4 negatives for Indian IT from proposed H1-B visa rules

Moneycontrol Bureau

Brokerage house Nomura feels the passage of the proposed US Immigration Bill in its current form would be negative for the Indian IT sector and weaken competitiveness versus MNC IT players and depress margins. Earlier this week, the brokerage held a conference call with Ameet Nivsarkar (VP, NASSCOM) to understand the implications of the proposed Bill on Indian IT companies. Following are the key negatives of the proposed Immigration bill, according to Nomura: 1. Under the proposed Bill, in 2014, companies will be banned from obtaining further visas if more than 75% of their staff are H-1B or L-1 employees. In 2015, the ban applies to companies if more than 65% of their workforce is H-1B and L-1 workers. In 2016, the ban moves to 50%. Most Indian IT companies have 50-80% of their staff as H-1B or L-1 visa holders currently. 2. Employees on H1B visas may be restricted from working at the customer sites, although they can work from global delivery centres. This would require a business model change for Indian IT companies and raise the cost on onsite staffing for projects. 3. The bill proposes to significantly increase the fees for employers who are H-1B dependant compared to normal users of the program. If the employer has 50 or more employees, and more than 50% are H-1B or L-1 employees (who do not have a green card petition pending), the employer must pay a USD10,000 fee per additional worker. 4. The bill stipulates that employers post a detailed job opening on the Department of Labor's website for at least 30 calendar days before hiring an H1B applicant to fill that position. This would increase lead times for execution and would reduce competitiveness of Indian IT vs MNC IT, in our view.