The first blow to the Indian IT companies came from the US immigration bill which placed restrictions on the number of work visas that a company can sponsor. Canada soon followed suit. The latest development in the visa arena was announced in Australia when the country followed the global trend by tightening its work visa approval.
The move to prioritize Australian workers over foreigners will hurt the Indian outsourcing companies as they rely on a predominantly Indian work force. According to the new rules, companies cannot send employees on work visas to client companies, the basis of the outsourcing model. Further companies must follow stringent advertisement campaigns to make sure that the job is given to a foreign worker because of a genuine skill shortage.
An analysis conducted by Nomura, A japan based financial service company, shows that the new visa rules will directly affect the timeline, the contracts and the process of procuring new work visas for employees in Indian companies. The business process model relies on procuring cheaper labor. The new visa regulations state clearly that employees on work visas will be treated the same, including benefits and pay packages, as local employees.
Companies that have a large employee base on work visas will have to justify the need for the visas. Tech Mahindra with a major holding in Satyam and Infosys are all set to face the brunt from the visa regulations as nearly 8 to 9 percent of their invoices originate in Australia, according to Nomura.
The Australian visa regulations came into the limelight when a former Tata Consultancy Services employee was featured in a local television channel. The former employee was quoted as saying that the Tata Consultancy Services abused the available visa restrictions in Australia.
Tata Consultancy representatives were of the opinion that the allegations levelled against the company for not making honest efforts to look for Australian employees were baseless and completely false. The employee said that the company bought Indian software experts on visas without making adequate attempts to fill the post with Australian employees. This move by a simple ex-employee seems to have sparked a revolution in the Australian visa regulations.
Visa Regulation In Canada
The global tightening of visa regulations sparked another rethink in Canada. The Canadian government has directed companies to equalize pay between Canadian employees and those employees on work visas. Further the latest visa regulations state that the fast track visa approval system has been disbanded beginning in April.
Going beyond just the visa restrictions, the Canadian government now has increased power to revoke once approved work visas. The visa fees required to sponsor a work visa has also been increased.
Nomura stated that the visa changes in Canada will affect the firm iGate, an IT services firm headquartered in the United States which is heavily dependent on the Royal Bank of Canada for nearly 12 percent of its invoices.
These changes however pale in comparison to the changes that will be affected in case the US House of Representatives passes the immigration bill. The immigration bill once passed as it is will cause a widespread change in the business process outsourcing model. The visa regulation changes will drastically alter the profit margins of the companies forcing a rethink of the business model. Also the visa fees structure will sharply increase forcing a lot of companies to move contact centers back to India.
The Nomura report did not however see Infosys and Tata Consultancy Services as factoring in the possible US immigration bill changes into its stock pricing action. Further the analytical report named a few companies as being relatively safe from the visa regulation changes. The company said that Cognizant, HCL technologies and Wipro have a better margin security and secured revenue sources. They would therefore offer better valuations and be less likely to be volatile.