H1-B visa rule restrictions to put cost pressures on Indian IT companies, impact margins, says report

H1-B visa rule restrictions to put cost pressures on Indian IT companies, impact margins, says report: Tightening of H-1B work visa norms by the US is all set to apply and put a cost pressures on the Indian IT services firms and collision on their margins because of the increase in compliances and rise in onsite hiring, as per a report.

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Though, the brunt or affect will be have the company specific and relative to H-1B visa dependence, which is as per the agency ICRA report said so.

“The changes will disqualify certain positions currently eligible for H-1B visas, thereby impeding the movement of low-cost skilled labour from India and will have direct bearing on margins,” said Gaurav Jain, vice-president, corporate sector ratings, ICRA.

The US is also considered on awarding visas to the most skilled which is for the highest-paid beneficiaries.

ICRA feels this move can work against the Indian IT services sector (H-1B dependent) as the average wage is around very lower by 25 percent compared to companies which are not dependent on H-1B visas as per estimates anyway.

A firm is defined as H-1B dependent if more than 15 percent of its US full-time employees are on an H-1B visa.

Jain said awarding of H-1B visas based on highest skill or compensation that will be leaves no less headroom for Indian companies to receive such visas.

As a result, increased onsite hiring or raising the compensation for H-1B visa candidate can have affect of the companies’ margins and will be credit negative, he added further.

“However, the impact will be company specific and relative to H-1B visa dependence,” he added.

The US government is also planning to enduringly end work authorisation (H-4 visa) which is also granted to spouses of H-1B visa holders.

ICRA feels cancel such visas can have an indirect negative impact on workers at present employed on H-1B visas or seeking such visas whose spouses are doing some professionals work.

Jain said Indian companies can begin to ramp up onshore hiring.

“Leading firms are also increasing their proportion of offshore work to reduce dependence on such visas, though the magnitude of such shifts is expected to be marginal as only certain services are amenable to higher offshoring (testing, IMS) compared to others,” he said.

Overall, ICRA expects a ramp up in aground appoint and hirring, particularly for entry-level programmers which is in order to maintain a competitive cost structure, whilst reducing dependence on H-1B visas for such low-cost or cheap but talented and skilled labour.