The US Presidential election is usually a high-stakes affair for Indian techies, whose future and fortune often depend on the occupant of the Oval Office. In his first few weeks as President, Joe Biden has given technology firms and Indian IT professionals a lot to cheer about, as his administration has overturned many of Donald Trump's protectionist policies.
However, the picture is not entirely rosy and outsourcing majors could see their costs spike if some of Biden's policies go through.
Biden signed an immigration bill on January 20, 2021 that would clear greencard backlogs under the employment-based category. This would benefit close to 8 lakh Indians in the US, who are waiting for their greencards.
The administration has also done away with the proposed rule that intended to ban H-1B spouses from working. In FY19, close to 1.3 lakh H-1B visas were issued to Indians. Every year close to 85,000 fresh H-1B visas are issued, with Indians and IT firms being among the largest beneficiaries.
But a wage-related rule change could spoil the party. The Biden administration is currently reviewing a rule that would increase wages for H-1B employees. Though it has deferred the H-1B visa selection based on wages till the end of December 31, 2021, the administration is likely to implement it in the next fiscal.
Companies for now are playing it safe and are likely to continue with local hiring to reduce dependence on visas. With a majority of employees working from home for top technology companies, the dependence on visas is also likely to come down in the near term, as more companies move work offshore.
Salil Parekh, CEO, Infosys, said in a recent interaction with Moneycontrol, “We have built a very good model around localisation, but we also have a very good model where we have a lot of people working on different visa situations as well.”
The company’s business model, he added, is built on working with multiple scenarios even in the future. “Given where we are in the cycle, my sense is Infosys will be able to work in this set of scenarios and policy decisions as well if not better as we worked in the past because our objective is really to build a business that works under multiple scenarios," he said.
Commenting on the H-1B wage-based selection, V Ramakrishnan, CFO, TCS, recently said, “We don’t know even if these changes will survive. Some of the changes that happened, they were successfully legally challenged.”
Three US courts blocked the US Department of Labor (DOL) from implementing H-1B wage hikes, which came into effect in October 2020. It was on grounds that the rules violated administrative procedures. The DOL published the final rule for wage hikes on January 12, 2021 with a 60-day comment period. It is currently under review by the Biden administration.
“Having said that, our own dependency on these has come down significantly. So while these may create disruptions, these are part of the business model and we will be able to handle it whichever way the changes happen,” Ramakrishnan said.
“Prioritizing purely on wage levels has the potential to significantly damage some of the most innovative companies in the world along with many hospitals and healthcare providers, research facilities, universities and other petitioners,” IT industry body NASSCOM said in a statement.
Nevertheless, these wage hikes will add costs to IT firms. In an earlier interaction with Moneycontrol on November 2020 on H-1B wage hikes, C Vijayakumar, CEO, HCL Tech explained that while the company employs two-thirds of its staff as locals and the rest as H-1B workers, when the wages for H-1B visa holders are increased, the expectation will be to have that parity in place.
“That is going to result in wage inflation overall. We have to see what methods to adopt,” Vijayakumar said. “Second thing is, there is going to be a cost impact. There are no two ways about it,” he added.