H-1B visa overhaul: Indian IT firms face cost rise, dearth of skilled workers
A US legislation that proposes doubling of the minimum wages of H-1B visa holders to USD 130,000, sent IT stocks stocks plunging by 9% on Tuesday on fears that headcount expenses will go up hitting the sector’s profitability.business Updated: Jan 31, 2017 19:31 IST
Indian IT firms face the risk of higher operational costs and shortage of skilled workers with the proposed overhaul of popular H-1B visa regimeby American President Donald Trump, leading to a sharp slide in tech stocks and prompting India to convey its concerns to the US.
A US legislation that proposes doubling of the minimum wages of H-1B visa holders to US $130,000, sent IT stocks plunging by 9% on Tuesday on fears that headcount expenses will go up hitting the sector’s profitability.
Industry body Nasscom conceded that the Lofgren Bill contains provisions that may prove “challenging” for the sector. It plans to take a delegation to the US in February to meet US administration on this issue.
“Specific provisions of the bill that need to be considered are that the it does nothing to address the underlying shortage of STEM-skilled workers, which has led all companies to have a calibrated strategy of hiring locally and bridging the skills gap by bringing skilled workers on non- immigrant visas including H-1Bs,” Nasscom said.
The apprehensions come at a time when the US $150 billion industry is already unnerved by reports that Trump has drafted an executive order aimed at overhauling work visa programme.
The US protectionism could spell more trouble for firms like TCS and Infosys that are already facing strong headwinds from currency fluctuation and cautious client spending.
“Since the rationale for the administration and the legislative wing is to protect job opportunities for Americans, our strong suggestion is that they should carefully calibrate the conditions keeping in mind the skill shortage in the US,” Nasscom President R Chandrashekhar said.
Raising wage levels under new rules for certain set of companies will nullify the objective of protecting jobs for American nationals, he added.
Ministry of External Affairs has said India’s interests and concerns on the issue have been conveyed both to the US administration and the US Congress at senior levels.
Some analysts are of the opinion that Indian companies could easily witness around 60-70% rise in salaries of the H-1B visa dependent workforce.
“Hence, this could have significant impact on the net profit,” Angel Broking said.
Greyhound Research estimates that average margin hit for an IT services provider will be 5-10%, depending on the total base of employees currently on H1-B visas.
The current H-1B minimum wage of US $60,000 was fixed in 1989 and has since remained unchanged.
Companies like Tata Consultancy Services and Infosys, which derive more than half of their revenues from the US, declined to comment given the sensitivity of the matter.
On the other hand, global tech titans like Google CEO Sundar Pichai, Microsoft chief Satya Nadella, Apple’s Tim Cook and others have already gone public with their views on Trump’s protectionist stance.