US HIRE Act a bigger threat to Indian workers than H-1B fee: Decoded

The proposed HIRE Act 2025 in the US would impose a 25% tax on payments to foreign workers for services used within America, threatening Indian IT exports and remote jobs already hit by H-1B visa fee

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Skilled Indian professionals already grappling with the newly imposed $100,000 H-1B visa fees may soon face another setback if the United States passes a new law targeting outsourcing. The proposed Halting International Relocation of Employment (HIRE) Act 2025 seeks to impose a 25 per cent tax on American companies that pay foreign workers for services used within the US, a move that could sharply curb demand for Indian talent.

 

Former Reserve Bank of India Governor Raghuram Rajan and Congress leader Jairam Ramesh have both warned that the measure could strike at the heart of India’s IT and services economy, which earns more than half its revenue from the US.

 

“What we’re seeing is a creeping extension of tariffs from goods to services. This is a threat,” said Rajan in an interview with digital news platform DeKoder. “The HIRE Act could directly tax outsourced work, which has wide implications for countries like India that rely heavily on service exports.”

 

Ramesh, posting on X, said the Bill “reflects a growing mindset in the US that white-collar jobs should not be ‘lost’ to India, just as blue-collar jobs were ‘lost’ to China.”

 

What is the HIRE Act that experts are warning about

 

The Halting International Relocation of Employment (HIRE) Act was introduced in the US Senate on October 6, 2025, by Senator Bernie Moreno of Ohio and referred to the Senate Committee on Finance.

 

If enacted, the law would impose a 25 per cent tax on any US company that makes payments to foreign workers for services consumed within the United States. It would also prevent such payments from being claimed as tax-deductible expenses.

 

The proceeds would go into a Domestic Workforce Fund intended to train American workers and support apprenticeships. However, experts say the move effectively erases the cost benefit that drives outsourcing to India and other countries.

 

Rajan explained that the legislation “marks a move beyond goods tariffs to services, which needs very close attention.”

 

Why it matters for Indian companies

 

The United States remains the biggest source of income for India’s top IT firms, including Tata Consultancy Services (TCS), Infosys, and Wipro. The HIRE Act, if passed, could dent profitability and reduce new contracts for these companies, which depend heavily on US clients for software development, data management, and customer support.

 

The threat comes on the heels of steep hikes in H-1B visa fees, already seen as a barrier to skilled migration. Commerce Secretary Howard Lutnick recently called the visa programme “a massive scam,” signalling the administration’s growing protectionist stance.

 

Trump’s political base has been vocal about reducing dependence on foreign labour, particularly Indian tech workers, and this pressure could influence policy outcomes.

 

How it could affect skilled Indian workers

 

1. Reduced demand for outsourced jobs

If American companies face a 25 per cent outsourcing tax, offshoring work to India will lose much of its appeal, leading to fewer contracts and job openings for remote professionals.

 

2. Tighter visa environment

Although the HIRE Act does not directly amend visa rules, it reinforces a broader mood that favours domestic hiring. This could make US firms less likely to sponsor foreign workers under H-1B or L-1 programmes.

 

3. Impact on India’s IT exports

India’s IT services industry depends heavily on US clients, accounting for the bulk of its foreign exchange earnings. The proposed tax would weaken its competitive edge and could slow down new investment in the sector.

 

A Reddit user summed up the sentiment among American workers: “With the new $100K H-1B fees, companies will likely push even more jobs offshore. That’s why the HIRE Act matters, it’s the only effort on the table to regulate offshoring and redirect that money into building up our own workforce.”

 

Rajan on the wider impact

 

Rajan said that while the H-1B visa fee hike has drawn concern, its impact is relatively modest compared to the potential fallout from the HIRE Act. “Indian companies can still have personnel in the US, they may recruit more from Indian students who study there. But much more can now be done virtually,” he said.

 

He noted that global firms like Microsoft may increasingly hire staff directly in India through their global capability centres rather than depend on H-1B workers. “There will be adjustments, and the net effect will be less H-1B immigration, but it doesn’t look as bad as it first seemed. The HIRE Act is much more important for us.”

 

Rajan added that India must remain watchful of changes in trade and employment policies in its key markets. “The HIRE Act could affect not just trade in goods but also the country’s growing digital and service exports,” he said.