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H-1B suspension beyond September to hit IT services firms' talent supply chain: Report

The likely suspension comes on the back of rising unemployment in the US on the back of novel coronavirus pandemic

June 01, 2020 / 09:23 PM IST
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Likely suspension of H-1B and L-1 visas by the Trump administration beyond September could impact the talent supply chain for IT services and US technology firms, according to a Kotak Institutional Equities report.

Increased localisation efforts could help control damage to some extent, the report added.

The likely suspension comes at the back of rising employment in the US, which has now crossed 40 million on the back of the novel coronavirus, or COVID-19, outbreak. The Trump administration in an executive order signed on April 22 suspended immigration for 60 days. It stated that non-immigrant visas such as H-1B will be reviewed within a 30-day period to ensure that American workers are not impacted. That ended on May 22.

An order related to this regard could be expected in the next one-to-two weeks, the report said. “Such an order will not impact processing of visa applications, but can deny entry to applicants into the US  even with approved visas. In case of such an event, duration of the prohibition is important.”

If it is a temporary ban for 60-90 days, it will have not have a material impact since any visas approved would come under financial year starting October 2020. However, any ban into the US beyond September can impact supply chain of talent for IT services companies, the report added.

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Are IT firms prepared?

Top IT firms in the last few years have reduced their dependence on H-1B due to stringent visa regulations imposed by the Trump administration since 2017.

This includes increased denial rates and request for evidence. Top IT firms such as Infosys, Tata Consultancy Services (TCS), HCL Technologies and Wipro have stepped by their localisation efforts with more than 50 percent of their workforce now comprising American employees. According to TCS' annual report, close to 20,000 American employees have been hired by the company over the last five years.

These efforts over the last few years would to some extent contain the damage arising due to the US presidential elections as well.

“Tier 1 IT companies are in a good position to manage supply constraints due to further restrictions on H-1B visas provided these restrictions are for a brief period,” the report said.

Top H-1B employers

Among the technology firms, Amazon, Google, Microsoft, Facebook, Apple and Intel are one of the top H-1B employers with an approval rate of more than 96 percent.

Amazon, Microsoft and Google alone have close to 20,000 petitions approved, the report revealed. They are followed by Facebook and Apple at more than 7,000 approved visas.

Among Indian firms, Infosys recorded the least approval rate for H-1B petitions at 68.2 percent for the year-ending September 2019. Total number of petitions approved for Infosys was 8,053.

Cognizant and TCS are the largest employers with total approved visas standing at 19,333 and 7,592 respectively. Percentage of petitions approved was 69 percent for Cognizant and 78 percent for TCS.

The report reveals that number of approved H-1B visas have declined by more half since 2017. For TCS, approved petitions in 2017 was 14,953 whereas in 2019, it was 7,592. Similar trend could be found in Infosys, HCL Tech and Wipro.

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first published: Jun 1, 2020 09:23 pm