H-1B visa rule favouring advance degree holders to impact Indian IT companies

Vastavam web: A recent policy change favouring advanced degree holders for visas in US will lead to a hit on IT companies’ profitability as the number of H-1B visas approved gets reduced, a report said. In December 2018, the United States Citizenship and Immigration Services (USCIS) proposed reversing the process for H-1B selection favouring advance degree holders.

This is likely to lead to 10 per cent reduction in H-1B visa approvals for regular applicants, where the applicant is without an advance degree masters or higher from US universities, ratings agency Icra said.Increased onshore hiring associated with higher wage bill along with factors such as pricing pressure on commoditised services, wage inflation and lower revenue growth will negatively impact the margins going forward, it said.

Even though the companies have other factors to restrict the impact, overall operating margins are still expected to decline from 22.1 per cent in FY18 to 20.8 per cent in FY21, it said. Under the proposed amendments, USCIS would first select the 65,000 visas from the cumulative pool of regular as well as advance degree holder applicants and 20,000 highly skilled H-1B visas would then be allotted among the remaining pool of unselected advance degree holder applicants, domestic rating agency Icra’s vice president Gaurav Jain said.

“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,” he said. An entity is defined as H-1B dependent if more than 15 per cent of its employees are on an H-1B visa.