H-1B visa ban expiry to benefit Indian tech companies
Operating margins for the sector can fall by up to 80 basis points as local hires cost more, as per estimates
In a move that would bring much relief to Indian technology firms, the new Biden administration has decided not to extend the visa ban, including on H-1B visas, as it expired on Thursday.
The H-1B visa is a non-immigrant visa, which allows US companies to employ foreign workers in specialty occupations that require theoretical or technical expertise. A huge chunk of the nearly 85,000 H-1B visas issued every year is used by Indian IT services companies such as Tata Consultancy Services Ltd, Infosys Ltd and Wipro Ltd.
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Due to the uncertainties in the H-1B visa regime, a number of large IT companies have increased local hiring in the US to reduce visa dependence. However, this was impacting their margins as the cost of hiring US nationals is higher.
Employee expenses account for 60-65% of total operating costs for large IT services companies. According to estimates, operating margins for the sector can fall by up to 80 basis points as local hires cost 25-30% more than their H-1B counterparts.
The then US president Donald Trump had issued a Presidential Proclamation (PP) on 22 June 2020 barring entry of H-1B, H-2B, L-1, and certain J-1 visa holders into the US, claiming they posed a risk to the US labour market, and later extended the date of suspension till 31 March 2021. IT industry apex body Nasscom said allowing the suspension to lapse makes great sense for the US.
“As the courts seemed to agree, there was no credible evidence that the visa holders do harm to the US labour market. Quite the contrary, these individuals are a vital part of the US workforce and their presence enhances and helps enable the US economy, innovate, and grow jobs across the country. Nasscom believes this will help US businesses access talent critical to the economic recovery phase in the post-covid world, it said in a statement.
Overall, the unemployment rate in the US jumped to 6.2% in February 2021 from 3.5% in the year-ago, while the unemployment rate in computer occupations remained flat at 2.4% for the period. As of 30 March, there were over 750,000 job vacancies for computer-related occupations, up 20% since May 2020.
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1 min read . 01 Apr 2021Immigration experts said Biden has taken the safe route rather than creating H-1B visa reforms. “It is telling that Biden let Trump’s H-1B visa ban expire naturally rather than explicitly lifting it when he became president," said Mark Davies, global chairman, Davies & Associates, LLC.
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