As the fate of the H-1B visa program rests with the US Congress, Indian tech firms are losing sleep over proposed changes to the H-1B visa portion of the US immigration bill. Wipro Chairman Azim Premji asked Prime Minister Manmohan Singh on Sunday to seek the intervention of President Obama to remove provisions that are “discriminatory” towards Indian tech firms.
The US Senate passed an immigration bill in June that would increase the yearly H-1B cap to 180,000 from 85,000 which is good, but there are several killer provisions in the bill that could hobble Indian outsourcing firms’ businesses in the US.
Unfortunately, a coalition of US high-tech companies and pro-labor Democrats have twisted the worthy goal of knocking down America’s barriers to technical foreign talent into blatant protectionism.
Azim Premji. ReutersAzim Premji. Reuters
“Provisions of the Senate bill that are discriminatory and target Indian companies are — outplacement bans and restrictions; attestation on recruitment of US workers; and higher wages to H-1B employees vs. American employees,” Premji said in a letter addressed to Singh.
“We want your support to seek White House intervention to eliminate the discriminatory provisions in both the Senate and House bills and to treat Indian IT service providers at par,” said Premji.
The Wipro chairman noted that fixing the H-1B flaw in the immigration bill was in the interest of increasing India-US trade by five times from the current level of US$100 billion.
Killer provisions for Indian companies
Firstly, a company with more than 15 percent of its workforce on H-1Bs will be restricted from placing H-1B workers at the offices of their clients, an approach used by nearly all Indian IT services groups.
Secondly, the proposed legislation suggests that from 2016 any company with more than half of its staff on such work permits will be forbidden from applying for more visas, effectively creating a cap on temporary immigrant staff.
Thirdly, seeking to prevent undercutting American salaries, the bill would require H-1B workers be paid more than under current law, and impose steep fees of $10,000 per visa on big companies with more than half of their staff on H-1B visas.
The H1-B and L-1 Visa portion of the immigration bill is designed in a way that makes it more difficult and costly for Indian IT firms to bring in workers on temporary visas, while easing restrictions on US firms using those resources by increasing the annual cap on work visas.
Companies such as Infosys, Wipro, Cognizant and Tata Consultancy Services have set up large US offices with American employees to be closer to clients, but there is always an offshore angle. They rely heavily on H-1B visas to allow Indian staff to fly to the US when they are needed for face-to-face consultations and to work on projects in the US as part of their “global service delivery” model.
Indian companies naturally need some portion of their staff on-site in the US to understand the systems and specifications of their American clients, which is why they are heavy H-1B users. US companies often contractually require Indian tech firms to place employees on site to troubleshoot. The outplacement restriction deals a body blow to this whole business model.
US tech companies Microsoft and Accenture support these H-1B restrictions for the simple reason that in a world of finite visas, fewer visas for Indian companies means more for itself.
“Both companies have been expanding their IT operations in India and are directly competing with Indian companies for American “offshore” business. IBM now generates about a third of its revenues in India where it employs over 100,000 people. The visa restrictions are simply an effort to cripple their foreign competitors and capture their offshore market share, something that won’t save a single American job,” said Business Insider, a US technology and business website.
IBM now generates about a third of its revenues in India where it employs over 100,000 people. But because IBM and Accenture have a large American workforce, they will be able to hire even more H-1Bs than the Indian companies without running afoul of the new visa regime, notes the US news site.
Lobbying push moves to the House
The US-India Business Council and Nasscom, which represents India’s technology sector, which clocks in $100 billion in annual revenue, are spearheading a lobbying push to get lawmakers in the House to kill complicated and restrictive provisions for H-1B and L-1 visas. They are explaining to lawmakers that the bill creates more H-1B visas, but then makes it harder to use with all the new government rules.
House Speaker John Boehner said earlier in the day that his chamber will not simply take up whatever the Senate passes. India’s effort now will be to replace the Senate provisions with a much cleaner H-1B bill proposed by Republican Congressman Darrell Issa that has already passed House Judiciary Committee. House Republicans have delayed consideration of immigration bills until September.
India raised concerns about the immigration bill with Secretary of State John Kerry when he was in New Delhi saying the issue of short-term work visas shouldn’t be mixed up with immigration.
The proposed reforms could force Indian IT companies to hire thousands of new American employees or make acquisitions to ramp up American staff.
“Over the short term, the legislation would likely have a negative impact on Indian-heritage IT companies and give a competitive edge to US firms,” said Sid Pai, Partner and President, ISG Asia Pacific. “Over the long term, however, the provisions could encourage Indian firms to expand their US presence. Specifically, to avoid the provisions of the bill, Indian companies may step up local hiring and focus on acquisitions of US-based companies.”
Premji pointed out that contrary to misconception, “Indian IT companies in US in the past five years have created American jobs of at least 35,000 and today support 280,000 jobs in the U.S. Three out of these four jobs are held by Americans. Contrary to this, a leading American services company in the last six years has reduced 36,000 American workers.”
The Times of India reported that Wipro had spent $240,000 till July this year on lobbying in the US, compared to $210,000 it spent in the whole of 2012.
Indian companies are steadily creating more jobs in America and have paid more than 15 billion in taxes to the US treasury, according to Nasscom.