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Visa crunch hits IT players

Discussions on with US government on visa issues, but not much headway in sight.

Published: 17th November 2013 06:00 AM  |   Last Updated: 17th November 2013 12:54 AM   |  A+A-

After putting in nearly two decades of service with Tata Consultancy Services Ltd (TCS), the country’s largest software exporter, 41-year-old Rajkumar Murthy (name changed) from Anakapalli, Vishakapatnam district, took a drastic decision. He quit.

Murthy, who had worked with TCS in several countries during his career, was sent to China to service a five-year contract that the company signed with a local customer. He was happy to go to China but, once there, realized that his visa wasn’t legitimate.

Instead of a work visa, which allows non-residents to work on foreign shores, what Murthy had was a business visa, which entitles visitor to merely attend business conferences or meetings. If the local authorities identified the actual purpose of Murthy’s visit, he could be slapped with criminal charges. Also, unlike the US, which allows both tourists and business visitors to stay for six months at a time, China would send Murthy back every month to renew his business visa. “I felt this wasn’t right, and quit,” says Murthy.

Industry observers say Murthy’s is not an isolated case. Almost all Indian IT service providers have begun sending out their people to work in foreign countries on non-work permits. For one, the costs associated with a work and tourist visa vary significantly. In the US, while a B-1 (business trip) visa costs a little over Rs 8,000 and entitles one to stay up to six months, companies have to fill in enormous paperwork and cough up upwards of Rs 50,000 for a H-1B visa. Two, the US—which accounts for more than 60 per cent of the Indian IT firms’ total sales—issues a limited number of work visas every year. This year, the cap was set at 65,000 and the quota was filled within a week.

“The need for skilled foreign temporary workers exists in the US. This can be filled by Indians through Indian companies. This is an opportunity which is lost if the cap continues to be 65,000,” says BVR Mohan Reddy, CMD, Infotech Enterprises Ltd, which employs about 1,400 people in the US, of which over 800 are locals.

Hiring American citizens and permanent residents is expensive and, in turbulent economic conditions such as these, could be a drag on profit margins. NR Narayana Murthy, Chairman, Infosys Technologies Ltd, which has been under the US government scanner over immigration irregularities, recently admitted that the company had witnessed a ‘huge increase’ in compensation costs outside India.

Little wonder then that companies feel compelled to send employees out on visas other than H-1B. But they’re also getting caught.

As per the complaint filed by the US Attorney’s Office, Infosys knowingly used B-1 visa holders to perform skilled labour in order to fill positions in the US for employment that otherwise would have been performed by local citizens or legitimate H-1B visa holders. It says Infosys allegedly did this to increase its profits, minimize costs of securing visas, obtain an unfair advantage over competitors, and avoid tax liabilities.

Last month, Infosys agreed to pay $34 million to the US government to settle allegations of “paperwork errors” in I-9 filings. (Employers in the US use I-9 to document the identity and employment authorization of new hires.)

“The company’s use of B-1 visas was for legitimate business purposes and not in any way intended to circumvent the requirements of the H-1B program. Only .02% of the days that Infosys employees worked on US projects in 2012 were performed by B-1 visa holders,” explains an Infosys spokesperson.

But sadly, this doesn’t seem like an isolated case and the US authorities allege that several other Indian companies are also under the radar. But none of the big companies, such as TCS, Cognizant, Wipro or iGate, will comment on the issue. CP Gurnani, CEO of Tech Mahindra, too said his company has decided not to comment on the visa issue.

Trade body Nasscom admits that there have been discussions between companies and the US government on the visa issues but downplays the issue. “The Infosys case was old. Over the last 3-4 years, there have been many discussions between the companies that use work visas and US consular and government officials. I don’t think there is anything new that will get triggered,” says Som Mittal, Nasscom president.

Experts say the way forward depends on which of the two immigration bills,  Senate Bill and House Bill, gets passed by the US government. The first contains clauses such as the outplacement clause, which could dent Indian IT firms’ revenues while the House Bill has several positive provisions including an increase in H-1B visas or green cards beneficial to the sector.

“I think there is decent progress that is happening in terms of the House Bill becoming more acceptable. There are some corporates supportive of the Senate Bill who have become more supportive of the House Bill... we are closely monitoring it, trying to see what are the improvements that can happen on that and also working with our client organizations to see if and when, if some of those provisions stay, how do you mitigate that in terms of a revised working arrangement,” says Suresh Senapaty, CFO, Wipro Ltd.

If the Senate Bill gets through and if the cap on H-1B remains at the current level or tightens further, homegrown firms have only one thing to do. “There will be only two alternatives—more offshoring and more onshoring with local employees even if costs go up,” says L Suresh, CEO, Identis Tech Solutions.



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