Stricter US Visa Rules May Hit Indian IT Firms

February 5, 2009

Two US senators Dick Durbin and Chuck Grassley plan to reintroduce a stricter H-1B visa reform legislation this year, making it mandatory for outsourcing companies such as TCS, Wipro and Infosys to hire local American workers before seeking any H-1B visas for their Indian employees.

The move, if implemented, would drastically increase costs and make it difficult for the Indian IT companies to send employees onsite at a time of wrenching economic slowdown. The bill will also ask these companies to pay the prevailing wages to H-1B workers, making offshore outsourcing more attractive, and onshore resources costlier by 20-30%.

"The Durbin-Grassley bill would require all employers seeking to hire an H-1B visa holder to pledge that they have made a good-faith effort to hire American workers first and that the H-1B visa holder will not displace an American worker," senator Grassley's office said in a statement.

Companies such as Wipro, which serves US customers including Citi and GE by sending H-1B visa holders to the country, say such regulations will be unfortunate, if introduced.

"If a restriction of this kind is introduced, the playing field will get unevenly poised," said Pratik Kumar, Wipro's HR executive vice-president. Wipro had sent about 3,000 people on H-1B visas in the past two years.

Granted by the US Citizenship and Immigration Services, around 65,000 H-1B visas were issued to immigrants from companies such as Microsoft, Cisco, TCS, Infosys and Wipro last year. Each H-1B visa costs around $6,000.

Senator Grassley, along with senator Durbin, had introduced a similar bill in the last Congress to reform the H-1B visa programme, which is yet to be passed by the House. When contacted by ET, a spokesperson for senator Grassley confirmed that the senators plan to introduce a similar legislation again this year. Top Indian tech firms are issued around 2,000-3,000 such visas every year, enabling them to serve customers like GE, GM and Wal Mart in the US.

According to Morley J Nair, a Philadelphia-based immigration attorney, the demand for these visas has far exceeded the supply in recent years. In 2007, 123,480 H-1B petitions were received in the first two days of filing and USCIS had to stop accepting further petitions. In 2008, the filing period was kept open for five days, and more than 163,000 petitions were filed, including 31,200 against the advanced degree quota. "In both years, a lottery was conducted to pick enough petitions to meet the quota caps," Mr Nair said in a statement earlier this month.

While senator Grassley wrote a letter last week to Microsoft asking the company to lay-off foreign H-1B visa workers before cutting almost 5,000 jobs in the US, senator Durbin is President Barack Obama's fellow senator from Illinois, and among long-time supporters of tougher H-1B regime.

At a time when US unemployment rates are at their peak, many supporters of the bill hope that the senators would be successful this year. "Given the current environment, they surely have much better ammunition than last year," said a senior official at a US-headquartered software company, who did not wish to be identified. According to the US Labor Department, the unemployment rate in December last year rose from around 6.8% to 7.2% with almost two million workers losing jobs between September and December.

The democrats also have a much better control of the Congress than they did last year.

In the November elections, the democrats were able to add more seats to their majority in both the US senate and the House of Respresentatives.

"More than the visa-led hiring, we need to expand our US footprint, as part of a customer-led strategy," Mr Kumar said. "We already have centres in Atlanta and Detroit, and we are currently evaluating a few more locations to hire local professionals," he added. This year, Wipro has not increased salaries for onsite employees due to the ongoing slowdown.

The US is not the first market to be mulling a stricter visa regime for immigrant workers. In December last year, the UK's home office introduced a new point-based work permit system, reducing the number of positions available for migrants by almost 200,000.

However, it's not clear if the bill will get passed even this time, and Indian companies hope that the Obama administration does not disrupt the outsourcing equilibrium.

"It depends on if the majority decides to take up immigration reform legislation. It's unclear at this point," a spokesperson for Senator Grassley said.

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