills, now a H1-B visa could not be issued for that position. Besides, the new rules also ends employment authorization cards to spouses on such work visas.

It has to be noted that already the Indian IT industry is facing some Visa hurdles in other countries such as UK and Singapore besides US, as increasingly the protectionism phenomenon has been echoing globally.  While Singapore acts as the base for South East Asia, UK is the base for Europe. Now, with US announcing the visa curb, the future does not look as glittering as it used to be for Indian IT industry. With these developments, existing Indian engineers will be phased out and the companies will be forced to hire more local engineers. Further, Indian companies will be forced to adopt a highly selective approach to send engineers on H1B visas as they will have to face the risk of higher operational costs. As a result, Indian IT companies will slash the number of employees being sent to US to on H1 B visa by half in the coming years. Besides, Indian IT companies have also been ramping up local hiring even as the move impacts their margins and profitability. The Act could also lead to a decrease in interest in students flocking to American universities, thereby minimizing the brain drain.

Major Retrenchment

Has the Visa reforms enforced by the US result in ending the dream run of Indian IT workforce?  Is the golden era of Indian IT coming to an end? Are major Indian IT bellwethers preparing for restructuring to the harsh realities of today?

The effects of the reforms have already been felt in the Indian IT industry. In the last couple of months, major Indian IT companies have announced lay-offs.  Lakhs of IT employees have been asked to leave. It is not only the junior level employees but  employees at all levels including the senior and middle level as professionals with 15 to 20 years experience have been asked to leave.  It is estimated that in the next couple of years around 1 million IT jobs will disappear and it will be a bloodbath as 4 out of 10 will IT engineers will lose jobs.

 

The layoffs results of the falling profits or performance? The opinion varies. While the industry body NASSCOM states the lay-offs are due to rapid automation, cloud computing and digital transformation across the globe, many leading Indian companies say that the lay-offs are nothing but routine exercise to weed out under performers. But statistics reveal that in the recent months the Indian IT has been witnessing large scale lay-offs that have never been seen in the past, even in the times of global downturn.

Was the writing on the wall clear? Are the Indian IT companies so under prepared?  Industry pundits point out that the Indian IT companies are unable to keep abreast of the changing demands such as re-skilling. Moreover, across the globe the lower end works such as maintenance is now either localized or automated. Further, with the introduction of digital service models coupled with extreme automation, companies can downsize up to eliminate 40% of the employees in a given functional role. In a sense the IT industry has moved from outsourcing to insourcing.

Today the Indian IT industry has been pushed from robust growth to a position of re-inventing and adapting to new skill sets. These are real issues that the Indian IT companies need to focus on. Time has come, especially, in the rapidly changing marketplace to necessitate continuous learning and upgrading to keep the growth trajectory moving up.

The massive retrenchment across the IT companies in India is indeed a warning signal. Both the government and the companies must act together to maintain the social fabric before the loss of jobs in IT could herald redundancies across other sectors of the economy.

 

 

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