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Stricter US H1-B visa rules to cut into IT companies’ margins: ICRA Report

According to a report by ICRA, the changed scenario of stricter norms imposed by US administration on H1-B visas has put pressure on the margins of Indian companies
US President Trump’s new restrictions on the H1-B visa will affect the margins of the Indian IT companies as the cost of hiring rises phenomenally. The companies that are going to get affected are those that depend heavily on hiring low waged Indian candidates using the H1-B work visa. The current rules have increased the minimum salary for the H1-B visa holders to $90,000 from $60,000. Trump also wants to have highly skilled people to come to the US. People with higher skill levels need to be paid higher salaries. The IT companies earlier used to have a 25% advantage over competitors as they brought low skilled engineers at lower pay. This has earned the companies humongous profits. Present rules will benefit the highly skilled people most by getting them higher salaries. The IT companies will have a real problem as the cost of hiring has gone up. So they have two options either hire highly skilled workers and settle for lower margins or hire the local talent present in the US for lower salaries. But the dearth of talented and trained engineers are in short supply in the US. If there are trained people in the US the need for H1-B will not be there. So the only option left for IT companies is to hire highly skilled people for higher salaries and cut their profit margins. A recent report from rating company ICRA has highlighted this issue. The companies that are most affected are those that have more than 15% of its workforce constitute low-cost H1-B visa holders. In addition to this problem, the cancellation of the work permit for H1-B visa holders’ spouses will add further pressure as it will result in a dearth of another 70,000 skilled workers with H-4 visa.  The report says the IT companies have to increase onshore hiring in the US for the entry-level jobs to be cost-competitive. They may have to reduce the dependency on H1-B visas in future.

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