After the $100,000 H-1B fee hike blow, will the new proposed system for selecting visa applicants under the Donald Trump administration bode a death knell for the Indian IT sector? Not necessarily, say experts.The revised H-1B visa lottery system proposed by the Trump administration, prioritising higher-paid applicants, could potentially be less harmful to Indian IT outsourcing companies than anticipated.
Organisations could restructure their recruitment strategies, possibly seeing positive outcomes, according to an ET report. The new selection criteria would evaluate multiple factors including pay, expertise, experience and work location for H-1B visa distribution.
What is the new H-1B visa weighted system?
Last week, the Department of Homeland Security said it plans to replace the existing random H-1B registration lottery with a weighted selection system. This new approach aims to allocate visas towards foreign workers based on their skill levels and remuneration packages.The modified process will rank registrations according to the wage levels of potential beneficiaries. Under the proposed framework, individual beneficiary registrations will be distributed in the selection pool according to their designated OEWS wage classifications.Each application will receive a classification from I to IV, with higher levels receiving additional opportunities for selection. For example, registrations at Wage Level IV will receive four entries, whilst Level I registrations will receive one entry.Although beneficiaries may have multiple entries in the selection pool, they will only be counted once towards the numerical caps.
H-1B visa timeline
The weighted selection process will not affect the US Department of Labor’s prevailing wage determinations for positions, which remain based on comparing role requirements against standard occupational classification criteria.The administration’s strategy aims to incentivise employers to offer enhanced compensation or recruit candidates with superior qualifications and higher salaries, whilst maintaining access to workers across all pay scales.Also Read | Trump’s H-1B visa fee hike impact: Germany, UK, Canada roll out red carpet for India’s tech talent; pitch ‘predictable’ rules
New H-1B visa rules: Is it all bad for Indian IT?
Research conducted by the Institute for Progress (IFP) in Washington revealed that experienced professionals in fields like acupuncture or social work earning $40,000 yearly could receive higher preference than entry-level AI researchers at OpenAI or Anthropic earning $280,000, including surgeons.The findings suggest major IT outsourcing firms could receive 8% additional visas, as they typically recruit experienced professionals for specialised positions at competitive salaries. The IFP study showed these firms have approximately 85% of staff in Wage Levels II and III, whilst other companies average 60%.“A Wage Level IV job is not necessarily a high-wage job,” Jeremy Neufeld, director of immigration policy at IFP wrote in the study. “In fact, the data show many Level IV certifications for salaries far below the median American wage, while some Level II jobs are among the best-paid in the economy. The ranking system would thus favour companies sponsoring older workers with longer seniority, even in lower-skill jobs, over genuinely high-wage, high-skill roles.““Because the proposed rule assigns more lottery entries to Level II and Level III workers, large outsourcers gain an advantage despite offering systematically lower wages,” he wrote.Also Read | The $100,000 H-1B gamble: Why Donald Trump’s visa tax won’t save American jobs – winners and losersThe impact on outsourcing firms varies according to their employment structure, says VisaNation Law’s managing attorney Shilpa Malik. According to the ET report, she suggests that organisations depending primarily on Level I positions will encounter substantial difficulties.However, those who opt to employ moderately experienced professionals at Wage Levels II or III, despite increased costs, could potentially achieve better outcomes compared to the current random selection process.Nishith Desai Associates’ HR and employment laws practice leader, Deepti Thakkar, explains that the system prioritises expertise, experience and market worth. She indicates that American organisations will need to reassess their recruitment approaches for entry-level positions, focusing on domestic talent rather than depending entirely on cost-effective international workers.This particularly affects IT organisations that predominantly utilise lower-to-mid-wage H-1B workers, staffing services, or onsite placements.According to official statistics highlighted by Thakkar, primary visa sponsors Cognizant and Infosys offered average remuneration of $84,000, approximately 40% below the salaries provided by Apple and Google.Nevertheless, some experts caution that alternative strategies might not necessarily yield advantages for organisations.“The strategy of recruiting cheaper talent from different sectors and training them for technical positions may not be sustainable or universally applicable,” noted Atul Gupta, partner-labour and employment, Trilegal. “There are limitations to cost-based hiring approaches, as ultimately, the quality of professional experience and training remains the decisive factor in recruitment.”“The H-1B system is being recast into a premium, wage-driven mechanism,” said Preeti Sharma, Partner, Global Employer Services, Tax & Regulatory Services, BDO India. “High costs and wage-linked selection will push employers toward a smaller, more exclusive pool of hires, while accelerating reliance on offshore talent hubs for volume hiring.”Elaborating further, she discussed the significant impact on IT outsourcing companies. “Between FY2014–2019, these firms consistently topped the H-1B sponsor list, with most petitions filed for mid-level, Level I/II wage roles in the $70,000–85,000 range,” Sharma said.
