Wage hike for H1B visa holders in US push Indian IT for local hiring

Proposed new bill would want workers holding H1B visas to earn $100,000, up from $60,000 currently

With US Congress reintroducing bills to impose stringent laws for H1B visa holders, Indian IT services firms may have to look for higher local hiring there. The proposed new bill would want workers holding H1B visas, a large chunk of employees from Indian IT companies use this visa, to be paid a minimum of $100,000, up from $60,000 currently. The bill, Protect and Grow American Jobs Act, will remove the Master's degree exemption from H1B visa norms.

Even if the Indian IT services providers see a minimal impact on margins with the wage hike, they will have to focus on more local hiring, say industry analysts.

While Trump won the US presidential elections over promises of bringing back jobs to the US, last month he said that his administration would not let H1B visa holders replace the jobs of US citizens in the wake some.

"The proposed bill to hike the minimum wage for foreign workers in the US who hold H1B visa from $60,000 to $100,000 may not have a significant impact as they already pay between $75-80K to the employees with 0-2 years experience and for manager level with more than 5 years of experience the wage is usually above $100,000," said Pareek Jain, head of HfS Research India.

For the Indian firms, the challenge would be more on increased local hiring. "Such wage hikes may hit their margins initially but going forward they will have to rethink over more local hiring," added Jain.

On the contrary, for entry-level engineering graduates or computer science pass-out from the US would cost above $100000. It may vary based on location. For example, in the Bay area, it may be highest and lesser in small cities in the US.

IT services firms have traditionally looked at cutting cost by employing Indians onsite. Dinesh Goel, Partner and India Head at ISG, a technology research firm, believes such radical moves may hurt the US economy. "Cost is one aspect. But I will be surprised if they are really radical. A stricter immigration law towards H1B visas is likely to hurt the American economy, as the people working with foreign IT companies in the US holding H1B visas are adding value to American companies."

With the Industry seeing a shift from traditional services to digital technology delivery, they will need more on-the-site deployment. "As a trend, the technology services sector is seeing more localisation and reduction in offshoring. So it will be wise to make such reforms gradually with the industry trend," said Goel.