Trump's H1B visa policy to hit third-party supplier base of Indian IT firms

India is one of the biggest beneficiaries of H1B visas
A new policy announced by US President Donald Trump’s administration is expected to hit the third-party supplier base of Indian information technology (IT) companies in the US. 

According to the policy, companies would now have to go the extra mile to prove that its H1B employees deployed at third-party worksites have “specific and non-qualifying speculative assignments in speciality occupation”. 

“If a petitioner is applying to extend H1B employment for a beneficiary who was placed at one or more third-party worksites during the course of past employment with the same petitioner, then the petitioner should also establish that the H1B requirements have been met for the entire prior approval period,” the United States Citizenship and Immigration Services (USCIS) said on Thursday through the seven-page policy guidelines. 

H1B is a non-immigrant visa category, which allows employers to temporarily hire foreign workers in specialty occupations such as architecture, engineering, mathematics, physical sciences, social sciences, and biotechnology. Currently, the US issues 85,000 H1B visas every year, including 20,000 for those with advanced degrees from US universities. 

Indian and offshore-centric IT services companies are some of the biggest users of the H1B visa, which they use to depute employees at onshore locations or clients’ sites to work alongside the clients’ teams, and to transition work to offshore sites, which results in huge cost savings. 

About 40,000 of the 65,000 H1B visas available every year are availed of by Indians though top Indian IT services companies directly avail of around 15,000 and the remaining 25,000 are provided by third-party staffing agencies or ‘body shoppers’, who hire people with H1B visas and deploy them for their IT clients at the latter's clients places or third-party worksites. 

According to the USCIS, the required documents for H1B petitions at third-party worksites include evidence of actual work assignments, which may include technical documentation, milestone tables, marketing analysis, cost-benefit analysis, brochures, and funding documents.

“It will definitely have an impact but body shopping companies will be hit the most by the new policy,” said Kris Lakshmikanth, chief executive officer and managing director of Head Hunters India, an executive search firm.

While the new policy will not have direct financial impact on the Indian IT services firms, it would still entail additional paperwork atop the already cumbersome process, including increased scrutiny. “In view of the current policy announcement affecting third-party placements, it is almost mandatory to file all documents when applying for an H1B visa,” said Purvi Chothani, founder and managing partner of LawQuest, an immigration law firm. 

She added that Indian IT companies should be ready for the US authorities’ enhanced vigilance in the whole process. “The rules will be implemented more strictly and officers can no longer use their discretion about documents to prove employee-employee relationship, specialty occupation and specific jobs, when processing applications. The rejection rate may be higher because client firms may not support the Indian companies with required supporting documents,” she added.

The H1B visa rejection rates are already high, owing to the increased scrutiny under the Trump administration that has been pushing for an increase in local job creation. According to a report by Mercury News, the number of requests for evidence on H1B visa applications in 2017 jumped to 27 per cent in the first eight months after Trump came to power, compared to 19 per cent in 2016 under the Obama administration. Consequently, such scrutiny not only increases the processing time but also spikes the legal cost of processing for the companies. 

“While we are assessing the potential impact and will have more to say as we gather more information, initial perusal suggests that it applies to all third-party placements and not just those involving Indian or dependent companies. But this will be an unnecessary and expensive paperwork burden that will not make much difference,” said Indian IT industry body Nasscom. “Ultimately, this action seems to be at odds with the administration’s effort to reduce regulation and red tape,” the body added.

Indian companies have already slashed their applications drastically over the past two years. TCS and Wipro saw almost a 50 per cent drop in the number of approved applications last year. The next H1B visa filing procedure for the FY19 will commence from April 2. 

Why the decision affects India

 
  • India is one of the biggest beneficiaries of H1B visas
  • Of the 65,000 visas issued annually, around 40,000 go to India
  • Around 25,000 are provided by staffing firms or body shoppers

(With inputs from Romita Majumdar)


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