Saturday, January 23, 2010

Desi Consultancies and the New H1 Regime

This post is written by my friend and guest blogger Karthikeyan Chandran. He blogs at Glocal View

Many have read about the recent
USCIS memo on H1B which has abruptly changed the career course of many, what with denial of entry to many who went to India this holiday season and more who are still here. The implications of the memo is far reaching and as such there could be a big change in the way IT consultancies work. Here is the latest from Murthy (read full article here) explaining the finer elements of the memo and the subsequent clarifications from USCIS -
Job Shop Arrangements - Problematic
The most important example for IT consulting situations is the example of third-party placement or "job-shop" arrangements. The USCIS does not consider that there is a valid employer-employee relationship if the petitioner contracts with outside companies to fill their staffing needs. The positions are filled on an as-needed basis, rather than specifically being outlined in a contract between the petitioner and the third party. The beneficiary reports to a manager who is an employee of the third-party company. The beneficiary does not get work assignments from the petitioner; rather, the third-party company issues the assignments. The petitioner does not control the work, and there is no proprietary information regarding the petitioner that is used in the process. The end product is not related to the petitioner's business of IT consulting, and reviews are completed by the end client. The petitioner does not have the right of control and does not exercise control. Accordingly, there is no employer-employee relationship in this example.
Since most of the desi consultants work in a Job-Shop arrangement, and the business models of both the end clients and the desi consultancies revolve around this arrangement, in the short term there could be a lot of problems for people trying to re-enter US or applying for H1, at a minimum until further clarifications come from USCIS. What are the implications, especially for us desis here -
(a) if you are a student, this is probably one of the worst times to graduate. The market is really bad, and IT consultancies might sound like a solution to many. While it was true a few years ago, it is not anymore.

(b) If you are a desi consultant, i think it is atleast time to think about the next steps towards FTE (Full Time Employment). While it is true that in this market one atleast gets a few months buffer while on bench with a consultancy (desi)- if you get laid off while on FTE, it could be really traumatic to get your visa status straightened out in time - if the trend we are seeing is an indication what is to come, its better to jump ship than to be caught off guard. The USCIS has basically said that the H1Bs filed by desi consultancies who do job-shop business are invalid. If USCIS decides to tighten the noose, in one stroke your H1B can be revoked on this basis. Though it is unlikely that they would do this to every consultancy out there, if they start auditing "random" companies, you could be in trouble when you are the least ready.

Since the US just cannot cut the supply of IT professionals to US businesses - it would just choke them in the short term - abruptly, i can of think of the following three scenarios -
(a) The new memo would be more less invalidated with newer clarifications and work arounds. This is a real possibility and consultancies that are run on sound principles - pay check in time, paper work in order - might have an easier time getting back to normal.

(b) A new class of Visa might be created - like L1s or B1s - to fill just these short term projects. I see this as a possibility, albeit a not so good one. But this would only increase the paper work and uncertainty for a lot of working people. So, while it won't be popular, if it comes through desi consultants will have a tough time. I hope this doesn't happen.

(c) Vendor companies and End clients would be forced to hire H1s directly instead of depending on contractors. This would increase their overhead costs - providing benefits and such - and operating costs.
Among these three i see only option (a) coming through since and possibly to a lesser extent option (c).

But all in all, the free ride that desi consultancies had is coming to an end and for good measure. The only sad part is that many hard working desis might get hurt in the process.

Share your thoughts on what else we could expect.

Originally published
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Anonymous Anonymous said...

I'm only sad for those who are immersed in debt with their educational loans; not for those who want to be in the US at any cost for the sake of their "status" in India. Although this is bad for a lot of hardworking and sincere folks who play by the rules, I'd any day welcome immigration reforms like these than the ones down under in Australia. Also, 21st century Americans have gotten used to an easy life gifted to them by their hardworking parents and grandparents post WW2. Let them acquire skills and earn the jobs now being done by temporary Indian workers. It will be good for them, good for the world. The richest and most powerful nation can do with more learned citizens..


January 23, 2010 7:37 PM  
Blogger Anand said...

ha ha :-) this comment sounds as narrow minded as this new rule of H1 regime being introduced for it is nothing but a protectionist measure. At a difficult time, worst of Govt do that to protect the local citizens. havent we seen that so often in our own home land back home? Let us get over the facts of only thinking till the point we can. Because there are many more other valid reasons than the students not being able to pay the loans....isnt it?

January 24, 2010 9:54 AM  
Anonymous Anonymous said...

I guess the rule just says that there should be someone in the consultancy to whom one should be reporting to regularly. That pretty simple for consultancies to do I feel. You need to create report weekly or bi-weekly and that would create the Employee-Employer relationship required by the USCIS.

January 26, 2010 2:01 AM  
Anonymous Anonymous said...

I applied for a h1b visa in 2008 from a consultancy in India. I recieved RFE on march 2009. After RFE on August 2010 i recived a mailfrom USCIS saying that"
On May 15, 2009, we mailed a notice acknowledging withdrawal of this application or petition I129 PETITION FOR A NONIMMIGRANT WORKER. If you have not received the notice within 30 days of May 15, 2009, contact our customer service at 1-800-375-5283."

Can the consultancy which filed H1b Visa for me can withdraw my application without my consent.

Please reply at -

August 26, 2010 3:13 PM  
Blogger Brijesh Nair said...

Anon @ 7.13AM
Yes it is possible for companies to withdraw H1B petition without the consent of the applicant

August 28, 2010 9:08 PM  

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