The Indian IT sector is finally seeing light at the end of the long tunnel that the US Visa reform created. The house version of the immigration bill, US has received support from IBM. The House version of the bill seems to be gaining more support mostly because of the lack of the outplacement clause. The Indian IT industry was heavily opposed to the Senate immigration bill as the outplacement clause was thought to be detrimental to the industry.
The outplacement clause
The outplacement clause according to the Senate immigration bill in the US placed stringent limits on IT companies operating in the United States. The clause cited that only a small percentage of the company employees could be sent to the client’s on site locations.
The basis of the outsourcing model in current use would have to undergo a drastic transformation if this bill were to be passed as is. Owing to the lack of the outplacement clause in the House version, IBM is supposed to have written to the House Judiciary Committee intimating and extending their support to the bill.
Change of heart for IBM
The outplacement clause that for so long has been heavily debated and alternately opposed, was initially supported by IBM. JP Morgan analyzed the change of heart in IBM. JP Morgan was of the opinion that the reasons for the shift in stance could be a backlash from IBM’s clientele or the Indian government withholding certain preferred market policy changes.
This change of heart has however proven to be beneficial in the larger picture. The final bill when passed owing to the current support is unlikely to have any such restrictive clauses according to JP Morgan.
Understanding the outplacement clause
Apart from restricting the number of employees sent to work with clients at on-site locations, the outplacement clause had a number of restrictions. The percentage of non-immigrants employed by the company would dictate the filing fees on every subsequent H-1B visa application filed by the company. On an average companies today are paying $2,500 for every H-1B visa application and an additional fee of $1,225 for premium processing.
The consequences of the outplacement clause
Owing to the high filing fees for the H-1B visa, IT companies will have to ease away from their dependence on immigrant employees. The salaries that these immigration employees will be eligible to receive will also be higher if the clause were to be a part of the final bill.
Irrespective of whether the outplacement clause is a part of the final US immigration bill or not, JP Morgan advises Indian IT companies to be prepared for change. JP Morgan was of the opinion that the companies should localize hiring efforts, advertise vigorously and establish presence and recognition in US colleges. The industry would also benefit from a portrayal of being good US citizens. JP Morgan believes that the IT industry either collectively or individually should invest resources into creating a largely American persona in order to survive the tough global economic crisis.