As the Indian IT services industry derives a large chunk of its revenue from exports to America, any increase in the US visa cost has a direct impact on profit margins. Recently, the US President re-authorised the special fee on non-immigrant visas for companies that hire more than 50 per cent foreign workers and doubled it to $4,000 for H-1B and to $4,500 for L-1.
The special fee on non-immigrant work visas was originally introduced in 2010 under the James Zadroga 9/11 Health and Compensation Act.
Initially, the fee aroused a lot off hostility in India because of its ‘50 per cent employees threshold’ as it was mainly the Indian IT companies that crossed the limit. The big Indian IT companies have over 50 per cent of their workforce in onsite locations filled by H-1B visa holders.
The fee that has been re-authorised will cost the industry an additional $400 million a year, according to Nasscom estimates.
For the Indian IT industry that generates about $100 billion in revenue, the impact on margins from the new fee may be 30-40 basis points.
The Indian government has taken up visa fee hike by the US with the WTO as it is inconsistent with America’s commitments under the General Agreement in Trade in Services.
But a bigger concern is that more and more countries are getting protectionist and they want to support their own domestic industries. This year, Switzerland, for instance, did not increase the quota for highly skilled workers after reducing it in 2015. Now, there are talks that many senate members in the US are asking for a change in the US immigration Bill.
The demand includes a cut in the number of available visas to 70,000 from 85,000, preference to candidates from US universities and requiring companies applying for H-1B visas to have at least 50 per cent of their US workforce as Americans.
If these restrictions come into play, they may have far-reaching implications for Indian IT companies.