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Wednesday, July 15, 2020

Explained: How US pause on H1-B work visas will hit Indian companies

The US has blocked H1-B and certain other non-immigrant worker visas until the end of the year. A look at who uses these visas, and how the move will impact Indian firms who send workers to the US

Written by Aashish Aryan , Edited by Explained Desk | New Delhi | Updated: June 25, 2020 10:02:46 am
H1-B visa, H1-B visa banned, Donald Trump, Trump bans H-1B visa, US immigration visa An illustrative picture shows the application for United States of America work visa H1-B. (Getty Images)

The US administration on Tuesday said it was extending the 60-day ban on immigration and non-immigrant worker visas till the end of 2020. Popular work visas including the much-coveted H-1B and H-2B, and certain categories of H-4, J, and L visas shall also remain suspended until December 31, the White House said in a press note.

The move, US President Donald Trump said, was to protect domestic workers who had been impacted due to a contraction in the economy in the wake of the Covid-19 pandemic.

What are H-1B, H-2B, L and other work visas?

In order to fill a vacuum of highly-skilled low-cost employees in IT and other related domains, the US administration issues a certain number of visas each year which allows companies from outside the US to send employees to work on client sites.

Of these work visas, the H-1B remains the most popular among Indian IT companies. The US government has a cap of 85,000 total H-1B visas for each year. Of this, 65,000 H-1B visas are issued to highly skilled foreign workers, while the rest 20,000 can be additionally allotted to highly skilled foreign workers who have a higher education or masters degree from an American university.

Who is H-1B for?

H-1B: Person is Specialty Occupation: To work in a specialty occupation. Requires a higher education degree of its equivalent. Includes fashion models of distinguished merit and ability and government-to-government research and development, or co-production projects administered by the Department of Defence.

Apart from the H-1B visas, the US government also issues L1 visas which allows companies to transfer highly skilled workers to US for a period of up to seven years. H-2B visas allow food and agricultural workers to seek employment in the US.

Why did the US suspend non-immigrant worker visas?

Since it was started in 1952, the H-1 visa scheme has undergone many changes and revisions to allow or disallow certain categories of skilled workers in the US, depending on the economic situation of the country.

The technology boom coupled with the arrival of the internet and low-cost computers in developing nations such as India and China saw a large number of graduates willing to work at relatively low costs in the US, a win-win situation for both the employer and the employee. However, it has since often been criticised for sending low cost workers to the US at the expense of domestic workers.

Source: Reuters

In January 2017, after taking over as the president of the US, Trump had hinted that the low-cost workers were hampering the economy and undercutting jobs of citizens. The US had then hinted at reforming the “broken” H-1B visa system.

Trump seized the opportunity provided by the economic contraction due to Covid-19 by first banning the entry of non-immigrant workers till June 23, and then extending it till December 31.

In his executive order extending the ban, Trump said that while under normal circumstances, “properly administered temporary worker programs can provide benefits to the economy,”, the extraordinary economic contraction created due to Covid-19 posed a threat to the US workers.

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Who all does it impact?

Since the ban is effective immediately, the processing of all new H-1B, H-2B, J, and L visa categories stand suspended. This means those who do not have a valid non-immigrant visa as of June 23, and are outside of the US, will not be allowed to enter the country until December 31. Workers in essential services in the food sector have been given some reprieve, and their entry shall be decided by the consular officer of immigration services.

H-1B, H-2B, J and L visa holders, and their spouse or children already present in the US shall not be impacted by the new worker visa ban.

H1-B visa, H1-B visa banned, Donald Trump, Trump bans H-1B visa, US immigration visa H-1B visas are generally approved for a period of three years for a person, but many visa holders change employers to extend their US stay. (Getty Images)

How does it impact Indian IT companies?

Indian IT companies are amongst the biggest beneficiaries of the US H-1B visa regime, and have since 1990s cornered a lion’s share of the total number of visas issued each year.

As of April 1, 2020, the US Citizenship and Immigration Services (USCIS) had received about 2.5 lakh H-1B work visa applications, according to official data. Indians had applied for as many as 1.84 lakh or 67 per cent of the total H-1B work visas for the current financial year ending March 2021.

Apart from the suspension of these work visas, the executive order signed by Trump has also made sweeping changes to the H-1B work visa norms, which will no longer be decided by the currently prevalent lottery system. The new norms will now favour highly-skilled workers who are paid the highest wages by their respective companies.

This could result in a significant impact on margins and worker wages of Indian IT companies which send thousands of low-cost employees to work on client sites in the US. Though the large Indian IT companies have cut down their dependency on H-1B and other worker visas by hiring as much as 50 per cent of staff locally, they still rely on these visas to keep costs in check.

Indian IT companies also offer subcontracts to Indian nationals already present in the US with valid H-1B visas. Bangalore-based Wipro spends as much as 20 per cent of its revenue to subcontract Indian workers with valid H-1B visas.

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