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Donald Trump signs order that will increase H-1B visa scrutiny: 10 things to know

Last Updated 04 August 2020, 09:14 IST

In a huge blow to Indian IT professionals eyeing the US job market, President Donald Trump on Monday signed an executive order preventing federal agencies from contracting or subcontracting foreign workers -- mainly those on H-1B visa -- from hiring.

Read: Trump signs executive order against hiring H-1B visa holders for federal contracts

Here are 10 things you need to know about this move:

The main reason for issuing this order was the fear of rising job losses in the US, which are about 40 million due to Covid-19. According to the US government, the ban is likely to open up around half a million jobs for US citizens. However, according to experts, the new order is temporary in nature.

Following the order, issuing of four main categories of visas has been halted from June 24, 2020. They include: H-1B (given to skilled workers), H-2B (for seasonal workers), L (for executives, managers and specialised workers) and J visas (for cultural exchange, including interns, teachers, camp counsellors among others). However, foreign workers with valid visas already in the US will not be affected.

The move is likely to hit the margins of the IT companies at a time when they have been under strain for the past few years. This is because the cost of recruitment is higher for domestic employees compared to their H-1B counterparts.

Technology companies depend on this to hire tens of thousands of employees each year from countries like India and China. The order prevents federal agencies from hiring, contracting or subcontracting foreign workers -- mainly those on H-1B visa. According to Trump, the move is necessary to protect American workers and not to enable companies to destroy 'American jobs'.

Also Read: Visa freeze to hit US more than India

This move has been long in the making and the worsening economic situation in the US made it imperative for the Trump Administration, facing a tough election ahead, to respond to the challenge. The US economy is still struggling to recover from the lockdown as the unemployment rate has risen to an all-time high.

Indian nationals corner around 70% of the 85,000 H1-B visas issued annually by the US. So, this will be a major blow to the Indian IT companies which have benefitted from the H1-B visa regime. Though the restrictions will apply only to new work visas and not to existing holders who are in the US currently, this also complicates the position of the Indian government.

Indian top tier IT companies have been the biggest beneficiaries of the H-1B regime in the past few years. As per a 2015 report by Nasscom, the Indian IT sector not only supported more than 4,00,000 jobs in the US but has also contributed more than $20 billion in federal taxes from 2010-2015. This year also, nearly 2,75,000 unique registrations were submitted during the initial registration period. Nearly 81 percent of submitted registrations were for potential beneficiaries from India (67.7%) and China (13.2%).

Also Read: Visa freeze to hit US more than India

While Trump’s move may rally his support base in the run-up to the November elections, most business groups had been lobbying against this move given its potential to damage the economic recovery which is still at a nascent stage.

Outsourcing companies are dealing with the unpredictability of the visa situation and the prospect that an H-1B revamp could make it difficult to send anyone but the most critical of talent overseas

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(Published 04 August 2020, 04:11 IST)

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