Shares of technology stocks tanked, dragging the index around 4 percent on visa concerns. Stocks like TCS , Infosys and Wipro fell 3-5 percent while Tech Mahindra tanked 10 percent intraday Tuesday as minimum salary of H-1B visa holders is proposed to be more than double.
A legislation has been introduced in the US House of Representatives which among other things calls for more than doubling the minimum salary of H-1B visa holders to USD 130,000, making it difficult for firms to use the programme to replace American employees with foreign workers, including from India.
How the number stack up?
Infosys had 14,659 employees on H-1B visas and 1364 employees on L-1 visas in the US at end-FY2016. So as per calculations, H-1B ratio would be 30:70. A look at FY2016 H-1B filings data indicates that Infosys has the highest per-capita onsite wage in the peer group. TCS historically had high dependence on visa but it would have reduced in the past three years given that the company has stepped up local hiring. As per H-1B filings data, TCS’ onsite compensation is on the lower side in the peer group.
Wipro’s last disclosed local headcount was 40 percent in the US. The ratio between visa holders and locals would have remained steady or increased marginally in favor of locals since then. Additionally, acquisition of Appirio and HPS provides additional 3000 local headcount in the US.
HCL Tech has 65 percent locals in its US workforce and its wages are also at the top end among Indian IT. Accordingly, it is likely to be the least impacted.
Tech Mahindra’s dependence on visas is high for core IT services. The acquisition of LCC (has improved the local mix. It has 9,000 people including LCC headcount in US of which about 5000 are on visas (45 percent locals).
According to Bank of America Merrill Lynch, every 10 percent hike in H-1B wages can hurt earnings of Tech Mahindra by 4-11 percent. Tech Mahindra has earnings negative impact of 11 percent due to 10 percent hike in wage bill.
The legislation proposal
The High-Skilled Integrity and Fairness Act of 2017 introduced by California Congressman Zoe Lofgren prioritises market based allocation of visas to those companies willing to pay 200 percent of a wage calculated by survey, eliminates the category of lowest pay, and raises the salary level at which H-1B dependent employer are exempt from non displacement and recruitment attestation requirements to greater than USD 130,000.
This is more than double of the current H-1B minimum wage of USD 60,000 which was established in 1989 and since then has remained unchanged.
It raises the salary level at which H-1B dependent employer are exempt from attestation requirements to a new required wage level of 35 percentile points above the median national annual wage for Computer and Mathematical Occupations published by the Department of Labour Occupational Employment Statistics (roughly USD132,000), which would be adjusted in the future without the need for new legislation, and eliminates the Master’s Degree exemption for dependent employers.
The legislation sets aside 20 percent of the annually allocated H-1B visas for small and start-up employers (50 or fewer employers) to ensure small businesses have an opportunity to compete for high-skilled workers, while still protecting against outsourcing.
It among other things removes visa hurdles for students and other temporary visa holders by building a bridge from F-1 student status to Lawful Permanent Residence and removes paperwork burdens by streamlining H-1B filing requirements and reducing administrative costs.
The legislation tightens employee protection by stipulating that employers may not reduce beneficiary wages, regardless of whether the deduction is in accordance with a voluntary authorisation by the employee.