After visa fee hike, Trump's wage-based H-1B plan threatens to push Indian IT further offshore

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The Trump administration has proposed replacing the H-1B lottery system with a wage-based selection process, just days after imposing a record $100,000 visa fee, a move experts say could hit Indian IT staffing firms hardest and accelerate the offshoring of technology work.

The goal of the new process, according to the US Department of Homeland Security, is to “better protect American workers from unfair wage competition” and direct visas to “the most highly skilled foreign professionals.”

What’s the new proposal?

On September 23, the Department of Homeland Security unveiled a new proposal to overhaul the lottery-based H-1B visa system by introducing a wage-based selection process prioritising higher-paid, higher-skilled applicants.

The announcement follows a White House directive that dramatically increased visa fees to $100,000 for new H-1B applications, a steep rise from the previous range of $215 to $5,000.

Industry analysts caution that these measures risk disproportionately affecting Indian IT companies, potentially accelerating the trend of offshoring technology work to countries with lower labour costs.

Unlike the old lottery system, which randomly selected petitions when demand exceeded the annual cap, the new wage-based system would prioritize H-1B visas for higher-paid, higher-skilled workers.

Also read: Inside Trump’s chaotic overhaul of H-1B visa

Indian IT at risk

Daniel Kotchen, partner at US-based Kotchen & Low LLP, told Moneycontrol that Indian IT firms would be most exposed if the proposal is implemented.

"Indian IT firms tend to apply for H-1B visas for lower-wage positions compared to, for example, an end employer like Apple. I would expect that the IT firms would be disproportionately impacted by the Trump administration’s proposal,” he said.

The combination of higher visa costs and a wage-prioritised selection is expected to make it even harder for Indian firms to staff mid-level roles onsite in the US.

How will it impact Indians?

India has long dominated the H-1B programme. In 2024, Indians accounted for 71 percent of the 399,395 approved H-1B visas, with China a distant second at 11.7 percent.

Also read: Will the Indian IT sector crumble under the new H1B visa guidelines?

Margin pressure on IT companies?

According to Gaurav Vasu, founder and CEO of market intelligence firm UnearthInsight, Indian IT companies are likely to prioritize hiring locally, which may lead to short-term margin pressures. The majority of them have already reduced their dependency on H-1B visa allocations over the years, he said.

“There are too many changes proposed at this point; now, which one will be finalized is yet to be seen. But even if it goes through, it’s a clear indication of what they originally wanted to do – only get premium labour into the country,” he told Moneycontrol.

Also read: H-1B fee hike unlikely to impact Indian IT as top firms reduce dependency

Offshore delivery set to rise

Analysts believe that as onsite hiring becomes less viable, offshore delivery from India will gain further momentum.

“In the near term, we can expect the movement of some work offshore, as most contracts typically have flexible delivery clauses,” said Akshat Vaid, partner at Everest Group. “Expect enterprises to change the mix even further towards offshore. The governance and reporting workloads/associated costs might also increase.”

Also read: Analysts see limited impact on Indian IT as White House eases concern on H-1B fee hike

Pressure on mid-level roles, reduced opportunities

The wage-based model, if enforced, will also change the profile of Indians entering the US market. Kotchen pointed out that “as a practical matter, H-1B visas will likely be awarded for more niche, high-end roles, and fewer mid-level and lower-level roles.”

This could reduce opportunities for Indian professionals in academia, research, and healthcare, who often work at lower prevailing wage levels.

Also read: Only 3-5% of Indian IT workforce is on H-1B; companies don’t expect significant impact of new visa fee

Impact on US jobs

Prashant Yadav, partner for digital and technology at leadership consultancy firm Amrop India, added that while large product companies may absorb some of the talent because of their deeper pockets, the overall employment impact in the US may be adverse.

“It’s not a slam dunk. Product firms are very choosy in terms of the talent they pick up. They need more expertise. So they too might face challenges and may also need to figure out how to use more offshore talent, just like the services companies will need to do,” Yadav said.

Previously, Moneycontrol reported that the hike in visa fees is likely to hit US tech firms hardest.

Also read: $100,000 H-1B visa fee to hit US tech firms hardest: Govt sources

For now, it seems like American tech giants knew what was coming. For example, big tech companies such as Google, Apple, Meta, Microsoft, and OpenAI were already ramping up investments in India in the last couple of months.

From major office leases in Hyderabad and Bengaluru to new engineering hubs and AI partnerships, India is quickly becoming a critical part of their global expansion plans.

Also read: Apple, Google, Meta, Microsoft and OpenAI expand in India amid Trump trade tensions

Cost pass-through challenges

With the new visa fee shock already inflating the cost of onsite staffing, Indian IT service providers are expected to absorb part of the costs in fixed-price contracts while pushing for mid-contract amendments in larger transformation deals.

“For pass-through attempts, in time-and-materials contracts, they’ll push for cost-plus adjustments to pass fees onto clients,” Everest Group’s Vaid added, though he cautioned that success will be uneven like “some in niche skills, harder in commodity ADM (application development & maintenance).”

UnearthInsight’s Vasu is expecting a near-term margin impact across the Indian IT firms of all sizes.

“The clear underlying message is to hire locally. That’s what IT companies are going to do. There will be a 0.3-0.5 percent margin impact for Tier-1 IT companies that will get nullified in the long run as they plan smarter,” he said.

IT firms trail Big Tech in H-1B wages

The Trump administration’s move to scrap the lottery system and replace it with a wage-based selection process for H-1B visas could tilt the balance in favor of Big Tech firms over Indian IT services players.

Big Tech vs Indian IT

Data from aggregator MyVisaJobs platform shows that companies like Google ($178,184), Apple ($202,303), and Meta ($199,944) pay far higher average salaries compared to IT services firms such as Cognizant ($101,773), Infosys ($103,102), and HCL America ($104,848).

While Cognizant, TCS, and Infosys rank among the largest sponsors of H-1B visas, their lower wage levels could see them lose out under the proposed system, which prioritises higher-paying employers.

Outlook

This could further squeeze the pipeline of onshore talent for Indian IT, even as US tech giants consolidate their dominance.