Faced with tightening H-1B norms, Indian IT firms in US are hiring from Mexico on TN visas

Indian IT outsourcing companies have begun to feel the pinch of the Donald Trump regime’s tough visa stance.

During the July-September quarter this year, most Indian tech majors saw a significant year-on-year rise in the share of revenue spent on subcontracting, according to an analysts’ note from Kotak Institutional Equities Research released on November 20.

“Subcontracting is employed by IT companies as a short-term measure to fill gaps in supply intended to be filled through H-1B workers or offshoring, to avoid drag on margins,” Kawaljeet Saluja and Sathish Kumar wrote in the note. They expect “elevated subcontracting levels in the short to medium term” as companies find other ways to offset the supply gap due to the H-1B worker shortage.

Over the past year, the US government’s H-1B visa programme, used extensively by Indian firms, has come under the scanner. Already, it has tightened the criteria for granting H-1B visas, increased the paperwork involved, and rejected more applications. The Trump government has also kicked up efforts to dig up H-1B visa fraud and abuse.

A more permanent solution

While Indian IT companies have ramped up local hiring as a more permanent solution to their problems, it’s easier said than done.

At senior levels, local talent is sparse and that is leading to a poaching war, the note said. This is reflected in higher attrition numbers, further compounding the problem. “Entry-level talent is available but cannot be used for knowledge transfer phase or initiation of projects,” it said

So companies are increasingly recruiting from the US’s neighbourhood. Those with a presence in Mexico and Canada – which is all the firms mentioned in the Kotak note – can leverage the TN visa category to send workers to the US.

“Unlike H-1B visas, TN visas have no application timeline, are quicker and cheaper to process, have no annual quota and can be renewed indefinitely,” Saluja and Kumar wrote.

Already, the number of TN visas issued to Mexican nationals has spiked over the last year, “suggesting a possibility of IT companies using this route to satisfy demand requirements onsite (in the US),” the note said.

Mid-sized IT firm Hexaware, for instance, is treading this path. “We already have 500 people there [in Mexico] and one option is to source talent locally and move them to the US if required,” R Srikrishna, CEO of the Mumbai-based IT-BPO company, told The Economic Times newspaper.

This article first appeared on Quartz.