Indian Body Shopping with the United States H-1B Visa

(Migration in the CEE Countries)

Submitted by: Meha Lodha

June 2010

University of Wroclaw

Table of Contents

1 Introduction...............................................................................................................................1

2.1 Indian IT Immigrants in the US.............................................................................................3

2.2 The US H-1B Visa.................................................................................................................3

2.3 Body Shopping by Indian IT Companies..............................................................................4

2.4 Recent Change to US Policy..................................................................................................5

3 Conclusion................................................................................................................................6

References....................................................................................................................................7

1 Introduction

India has been drawing a lot of attention as a major source country in global migrations in

the 21st century and is faced with the pull and push migration effect. On one hand, India has

been an attractive destination country for migrants from the neighboring countries in the

subcontinent, both irregular and illegal, primarily from Bangladesh, Nepal, Bhutan and the Tibet

region in China and on the other hand, an approximate 20 million Indian migrants, comprising

roughly half non-resident Indian (NRI) citizens, and half foreign persons of Indian origin (PIO) –

the two together now being referred to as the ‘Indian Diaspora’. The Indian Diaspora is a

function of the flows of migration of unskilled, semi-skilled and highly skilled workers and their

families from India over nearly two centuries.

In the post-colonial times, traditionally the United Kingdom (UK) was the favored

emigration destination for Indian migrants. It was only in the 1970s that the United States (US)

overtook first the UK and then Canada as the prime developed country of destination for Indian

skilled migrants. In the developed countries, today, the focus on the Indian skilled migration

remains in the US, the country with the largest stock as well as flow (up to 80 per cent of Indian

migration to the developed countries) of educated and professionally qualified personnel from

India. The landmark 1965 Amendments to the Immigration and Nationality Act of 1952 in the

US brought Indian immigrants’ right to enter the US in line with that of the citizens of other

countries. This was the beginning of the end of the first phase of Indian emigration to the UK,

when the US became a more attractive destination for the ‘knowledge workers’ of India.1

Knowledge workers, here, generally refers to high-skilled Information Technology (IT)

sector workers. India's domination of computer-trained temporary workers is mainly attributed to

the large supply pool in India and to the fact that prior waves of Indian IT workers had

1 Khadria, Binod; Migration Between India and the UK; Public Policy Research; Sep/Nov2006, Vol. 13 Issue 3, p172-184

successfully established a significant presence in the IT industry. The US H-1B visa allows high-

skilled US businesses to hire foreigners with at least a bachelor's degree in occupations including

scientists, engineers and IT specialists. There are two sides of this coin - on one side this is a

good opportunity for the high-skilled labour in India who can not be effectively utilized in the

Indian labor market and on the other side this leads to a problem on brain drain.

Body shopping is the practice of consultancy firms recruiting IT workers in order to

contract their services out on short-term bases. Regarded as legitimate consultancy by both the

companies that practice it and by the people employed, body shopping is disparaged by those IT

services companies in India that assert that they provide real services (such as software

development) rather than the "sham" of merely farming out professionals to overseas

companies.2

2.1 Indian IT Immigrants in the US

The US is home to about 2.3 million people constituting the Indian Diaspora (this

constitutes Indian immigrants, Indians born in the US, Indian immigrants from countries other

than India) of which about 1.6 million are Indian immigrants, making them the third-largest

immigrant group in the US after Mexican and Filipino immigrants. Indian immigration to the

US, a fairly recent phenomenon, grew rapidly during the 1990s and 2000s.

In terms of academic achievement, Indian immigrants were better educated than other

immigrants and the native born. In 2008, 73.6 percent of Indian-born adults age 25 and older had

a bachelor's degree or higher compared to 27.1 percent among all 31.9 million foreign-born

adults and 27.8 percent of all 168.1 million native-born adults.

Over one-quarter of employed Indian-born men worked in information technology. One-

third of employed Indian-born women worked in management, business, and finance and in

information technology.3

2 Aneesh Aneesh (2006). "Body Shopping". Virtual Migration. Duke University Press. pp. 39–403 Indian Immigrants in the US http://www.migrationinformation.org/USfocus/display.cfm?id=785 Accessed Date 6th

June 2010

2.2 The US H-1B Visa

The US Immigration Act of 1990, effective from 1995, introduced the H-1B temporary

worker category. This visa category allows US businesses to hire foreigners with at least a

bachelor's degree in "specialty occupations" including scientists, engineers, and IT specialists. H-

1B visas, which are tied to a specific employer, are valid for three years and may be renewed for

another three years. At that point the employer can decide to apply for lawful permanent

residence for the H-1B visa holder.

Economist B. Lindsay Lowell observed that the number of Indian H-1B visa holders

grew fivefold between 1989 and 1999 and peaked in 2001 with 160,000 issuances. In that year,

82 percent of all computer-related H-1B visas were given to Indians and 85 percent of all Indian

H-1B beneficiaries were counted as computer related. In 2007, India received one-third or

158,000 of all H-1B visas (including new visas and renewals).4

2.3 Body Shopping by Indian IT Companies

Indian outsourcing companies (from IT and IT Enabled Services sector) accounted for

nearly 80 per cent of the visas approved in 2007 for the top 10 participants in the program.

Infosys Technologies and Wipro, both based in Bangalore, India, top the list of H-1B visa

recipients in 2007, with 4,559 and 2,567 approved visa petitions, respectively, according to data

from the US Citizenship & Immigration Services (USCIS).

Critics such as Grassley and Durbin charge that the outsourcers are abusing the US

program. The work visas, they say, are supposed to be used to bolster the US economy. The idea

is that companies like Microsoft, Google, or IBM can use them to hire software programmers or

computer scientists with rare skills, fostering innovation and improving competitiveness. Instead,

critics say, companies such as Infosys and Wipro are undermining the American economy by

wiping out jobs. The companies bring low-cost workers to the US, train them in the offices of

4 Post-Independence Migration to High-Wage Economies http://www.migrationinformation.org/Profiles/display.cfm?ID=745 Accessed Date: 9th June 2010

US clients, and then rotate them back home after a year or two so they can provide technical

support and other services from abroad.

The offshore outsourcers deny they're abusing the program. The visa program is open to

any company with US operations, no matter where its headquarters. More important, the

outsourcers say they're helping US companies stay competitive, allowing them to reduce costs

and concentrate on their core competencies. "The Indian IT industry has helped improve the

competitiveness of our customers in the US," said Som Mittal, president of Nasscom, the trade

group that represents the Indian companies. He added that Nasscom's members are "strong

upholders" of regulations in client countries. Infosys and Wipro declined to respond to criticisms

they are misusing the program. In the past, they've said the jobs they fill in the US are higher

skilled than those in India, involving sales and custom software development. Infosys has about

9,000 workers in the U.S., including 7,500 on H-1B visas. (It has 88,000 workers worldwide.)5

In one documented case study deemed as a typical example, a body shop in Hyderabad,

India was able to win a 360 man-month deal with a US company that urgently needed 40 IT

workers with a very "specific" skill on a 9-month project. Although the Indian body shop

company could easily find lower paid workers in India for the job, the H-1B visa process would

take too long to bring them into the US to work. Thus, the Indian firm forwarded a request to its

associate network to locate 40 Indian temporary workers in the US. A search was undertaken by

the network for available Indian H-1b workers, resulting in a list of recently laid-off Indian H-1B

workers in the US. Sponsorship for the laid-off Indian H-1B workers was reassigned to the

needing bodyshop and a portion of the newly employed workers salary was given as commission

to the peer body shop that help locate the laid off H-1B workers in their associated peer network

of Indian body shops.6

5 Herbst, Moira; Guess Who's Getting The Most Work Visas;.BusinessWeek; 3/17/2008, Issue 4075, p062-064, 2p6 Xiang Biao (2004). "Indian information technology professionals' world system: the nation and the transnation in individuals' migration strategies" State/Nation/Transnation: Perspectives on Transnationalism in the Asia-Pacific. Routledge. pp. 166–167

2.4 Recent Change to US Policy

USCIS (U.S. Citizenship & Immigration Services) recently issued a Memoranda dated

8th Jan 2010. The memoranda effectively states that there must be a clear "employee employer

relationship" between the petitioner (employer) and the beneficiary (potential Visa holder). It

simply outlines what the employer must do to be considered in compliance as well as putting

forth the documentation requirements to back up the employer's assertion that a valid

relationship exists.

The Memoranda gives three clear examples of what is and is NOT considered a valid

"employee employer relationship" - an accountant working on and off-site to work, a fashion

model, a computer software engineer working off-site.

In the case of the software engineer the petitioner (employer) must simply agree to do

(some of) the following among others:

- supervise the beneficiary off-site & on-site

- maintain such supervision through calls, reports, or visits

- have a "right" to control the work on a day-to-day basis if such control is required.

- provide tools for the job

- hire, pay and have the ability to fire the beneficiary

- evaluate work products and perform progress/performance reviews

- claim them for tax purposes

- provide (some type of) employee benefits

- use "proprietary information" to perform work

- produce an end product related to the business

- have an "ability to" control the manner and means in which the work product is

accomplished.

It further states that "common law is flexible" in how these factors are to be weighed.7

7 Determining Employer-Employee Relationship for Adjudication of H-1B Petitions, including Third-Party Site Placements http://www.uscis.gov/USCIS/Laws/Memoranda/2010/H1B%20Employer-Employee%20Memo010810.pdf Accessed Date: June 10th 2010

3 Conclusion

Differences are growing between the US tech companies and the Indian outsourcing

outfits. US companies often try to keep visa workers in the country and help them become

American citizens, while the outsourcers typically employ visa workers in the US on a temporary

basis. Some American tech companies say they may support reforms in the visa program to crack

down on any abuse. "If Congress decides the visas are being used in ways that don't benefit the

economy, there should be additional enforcement provisions or measures," said Jack Krumholtz,

Microsoft's chief lobbyist.

Many U.S. workers oppose any expansion of the program. They say H-1Bs let companies

hire cheap workers from abroad, rather than Americans. They say the timing for expansion

couldn't be worse, with the economy faltering. "Foreign workers are coming into the U.S., even

though Americans need jobs," says Kim Berry, president of the worker advocacy group

Programmers Guild. "It turns the intent of the H-1B program upside down."

The “mis-use” of the H-1B visas by Indian IT companies and the corresponding rebuttal

by the US in streamlining the use of the H-1B visa by changing the policy seems like the ball is

now in the court of the Indian IT companies. Whether they will be able to meet the requirements

of the changed policy by finding a way to effectively establish employer-employee relations for

workers working on and off-site, remains to be seen.

References

- Khadria, Binod; Migration Between India and the UK; Public Policy Research;

Sep/Nov2006, Vol. 13 Issue 3, p172-184

- Aneesh Aneesh (2006). "Body Shopping". Virtual Migration. Duke University Press. pp.

39–40

- Indian Immigrants in the US http://www.migrationinformation.org/USfocus/display.cfm?

id=785 Accessed Date 6th June 2010

- Post-Independence Migration to High-Wage Economies

http://www.migrationinformation.org/Profiles/display.cfm?ID=745 Accessed Date: 9th

June 2010 Herbst, Moira; Guess Who's Getting The Most Work Visas;.BusinessWeek;

3/17/2008, Issue 4075, p062-064, 2p

- Xiang Biao (2004). "Indian information technology professionals' world system: the nation

and the transnation in individuals' migration strategies" State/Nation/Transnation:

Perspectives on Transnationalism in the Asia-Pacific. Routledge. pp. 166–167

- Determining Employer-Employee Relationship for Adjudication of H-1B Petitions,

including Third-Party Site Placements

http://www.uscis.gov/USCIS/Laws/Memoranda/2010/H1B%20Employer-Employee

%20Memo010810.pdf Accessed Date: June 10th 2010