H-1B Pay Boost by Trump Administration: "​What it means to Indian IT Companies"​!

H-1B Pay Boost by Trump Administration: “​What it means to Indian IT Companies”​!

Recently, The Trump administration have come out with an announcement on H-1B Visa which implies an overhaul of the H-1B visa program for high-skilled foreign workers that will require employers to pay H-1B workers significantly higher wages.

Few other announcement on the same includes narrowing the types of degrees that could qualify an applicant and shortening the length of visas for certain contract workers. These changes were introduced by the Departments of Labor and Homeland Security on Tuesday – 2Oth Oct’20.

Under the new rules, H-1B workers in jobs at the lowest of four skills levels must receive the 45th percentile of the wages for their job type and location. Previously, they could be paid 17th percentile. Under the new rule, the higher the skills level, the higher the wage point is on the wage distribution. Workers at the highest skills level must be paid at the 95th percentile on the wage distribution, up from 67th percentile.

Mr. Cuccinelli and Patrick Pizzella, the deputy secretary of labor, said the changes were necessary to protect American workers, whom the administration believes are being undercut by foreign workers on H-1B visas who are paid lower wages to perform similar jobs.

According to Cato Institute, Indian IT firms will have to increase wage offers for H-1B employees by more than 30% following the Trump administration’s new rules. These will push MNCs IT firms to hire locally, and/or move work to offshore locations.

The National Foundation for American Policy, which supports expanding the H-1B program’s current 85,000 cap on new visas, said its calculations showed that for computer-related jobs in Silicon Valley, minimum required pay will go up by about 35% to 40% across all skill levels.

Meanwhile, we have seen Indian IT companies recruiting largely in last quarter. India’s top IT services providers – TCS, Infosys, Wipro and HCL Technologies – increased their hiring in the quarter-ending-September.

TCS itself had recruited 9,864 people, “in anticipation of the growth trajectory” ahead, the company’s HR head said. There was an uptick from the first quarter, when the four companies reported a net reduction of over 9,000 workers.

What new H-1B visa rules means to Indian based IT Companies ?

This would significantly increase costs for Indian IT service companies that depend on H-1Bs, and will push them to hire hire locally, and/or move work to offshore locations like India.

One of great advantage MNC tech companies have, is providing onsite abilities for their clients. This is also cost effective for them. After new regulation, MNC Indian companies might lose this advantage. Their US clients might start initiating their work to mid- smaller technology companies in India due to costing vs benefits criteria.

US based client offices might not be specific of office locations in India. Their main criteria will always be delivering quality products. This might create a surge in local recruitment especially in Tier 2 cities as there will be a cost arbitrage compared to Tier 1 locations.

Existing H-1B holders looking to renew their visas might not qualify unless their employers raise their salaries accordingly. And this might increase supply of quality experienced software developers in India, especially in Research sector which is much needed for next stage of growth. Also, these might make India progressing on nascent arenas like Artificial Intelligence and Robotics.

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