How will Donald Trump's H-1B fee hit Indian IT firms?

The United States government has announced its plans to impose a $100,000 fee on fresh H-1B pleas, potentially hurting the Indian IT industry, which largely relies on American clients. The policy change may force Indian IT giants to hire more expensive local talent, which may push their expenses.

What's theUS fee?

Earlier, H-1B applications used to cost the companies between $2,000 and $5,000 per applicant. However, the new rule will now require people to shell out $100,000 per applicant.

If an IT giant files for 5000 H-1B applications, this cost will now be $500 million.

Motilal Oswal Financial Services told Business Standard that Indian IT companies will likely avoid new H-1B filings and expand hirings abroad.

The Indian IT companies earn nearly 60 per cent of their revenues from the US. Over the past 10 years, they have been reducing their reliance on H-1B hirings.

Around 20 per cent of employees of the mega IT companies are based in the US. Of these, nearly one-third hold H-1B visas.

"With localisation drives in the US and higher local hiring, only about 20 per cent of employees are currently based on-site. Of this, 20-30 per cent are on H-1B visas, implying that H-1B holders represent just 3-5 per cent of the active workforce for a typical vendor," Motilal Oswal noted.

Motilal Oswal said that with H-1B hirings dwindling, on-site revenues will decline. However, since offshore delivery is more profitable for these companies, operating margins can still improve.

Firms might also hire green card holders and US citizens.

American companies also file H-1B applications. Amazon's approval list was 10,044 H-1B visas, TCS had 5,505 approvals., Microsoft (5,189), Meta (5,123), Apple (4,202), and Google (4,181) reported BS.

This issue will also hit the global tech giants, not just Indian companies.