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Strict visa norms in the US affecting Indian IT companies

The increasingly stringent norms of H-1B visa has forced the Indian IT services firms to increase their local hiring in the US.

The increasingly stringent norms of H-1B visa that permits companies to employ foreign workers in the US in specialty occupations temporarily has forced the Indian IT services firms to increase their local hiring in the US, despite their higher costs.

Some Indian IT players to increase local hiring

Lately, Infosys Limited said that it intends to hire 1,000 individuals locally by 2023 for its recently launched Technology & Innovation Center in Arizona. The firm has surpassed its spring 2017 pledge to employ 10,000 American workers as a share of its continuing efforts to stimulate the pace of innovation for US operations.

HCL Technologies Ltd has also brought down its reliance on H-1B visa by hiring more individuals locally. According to estimates from industry insiders, the firm has around 17,000 employees in the US, and 64.7% of them are American citizens.

India’s largest IT services provider, TCS Ltd, has around 30,000 US employees, making it the largest employer in the US among Indian firms.

In June, Wipro Limited had announced the launch of its new center of excellence in Minneapolis-St. Paul area of the States. The firm plans to hire 100 people locally in the coming two years to boost its already substantial presence in the region.

Cognizant continues to hire in the States to keep up with the needs of their business growth. Nearly 76% of the company’s revenue comes from North America and has almost 60 US facilities and clients in 49 states. The firm promised to hire a minimum of 25,000 employees over five years in 2017.

Drop-in H-1B visa approvals

Presently, there is a yearly limitation of 65,000 on new H-1B visas with an additional 20,000 visas for those with advanced degrees from a US institution.

According to a June report by ICRA, a rating firm, the number of H-1B visas issued during September to October 2018 dropped 10% YoY from 373,400 to 335,000 due to tighter inspection, which led to higher on-site hiring in FY19.The amount of H-1B visas for initial employment received by the companies reduced by 40% between the years 2014 and 2017.

Reports by NASSCOM stated, “As a result, the share of H-1B employees in total employment in the US has declined, and the share of US-born employees has risen by 5-7%.”

The key contributor to the increase in on-site hiring is high visa denial rates. Wipro has had the highest visa denial rate at 62% in the Q1 of FY’19 up from 7% in FY’15, according to an analysis of data from USCIS (US Citizenship and Immigration Services) by the National Foundation for American Policy. Infosys had a denial rate of 57% in October-December 2018, followed by HCL Technologies (43%), and Tata Consultancy Services (37%).

Investment Information and Credit Rating Agency said that on-site hiring raises the cost for the Indian IT firms and adds up to a higher visa fee and compliance cost associated with enhanced scrutiny of visa applications.