Trump may have an ugly surprise for H-1B visa applicants

• Both regular applicants and those with advanced degrees will now be clubbed together in a pool that is subject to a cap of 65,000, under a recent proposal.
  
• The move will result in a 10% drop in H-1B visas for regular applicants, says ratings agency Icra.
  
• A ‘potential path to citizenship’ was also hinted at recently by US President Donald Trump, but nothing concrete has been floated yet.

The fate of H-1B seekers and employers still hangs in the air as more mixed messages emerge from the White House on the new rules yet to be unveiled.

It’s been speculated widely the new rules governing the H-1B visas, used primarily for temporary work in the US, will favour applicants with advanced degrees and highly-paid workers, according to an advanced notification.

And this preference may be taken out of the general annual quota of 65,000, reducing the number of visas available to less-skilled workers usually employed by the Indian IT companies.

As of now, advanced degree applicants -- those who hold a master’s degree or higher from a US educational institution -- had a separate quota of 20,000, aside from than the 65,000 picked from a lottery system.

Under the proposed rules, the separate quota of 20,000 will only be tapped if there are unselected advanced degree holders from the common pool. Every year, the regular applicant pool quota of 65,000 fills up fast when the lottery system kicks in.

According to an Indian ratings agency ICRA, the move will result in a 10% drop in H-1B visas for regular applicants -- those that do not have a master’s degree from the US or higher. This would mean fewer visa allocations for Indian companies employing regular H-1B seekers.

The companies will then have to hire more American employees. “Increased onshore hiring associated with higher wage bill along with factors such as pricing pressure on commoditized services, wage inflation and lower revenue growth will negatively impact the margins going forward,” ICRA said in a recent report.

The rating agency expects the operating margins of companies dependent on H-1B will shrink from 22.1% in FY18 to 20.8% in FY21.

“This will work against the Indian IT services sector (H-1B dependent employers) as their share of masters degree or equivalent for H-1B visas approved was approximately 27 per cent compared to 55 per cent for non-H-1B dependent employers,” Icra's vice president Gaurav Jain told PTI.

Last week, US President Donald Trump said in a tweet that soon-to-be-announced H-1B rules would bring about ‘simplicity’ and a ‘potential path to citizenship’ for visa holders, but stopped short of giving clarity on how it will work.

Indian companies have been drumming up hiring of local American workers in the wake of backlash against alleged discrimination favouring Indian workers and a class action lawsuit against several Indian IT majors.

This has already taken a toll on their margins, which appear to have been steady decline: TCS saw its earnings before interest and taxes (EBIT) margins drop from 28% in FY2011 to 25.8% in FY2017. While Infosys saw a much sharper fall from 29.5% to 24.7% in the same period.

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