Indian IT Companies Respond to H-1B Visa Fee Increase Through Local Hiring, Offshoring, and Nearshoring: Report

Indian IT firms are likely to rework their strategy in the wake of the US administration's recent sudden spike in H-1B visa charges, a report stated on Tuesday.

On September 19, US President Donald Trump signed an executive order mandating a $100,000 fee for filing new H-1B visa petitions—a drastic jump from the existing fee of about $1,500.

This action is expected to impact Indian IT companies, which have historically depended on the H-1B program to deploy skilled workers to the US.

But statistics put together by Nuvama indicated the overall effect on Indian IT companies could be minimal, given the industry has progressively minimized its dependence on H-1B visas in eight years.

The transition has provided businesses with a head start on mitigating the impact of the recent policy transition," the report said.

Firms are likely to absorb the added costs through nearshoring, offshoring, and increasing local hiring in the US, Nuvama said. Some short-term financial and operational disruption is unavoidable, but more offshoring is seen to wear off the pressure eventually.

The report also highlighted that the majority of Indian IT services firms will be able to simply forego the new fee, as the added $100,000 makes the H-1B visas economically unfeasible. With the median income of Indian IT employees on H-1B visas between $80,000 and $120,000, the added fee would make the deal economically unsound.

However, firms are more likely to consider alternatives like renegotiating customer contracts to split the cost, hiring locally in the US, or expanding nearshore operations in economies like Canada and Latin America, which share the same time zone as the US.

A greater focus on offshoring to India or other low-cost regions is also likely, the report added.

It said that although the sector might experience short-term uncertainty, the situation will be able to stabilize once IT companies have adjusted to the new situation and found better means of doing business.