Visa program may aid foreign companies

India-based companies with U.S. operations rely heavily on temporary visas, and the trend could escalate with a recent change in the law.

Ed Frauenheim Former Staff Writer, News
Ed Frauenheim covers employment trends, specializing in outsourcing, training and pay issues.
Ed Frauenheim
8 min read
U.S. companies aren't the only ones taking advantage of statutes designed to allow U.S. employers to hire foreign workers.

Indian information technology companies with operations in the United States actually are some of the biggest applicants for H-1B visas and are heavy users of L-1 visas, according to a study by Rochester Institute of Technology public policy professor Ron Hira and statistics culled from Securities and Exchange Commission filings.


What's new:
Use of guest worker visas by Indian companies underscores the difficulties of finding politically acceptable regulations in a globalized economy.

Bottom line:
The H-1B visa program has been a hot topic in the tech industry for several years. The issue is boiling over again because of a dramatic rise in overseas outsourcing, which is costing thousands of U.S. workers their jobs, and the presidential election campaign.

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India-based Wipro, for example, had 850 workers in the United States on H-1B visas and 1,401 employees on L-1 visas as of Sept. 30, 2003, according to a filing with the SEC. Those visa holders made up "the majority of our personnel in the United States," the company said. Wipro applied for 3,120 H-1B visas for the year ended Sept. 30, 2001, Hira found, while by comparison U.S.-based IT services giant Electronic Data Systems asked for 452 of the visas.

And H-1B visa applications from India-based IT companies could climb as a result of a recent change in the law, Hira said.

The annual cap of the H-1B program fell from 195,000 to 65,000 as of Oct. 1, 2003. But another change was the elimination of rules that required companies with a large proportion of H-1B workers to do such things as attest that they sought U.S. workers before applying for another H-1B visa.

"Even though the cap has gone down to 65,000, the regulations are looser," Hira said. "They likely will take advantage of that."

Use of the guest worker visas by Indian companies underscores the difficulties of finding politically acceptable regulations in an increasingly globalized economy. The use of foreign workers through the H-1B program has been a hot topic in the tech industry for several years. But the issue is boiling over once again because of two factors: a dramatic rise in overseas outsourcing, which is costing thousands of U.S. workers their jobs, and the presidential election campaign.

H-1B visas are supposed to be gap fillers, allowing companies to find well-educated employees when they run into trouble hiring qualified U.S. workers. Critics have charged, however, that some companies are using them on a constant basis to cut costs. Also, the visas are intended to help U.S. employers stay competitive, but Hira said his research shows their use by foreign-based companies has accelerated the shift of tech work abroad.

A number of reforms to the visa programs have been proposed by lawmakers and critics. But Sridhar Ramasubbu, general manager of finance and investor relations for Wipro, warned that severely curtailing or eliminating the visas would backfire, with even more IT work being handled offshore.

"We are ready to offer the jobs to anyone who is willing to work on a global-delivery model," Ramasubbu said. "If you say, 'I can work in only one location,' that's a problem."

Visa alphabet soup
The controversial H-1B visa program is designed to let U.S. employers import highly skilled workers, such as computer programmers, into the country for a period of up to six years.

The L-1 visa program allows companies to temporarily bring in their employees from other countries for managerial or executive work, or work that entails specialized knowledge. There is no annual cap for the number of L-1 visas that the government can give out, nor is there a required pay rate. In the H-1B program, employers are supposed to pay a prevailing wage.

Hira's paper, which is slated to be published this year in the journal Technological Forecasting and Social Change, cites government figures to show that India-based companies Wipro, Tata Consultancy Services and Infosys Technologies were among the top 15 H-1B petitioners between October 1999 and February 2000.

Hira also focuses on the use of guest worker visas by three India-based tech firms: Wipro, Infosys and Satyam Computer Services.

According to Hira, Infosys' use of H-1B guest workers roughly doubled to more than 2,000 from March 2001 to the end of 2002, a period during which the U.S. technology industry lost hundreds of thousands of jobs. Use of L-1 visas by Infosys also increased over that period. All told, Infosys had close to 2,900 employees in the United States on one of those two visas at the end of 2002, representing about 21 percent of the company's worldwide work force, he said.

In a recent SEC filing, Infosys said its total number of workers on the visas had climbed to about 3,400, as of Sept. 30, 2003, with about 2,600 on the H-1B visa. The majority of Infosys' IT professionals in the U.S. held H-1B or L-1 visas, the company said.

Wipro had a total of 1,231 H-1B and L-1 visa holders in the United States in the year ended Sept. 30, 2002, while Satyam had 1,322 visa holders, Hira said.

In Hira's view, the jobs given to H-1B and L-1 holders often are not the type of work for which a foreign specialist is needed. "They are pretty generic jobs that could be filled by Americans," he said.

Depending on H-1Bs
Hira surmised that Infosys, Satyam and Wipro all fit the category of "H-1B dependent" employers based on their public statements. Organizations with at least 51 full-time employees in the United States were defined as H-1B dependent if 15 percent or more of their workers were holders of that visa.

U.S. Citizenship and Immigration Services, a bureau of the Department of Homeland Security that helps run the H-1B program, does not have a list of companies that were H-1B dependent. It also does not tally the number of companies that fit that category, bureau spokesman Chris Bentley said.

Infosys and Satyam did not respond to request for comment. Wipro's Ramasubbu acknowledged his company was H-1B dependent.

Hira worries the expiration of the H-1B dependent category means India-based companies will have freer rein to bring in H-1Bs to the detriment of U.S. workers. That view is not shared by Harris Miller, president of the Information Technology Association of America trade group.

Miller found nothing inherently wrong with a high proportion of H-1Bs at the Indian companies. "There's nothing in the law, that I'm aware of, that says a company can't have 100 percent" of their employees on H-1B visas, he said. The key, he said, is that the employer cannot use the H-1B visa rules as a "cheap labor" program.

Hira, though, presents evidence that Indian IT companies seeking H-1B visas may have paid lower wages than U.S. counterparts. For example, for the year ending Sept. 30, 2001, Wipro requested a total of 3,120 H-1Bs, and pledged to pay a total of $158 million in wages, for an average annual wage of $50,648, Hira found. EDS requested a total 452 H-1Bs and pledged to pay $32 million in wages, for an average annual wage of $71,251, according to the study.

Hira's numbers do not necessarily offer a precise comparison between wages paid to technology workers at EDS and Wipro. For one thing, the figures come from applications for H-1B visas that may or may not actually have been used. Also, it's possible that EDS asked for H-1B workers in more highly skilled job categories than the H-1B workers requested by Wipro. In addition, the companies may have used H-1B visas for non-IT positions.

Wipro's Ramasubbu said his company adheres to both the letter and spirit of the H-1B law.

Hira also believes the India-based companies' use of visas has helped promote the shift of IT work offshore, an increasingly controversial trend. Visa holders in the United States forge a link back to colleagues in India, he suggested. What's more, the visa workers bring technology knowledge with them when they return to India, he said

In addition to India-based companies, U.S.-based IT companies that carry out much of their work in India are heavy users of the visa programs, Hira noted.

Reforms on the horizon
Among the legislation proposed to reform the H-1B and L-1 visa programs, Sen. Christopher Dodd (D-Conn.) and Rep. Nancy Johnson (R-Conn.) have proposed a bill that would do such things as end the practice of allowing L-1 visa holders to be subcontracted by one employer to another, require that L-1 workers be paid the prevailing wage and require all companies that hire H-1B employees comply with lay-off protections and recruitment requirements that had been reserved for H-1B dependent firms.

The measure also would give the Department of Labor the authority to begin investigations for potential violations in the law, if there is reasonable cause to believe that an employer is not in compliance. Dodd said that under current law the Department of Labor does not have the authority to verify whether information provided by employers on labor conditions, such as wages to be paid, are correct. The Secretary of Labor is charged with investigating complaints related to the H-1B program.

The ITAA's Miller believes the H-1B program does not need fixing and says that critics such as Hira concerned about possible abuse of the law can file a complaint with the Labor Department. As for the L-1 visa program, Miller said he's heard concerns that visas have been given out to individuals without "specialized" knowledge. In response, the ITAA has issued a paper with examples of what does and does not qualify as specialized knowledge in the IT industry.

Miller doesn't think a mandatory pay standard is necessary for L-1s, arguing it would cause a headache for companies moving people into and out of the country for short periods.

Severely restricting or abolishing the visa programs, he said, would hurt the U.S. by triggering trade wars and forcing more IT work overseas. That's because IT work is best done with teams composed of people from around the world who need the ability to travel abroad, and U.S. IT employers would lose out to international competition, he said.

Hira doubts such a scenario would occur, pointing to statements from Indian IT companies themselves. For example, a recent financial statement from Wipro says: "If U.S. immigration laws change and make it more difficult for us to obtain H-1B and L-1 visas for our employees, our ability to compete for and provide services to clients in the United States could be impaired."

Wipro's Ramasubbu said there could be a delay in work heading to India if the visa programs were abolished. But he maintained that the United States would have less IT employment if the visa programs went away.

"The work will continue to be done," he said. "More work will go to India."