H1-B visa requests touch maximum limit within five days

As number of petitions expected to be higher than last year's, Indian IT firms might increase onshore hiring

Five days after it opened the window for filing of H-1B visas applications for 2016, the US government on Tuesday said the cap had been reached. It will now conduct a lottery system, a computer-generated random selection process, for H1B requests.

This is the third year when the H-1B visa cap was reached within the first five business days, indicating growing demand for the visa, popular among Indian information technology (IT) outsourcing services providers for deputing workers to clients’ locations.

H-1B is a non-immigrant  category, which allows employers to temporarily recruit foreign workers for jobs requiring special skills such as architecture, engineering, mathematics, physical sciences, social sciences and biotechnology. The US issues 85,000 every year though there is a provision of an additional 20,000 for people with advanced degrees from US universities.

Only a fraction of the total number of petitions is likely to be selected in the lottery. “Based on last year’s numbers, when 175,000 petitions were received for a total of 85,000 available H-1B visas, there is some chance that 50 per cent or less may be selected this year,” said Poorvi Chothani, managing partner at immigration law firm LawQuest.

“However, there is a general expectation that the US Citizenship and Immigration Services (USCIS) is likely to receive more petitions than last year. If this happens, the number could go down. For instance, if USCIS receives 200,000 petitions, it could go down to 30 per cent or less as many Indian IT workers will not qualify for the Master's cap and 6,800 are reserved for nationals of Singapore and Chile,” she added.

According to the lottery system, USCIS will initially determine those US Master’s degree cases that will be randomly selected towards the 20,000-limit. The remaining US Master’s degree cases will be added to the pool of general H-1B cap petitions.

USCIS will execute the second random selection process to determine those cases that are accepted toward the more general 65,000-limit. Only those cases that win the lottery will receive a receipt from USCIS. All other cases will be returned with their filing fees.

In the past financial year, the top four Indian IT companies saw a steady decline in the number of H1-B visas received compared to FY12-14. This was despite the continuing high rejection rate for L-1 visas, which according to various reports, is about 50 per cent.

In FY16, it is expected that the improved economic health of the US would push the demand for H-1B from sectors other than IT. “We expect that receipt notices for the cases that are filed for premium processing will be issued before mid-May and all other receipt notices will be issued between April and June/July 2015,” said Chothani. This will, at least for the next few weeks, result in the Indian companies not knowing whether their petitions have been selected, which makes it difficult to make commitments to clients and/or plan human resource requirements, she added.

The uncertainties around obtaining of H-1B visa are also expected to result in forcing the Indian IT services firms to increase local hiring, impacting the profit margin.

“In an already heated market, lower H-1B allocation, coupled with higher rejection rate in L-1, could result in continuing higher onsite hiring,” Shashi Bhusan, senior research analyst-institutional equities at brokerage firm Prabhudas Lilladher, said in a report.

“The recent wage survey indicates continued shortage of skills pushing higher wages. Hence, local hiring as well as wage inflation will most likely result in continued risk to onsite margin and hence, overall margin,” he added.

The impact of onsite hiring on margin is expected to be similar for all Indian IT companies, he added. However, the strong demand for H1-B is a positive indication of healthy demand environment and business activity in the US.

The IT sector expects a moderation in sub-contracting cost for Indian firms in FY16.