Trump's $100K H-1B fee leaves techies, IT industry searching for solutions

The high cost of hiring someone on an H-1B visa, once the most sought-after working visa, means companies will have to be very selective about their onsite hires to get the best talent they need

US President Donald Trump’s crack-down on immigrants has finally reached the H1-B visa programme, the most-used visa for working professionals to enter that country.

 

The H-1B visa has been used extensively by both Indian and multi-national technology firms in equal measure to access talent. At the same time, the visa offered a window of opportunity for many to leave Indian shores for a better future in America.

 

A key to success for employers and employees

 

The visa programme was also one of the most sought-after mechanism for attracting and retaining global talent. As one of the human resources head of a large IT services company once mentioned: “The access to onsite work is a crucial mechanism of retaining talent. It also means talent is available where we want it to be.”

 

Since 2000, hundreds of thousands of Indians have used the visa to aspire for a better life while also giving Indian talent global visibility. Over time, the H-1B has gained additional significance, given that the US accounts for about 28 per cent of total remittances into India, estimated at around $35 billion annually. A Citi report highlighted that the direct impact of H1-B visa will be on remittances, even though a bigger chunk of remittances might be from Indians on other kinds of visas or residency status.

 

Mixed signals from Trump administration

 

The US President through an executive order last week introduced a one-time fee of $100,000 for any new H1-B visas. Days later, however, the Department of Homeland Security (DHS) outlined plans for a weighted selection system that would favour the allocation of these visas to higher-skilled workers over the decades-old lottery system when applications typically exceeded the annual cap of 65,000. Under the new proposal, visas will be allocated according to wage tiers, giving higher-paying jobs a greater chance of selection.

 

While this is still at the proposal level, industry experts believe this will significantly shift the way talent will move globally. The changes that the US government is proposing will also make sure who gets access to such talent.

 

“From what we are hearing and all the announcements and changes that have happened so far, it looks like they are making it very difficult or almost impossible for the IT services companies and the ecosystem to get access to this talent. But big techs will be able to manage to get these skills,” an industry analyst said, on condition of anonymity.

 

Beginning of the end

 

Industry experts and analysts say the changes to the visa programme are a death-knell for the H1-B in its current form. “$100,000 in Indian rupee is almost Rs 88 lakh. Unless the client is willing to pay that kind of billing rate or covers the cost or the services company does, only then this will be opted,” said a senior executive at an IT services firm.

 

According to a Bloomberg report, the increase in the fee will eliminate up to 140,000 jobs annually in the US.

 

Changing with the times

 

Indian industry players concede that they started its business model on labour arbitrage but insist that that model has changed over the past two decades as they have hired more local talent as part STEM training programmes.

 

For instance, TCS hired 20,000 locals in the US since the Covid-19 pandemic through 2024. Milind Lakkad, former CHRO of TCS, said earlier this year that the company’s model of hiring local globally is working well. “We hired 1,100 people in the US in this quarter (Q4FY24),” he had said at the time.

 

According to a Kotak Institutional Equities, IT companies make $150k-$170k of revenue per person per annum in the US. The fully-loaded salary cost per person in the US will be about $110-120k per annum. "The absolute EBITDA per onsite person, in our view, will be about $18k-22k per annum after taking into consideration bench costs, travel and SG&A costs," it said, adding that "A $100k one-time fee per new petition might not make commercial sense in most cases."