H1B salary hike plan: L&T Tech fears 2.5% hit on margins

While H1B visa holders draw $62,000-65,000 a year, L&T workers' average salary is $75,000-80,000

L&T Technology Services on said its pre-tax profit margin may be hit by up to 2.5 per cent if the US hikes minimum salaries for H1B visa holders to $1,30,000, and that it is working on alternatives, including shifting the jobs to India.

"We have over 1,600 engineers in the US and around 65 per cent of them are on H1B visas. If the salaries were to be hiked, our calculations suggest an impact of 2-2.5 per cent on Ebidta (Earnings before interest, tax, depreciation and amortization) margins," Managing Director and Chief Executive Keshab Panda told PTI.

In the face of difficulties like the new visa bill, which proposes to more than double the minimum wages for H1B visa-holders to $1,30,000, Panda said the software arm of engineering major Larsen & Toubro, will either have to reduce reliance on onsite workforce in the US that accounts for 63 per cent of is revenue, or hike billing.

At present, the average salary of its employees in the US is $75,000-80,000 while the H1B visa holders draw USD 62,000-65,000 per annum, he said explaining the necessity to take corrective steps, he said.

L&T Technology has written to 25 clients, to understand their take on how to deal with such an eventuality, if it were to come true. However, none of the customers have yet replied back and are in a wait-and-watch mode, he said.

One of the options is to shift the engineers back to India which will help its customers with costs and also help expand the margin for the company, he said.

He further said there is some degree of comfort which the clients share with the H1-B visa-holders, having worked together for a few years.

Panda said L&T Technology may be able to renegotiate contracts with some of its clients by impressing them on the need to do so given the circumstances.

He wondered whether there are enough hands in the US to work on projects if all the tech companies start vying for local talent.

The evolving situation in the US and the number of engineering jobs which get relocated to India will have a bearing on its domestic hiring, he maintained.

At present, the company is forging partnerships with reputed academic institutes to work on real life problems, which will also lead to absorption of some of the people into the company's workforce, Panda said.

Meanwhile, the company announced setting up of an industrial Internet of Things (IoT) lab, the fourth such set-up exclusively for Rockwell Automation, in Bengaluru.