Explainer | What does the delay in H-1B wage hikes till Nov 2022 mean for Indian techies?

Kellen Powell, an immigration attorney in the US, said, “I think in part, the rule is being delayed because the administration is worried that the wage rule was rushed and they need to think about unintended consequences.”

The Biden administration has deferred once again the H-1B wage hike rule that would increase the salaries of highly skilled workforce. A huge relief indeed to Indian techies and IT firms, one of the largest beneficiaries of the visa.

But, the move has also raised questions from the immigration experts on the government’s intention in delaying instead of scrapping it altogether.

What is the rule about?

The rule “Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Immigrants and Non-Immigrants in the United States” by the Department of Labor, seeks to increase wages of H-1B and other skilled immigrant workforce such as H-1B1, E-3 and green card applicants.

It was expected to be implemented on May 14, 2021, with the effective date being July 1. It will now be implemented from November 14, 2022 and the effective date is January 1, 2023.

Why the delay?

Kellen Powell, an immigration attorney in the US, said, “I think in part, the rule is being delayed because the administration is worried that the wage rule was rushed and they need to think about unintended consequences.”

The period will allow them more time to analyse the legal and policy issues raised by the rule, as well as additional time to compute and validate prevailing wage data for specific occupations and geographic areas, said the US-based immigration law firm Fragomen in a note.

In addition, the Biden administration is looking to implement a comprehensive immigration reform by 2022, said Powell and added that in that case it might render the wage hike rule useless as the current immigration system will be replaced.

Some have pointed out to the backlash they might face if they were to get rid of the rule. “The headlines would be something like, ‘Biden lowers minimum wages for foreign workers’. They obviously don’t want that kind of publicity,” quipped an immigration attorney.

What does this mean for Indian IT and techies?

This is indeed a huge relief. Indians are the largest beneficiaries of the visa. In FY19, of the 1.8 lakh H-1B visa issues, Indians accounted for about 1.3 lakh. Also of the 85,000 fresh visas issued every year, Indians account for a significant share.

The gap of almost two years will give the firms plan an alternate strategy, be it localisation or increasing their offshore effort. Top IT firms have more than 60 percent of their employees in the US as locals. Efforts are being made by the firms to further improve localisation.

But the wage increase would indeed put additional strain, as firms will have to increase the wages for the American employees as well to ensure parity. So this translates to additional cost for the firms.

Is this the first time the implementation is being delayed?

No, the H-1B wage hike rule has a history. It was first implemented on October 8, 2020. The rule increased the wages by as high as 50 percent in some regions and earned a huge backlash from the tech, education and immigration community. Three lawsuits were filed in the US courts challenging the rule. All three US courts passed the order that the rule was unconstitutional since it did not follow the notice and comment period.

Again on January 12, 2021, the Trump administration announced the rule. Unlike the former, the one announced in January reduced the scale of hikes. For instance, the wage hikes range between 35 percentile and 95 percentile compared to 45 percentile and 90 percent for the four H-1B wage levels. (Level 1 being freshers and level 4 were highly experienced professionals).

This was deferred by 60 days when Joe Biden was sworn in as the President on January 20, 2021. On March 12, 2021, the administration announced delay in implementation till May 14, 2021.

Are there any lawsuits filed against the rule?

Yes. Memphis-based immigration attorney Greg Siskind, said that they would continue with their litigation against the rule. Siskind is representing Purdue University challenging the DOL’s rule that hiked wages for H-1B, H-1B1, E-3 and PERM cases.

There are likely to be more lawsuits if the rule is implemented given the additional cost companies have to incur and inability to access talents for smaller firms.

Why are people opposing the rule?

While large tech firms will be able to pay large salaries, the same cannot be said for smaller firms. “The wage rule impacts small businesses, not the staff augmentation (outsourcing) companies. While the outsourcing companies can just pass the increased costs on to their end clients, small businesses cannot,” pointed out Powell, the expert cited earlier.