Opinion

Be prepared for the H1B visa squeeze

MOHAN R. LAVI | Updated on June 12, 2013 Published on June 12, 2013

H1B visa queues may not get longer. — R. Ragu   -  The Hindu

Software firms should try out joint ventures, sub-contracting and US acquisitions to get over this hurdle.

US President Barack Obama is being forced by a “group of eight” legislators to consider The Border Security, Economic Opportunity and Immigration Modernisation Act, 2013, which takes a look at homeland security.

Raising the cap

The fact that this law has not been given a nickname as is the wont in the US, suggests that these are early days yet for the Bill, which the software industry in India is following with bated breath.

The Bill raises the annual H-1B visa cap and H-1B wage requirements, and requires employers to make significant efforts to recruit US workers. The current H-1B visa cap of 65,000 is replaced with a cap that fluctuates between 115,000 and 180,000 based on a market escalator formula that considers employer demand and unemployment data.

Employers are required to place mandatory ads and perform other good faith recruitment to find US workers before hiring an H-1B worker.

Employers cannot intentionally displace US workers; besides, they must pay an additional fee to place an H-1B worker with another company. Heavy users of the H-1B programme have additional obligations, such as offering the job to US workers first, and a prohibition on having more than 50 per cent H-1B or L-1 workers in their workforce.

The Bill also makes it easier for H-1B workers to change employers and limits employers’ ability to place L-1 workers with other employers. .

When Enron happened, the US reacted with Sarbanes Oxley. When the global financial crisis was created by banks, the US responded and reacted with American Recovery and Reinvestment Act and a host of changes impacting the banking industry such as the Volcker Rule. The immigration law is probably one of the few pieces of legislation where the US is not reacting to an occurrence — though one could say that the gun-shootouts and bombings during the Boston Marathon could be triggers; one of the objectives of the law is to control immigrants at the US borders.

Impact and response

It is apparent that the proposed legislation would impact the software industry in India — and very hard. The business model of many of these service providers would need to be re-looked into. Increased costs and margin hits along with impediments in placing H-1B and L-1 visa holders on site in US clients’ locations would be the critical areas of concern.

The 15 per cent ratio in the latest amendment would curb the possibility of working at client sites, and the increase in visa fees will impact costs.

The software industry could respond with a host of strategies — they could pass on the increased costs to clients (the low-cost tag that India is fading away year-on-year); they could increase acquisitions of US-based companies so that they have the local resources to service clients; they could near-shore instead of off-shore, or they could also work out arrangements (sub-contracting or joint-ventures) with other service providers which typically do not exceed the visa limits.

Software service providers in India would have to think of out-of-the-box and jugaad solutions to tackle the rationing of visas — once they come into force.

CUMBERSOME LAW

By attempting to fix immigration, visas and homeland security in one single Bill, the United States appears to be attempting too much, too soon. It would do well to break up a gargantuan Act into its individual components and tackle them individually.

The US has benefited economically from India service providers; so taking a hard stance overnight would only fracture relationships. The software industry would be hoping fervently that the final provisions are diluted and watered down. The US should think of a sunset date (say, five years from now) for the present immigration law and introduce the new law in phases.

(The author is Director, Finance, Ellucian.)

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Published on June 12, 2013
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