US H-1B visa curbs bill to hit IT sector

Protectionism has started raising its ugly head in the United States.

On Friday, information technology (IT) companies woke up to the rude shock of assistant senate majority leader Dick Durbin and senator Chuck Grassley introducing a bill to amend the current H-1B and L-1 visa programmes.

If the Durbin-Grassley legislation were to become law, the IT industry believes it would have to alter its current business model. The industry is, however, waiting for more clarity to emerge on the measure.

The bill was introduced in the Senate on Thursday. Going by Durbin’s tone in the press note issued on Friday, it seems the authors of the bill mean business this time.

“The H-1B visa programme is plagued with fraud and abuse and is now a vehicle for outsourcing that deprives qualified American workers of their jobs,” Durbin said. “Our bill will put a stop to the outsourcing of American jobs and discrimination against American workers.”

The bill proposes that employers who want to hire an H-1B guest worker should first make “a good-faith attempt” to recruit a qualified American worker. It also prohibits employers from using H-1B visa holders to displace qualified American workers.
But what will hit Indian tech firms the hardest is the suggested amendment to prohibit “employers from hiring additional H-1B and L-1 guest workers if more than 50% of their employees are H-1B and L-1 visa holders.”

This means foreign firms — including Indian players — working on projects in the US would have to maintain a minimum 50% ratio of local workers.

At present, IT outsourcing companies’ onsite projects are executed by over 80% H1-B or L-1 visa holders. They employ less than 20% — in some cases even less than 10% — locals.

If the bill is passed, it would also change the onsite and offshore mix for an IT company, and this could alter their currently lucrative global delivery business model.

“We have to get clarity on the definition of ‘employees’ in the bill because most of the H1-B and L-1 visa holders employed on onsite projects are on short assignments, but they are on the payroll,” said TV Mohandas Pai, HR head of Infosys.

Rostow Ravanan, chief financial officer, MindTree, said the repercussion of the proposed law would be more at the operational than the cost level.

Ganesh Natarajan, vice-chairman and CEO, Zensar Technologies, and Nasscom chairman, was more forthcoming.

“The provisions completely prohibit foreign companies, like Indian IT service providers, from getting any access to H-1B and L-1 visas. This will restrict their ability to compete in the US marketplace, is against the principles of free trade, and is a trade barrier,” he said.

Natarajan believes the premise that an H-1B visa is used to displace American workers is misplaced. “Indian companies had been allocated 12,000 visas in 2008 out of the total limit of 85,000 visas. This forms an insignificant percentage of the US technology workforce,” he said.

The latest data from the US Citizenship and Immigration Services (USCIS) shows that till April 2009, it has received about half the H-1 B visa applications against the cap of 65,000 for FY10. “This clearly demonstrates that companies are not using the H-1 B visa route to replace US workers with lower-cost foreign talent,” Natarajan said.