H1B Barriers Force Indian IT Cos To Hire Locally

by CXOtoday News Desk    Apr 14, 2014

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Limited availability and high demand for H-1B work visas in the US has forced Indian IT companies to hire local talent for onsite positions. According to reports, there has been a steady rise in the number of H-1B visa petitions filed this year and Indian IT firms who are the biggest users of H-1Bs are out to grab a greater share of these ‘limited’  number of visas.  

The US Citizenship and Immigration Services (USCIS ) just announced that it received 1,72,500 H-1B petitions in the first few days of this month when it was open for accepting these petitions, as against 1,24,000 last years’, which means there has been a 40% increase in petitions this year.

While on one hand, the surge in the number of visas show how much the US economy has improved and the desperation of IT outsourcers to aggressively tap into this opportunity, it would also mean that Indian IT companies might need to hire more local talent to fill vacancies in the US — a costly proposition affecting margins.

Read: The Immigration Bill has serious implications for the entire IT industry

“The US economy is doing extremely well. Demand for outsourcing has picked up in the last two years and outsourcing companies have been caught unawares by the spike in demand. This year, they are trying to make sure they have enough visas to get and fulfil orders,” Ankita Vashistha, MD of outsourcing advisory and research firm Tholons told TOI. The H-1B is a non-immigrant visa that allows US employers to temporarily employ foreign workers. H-1Bs, however, come with a cap of 65,000, with an additional 20,000 given to those with advanced degrees, says the report. 

When petitions exceed the quota, USCIS conducts a lottery to determine the petitions to be accepted. The more petitions a company files, the greater its chances of receiving visas. The number of petitions for the advanced degree quota is normally not many more than the quota of 20,000. This means that this year some 80,000 petitions in the general category will be rejected. However Vashistha notes that both these movements have been very slow. Nevertheless, she said visas will remain important for at least the next five years.

Indian IT companies have the option of using the L-1B work visa, but these are meant to be used for those with even more specialized knowledge than the H-1B, reads a TOI report. And all these are spelling trouble for Indian IT services firms.

Shashi Bhusan of Prabhudas Lilladher in his report: “The trend of lower H-1B allocation along with higher rejection rate in L-1 (another work visa meant for employees of large multi-national companies) is disturbing for Indian IT. We expect Indian IT companies to push for higher onsite hiring in an already heated market. The recent wage survey indicates continued shortage of skills pushing higher wages. We see continued risk to onsite margin, hence overall margin due to the same. Moreover, the companies need to keep higher bench and adequate planning to cater on-demand resources.”

Business Standard mentions the 2014 Salary Guide by Robert Half Technology which revealed that the average base compensation for IT professionals in the US is expected to rise 5.6 per cent in 2014, with tech salaries seeing the largest gains among all fields researched, including accounting, finance, marketing and legal. Employers will pay even higher salary premiums for IT professionals with in-demand skills such as mobile applications, software development and business intelligence analysis, Robert Half found.

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