IT companies likely to reduce H-1B visa impact by nearshoring, hiring local talent: Nuvama

NEW DELHI: The IT companies are expected to find ways to soften the blow of the recent hike in H-1B visa fees announced by the US administration, according to a report by Nuvama.

On Friday, September 19, US President Donald Trump passed an executive order imposing a $100,000 fee for new H-1B visa applications, a sharp increase from the current level of about $1,500. The move is likely to affect the operations and financials of Indian IT firms, but analysts believe the overall impact will remain limited.

Nuvama noted that Indian IT firms have, over the past eight years, significantly reduced their dependence on H-1B visas. This shift has already laid the groundwork for mitigating the latest policy shock. “We believe Indian IT companies shall mitigate this impact by higher nearshoring/offshoring and/or hiring local talent”, the report stated.

However, the report also highlighted that some near-term financial and operational pressure is unavoidable. In the longer term, higher offshoring is expected to cushion much of the burden created by the steep visa fee. The report added that most IT services companies are unlikely to pay the higher fee, as the economics of the visa have become unviable. The current median H-1B salary for Indian IT firms ranges between $80,000 and $120,000, and an additional $100,000 fee would make such visas uneconomical.

Instead, companies are expected to turn to alternative strategies. These include renegotiating contracts with clients to share the additional costs, hiring more local talent in the US, or expanding nearshoring to regions like Canada and Latin America to remain in the same time zone. Another major lever will be increased offshoring to India or other cost-effective destinations.

“Over the medium to long term, the situation is likely to stabilise as the sector companies discover more ways to do business efficiently,” the report added. This could involve a stronger reliance on offshore staffing and greater local recruitment in overseas markets. However, the volatility in the near term is expected as the industry adapts to the higher cost environment. (ANI)