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Our Bureau The tightening of H-1B visas by the United States Citizenship and Immigration Services (USCIS) is likely to have a negative bearing on Indian IT services companies with significant dependence on such visas, according to credit ratings agency ICRA.
“Tightening of H-1B norms and the changes thereof 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 .
Similarly, the awarding of H-1B visas, based on the highest skill or compensation, will leave less headroom for Indian companies to get such visas, Jain added.
Company-specific
“Consequently, increased onsite hiring or raising the compensation for H-1B visa applicants will significantly impact companies’ margins and will be credit negative. However, the impact will be company-specific and relative to H-1B visa dependence,” he said.
The cap on new H-1B visa issuances is 65,000, with an additional 20,000 for highly-skilled labour possessing a master’s or a higher degree from a US university. Indian companies’ share of the total H-1B visas (fresh as well as renewals) issued in FY17 (October-September period) was close to 75 per cent (65.3 per cent in FY13). Most of it was issued for the computer-related field.
The Indian IT services sector has been obtaining fewer H-1B visas over the past few years. This is mainly owing to lower growth opportunities as well as a shift of services offered to digital technologies, which rely on automation, leading to a lower requirement of skilled labour workforce.
Between FY15 and FY17, in ICRA’s sample of eight leading Indian IT services companies, there was a roughly 37 per cent decline in the share of approved petitions.
The lower H-1B visa demand is also reflected in the decline in net hiring by leading IT services companies as well as applications made for H-1B visas.
The net addition, as a percentage of the total employee base, reduced to 1.1 per cent during FY18 from 10.7 per cent in FY15 for the sample companies.
Falling numbers
For FY17 visa approvals (H-1B lottery held in April 2017), the USCIS received 1.99 lakh applications, compared to 2.33 lakh applications in FY15, a reduction of 15 per cent. This declined further to 1.90 lakh applications in April 2018, reflecting lower requirement of H1-B visas.
“Tightened visa norms are bound to increase compliance requirements as well as higher onsite hiring and add to cost pressures. Indian companies have started to ramp up onshore hiring. Leading companies 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, etc). ICRA expects a ramp-up in onshore hiring, particularly for entry-level programmers, to maintain a competitive cost structure while reducing dependence on H-1B visas for low-cost skilled labour,” said Jain.
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