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H-1B: The Recession's Impact

 
 
By John Hazard  |  Posted 2011-04-06
 
 
 

IT hosting and on-demand infrastructure provider SingleHop is growing fast. In the last five years the small company in Chicago has increased revenue 4,000 percent.

SingleHop’s core business of hosted applications and on-demand infrastructure services are in hot demand as businesses of all kinds embrace managed services and hosted applications in the cloud. SingleHop’s employees are in equal demand as the company adds more customers and hosts more applications for existing companies. The problem is there aren’t enough of them and SingleHop has struggled to find IT pros with the significant technical experience to tackle some of the unique issues its engineers face when hosting business-critical applications of all shapes, sizes and types.

In March, SingleHop found one of those engineers with a unique background and started the process to hire him. It needed him in the Chicago office and responding to client calls in two to three weeks, maximum, said Dan Salcedo, SingleHop’s director of communications. No problem for SingleHop or the employee, but a major problem for United States Customs and Immigration Service, which was required to approve the employee's hire and move to the U.S. under an H-1B work-permit visa. The average time required to gain approval and hire an employee under an H-1B visa: three to six months; three to six months longer than SingleHop could afford.

"That is completely impractical for the technology industry," Salcedo said. Unlike other industries, the pace of development and unique situation required by almost every application technology companies like SingleHop manage, requires fast, flexible hiring periods. Something the H-1B process doesn’t afford. "You’re talking about several months, at least, where that employee is not working and we’re not able to do some sort of business. That’s a business limitation."

The downtime might be manageable at a larger company, but at SingleHop, with 50 employees and $23 million in annual revenue, every employee and every customer engagament impacts the bottom line. The inability to hire H-1B employees in a timely and cost-effective manner is strangling business opportunity.

Just two years ago the debate over H-1B visas focused on the number (65,000 annually), which was far too few to meet the demand. From fiscal year 2007 to fiscal 2009, the entire allotment was used on the opening day for applications (April 1, six months before the start of the Federal fiscal year). Companies of all shapes and sizes were forced to chance their H-1B visa hires on a lottery system with an estimated one-in-three chance of success. Nearly all protested the limitation.


During the recession, the weak demand for labor eased tension on the H-1B system and the debate over the quota was silenced. This year, the 65,000 visas were available until late January, nine months into the application period. Today, the debate focuses on the process, which critics say is slow, expensive and impractical. And the protests come mostly from smaller businesses, which argue that the system is disproportionately difficult for those businesses such as VARs and service providers.

It's not likely to get better any time soon, said Leslie K. L. Thiele, an immigration attorney and partner at Whiteman Osterman & Hanna, Albany, NY.

"Congress hates the H-1B," Thiele said. "They like to think it is used by Indian computer programmers to come over here and undercut the wages of U.S. workers. Congress doesn’t believe there aren’t enough U.S. workers to do these jobs and so they penalize the employers who use them... They're unlikely to do anything to make the process easier or manageble for anyone, let alone small businesses."

The special difficulty the H-1B system presents for small business, said Thiele and others who have experience with the process, is a construct of three factors: the cost of the application process, the unrealistic standards to which the USCIS holds business owners and the slow, laborious approval.


For starters, the fees alone are expensive and they keep rising everytime congress wants to appear tough on foreign labor, said Thiele. The fee alone is between $2,000 and $3,000 depending on the particulars of the application. But the process is complex and labor-intensive, most employers opt to file through an immigration attorney, which generally adds another $1,000 to $3,000 to the costs, according to Thiele and other immigration attorneys. "For an employer, you're making a choice between time away from your business to file the application and maybe do it wrong, or paying someone to do it for you right," Salcedo said.

When you consider filing fees, attorney fees and other factors, the notion that H-1B employees are cheaper or undercutting wages is completely bogus, Salcedo said. "In addition to their salary, which the USCIS must approve as average or higher for the job title and region, you're paying their fees, plus the legals fees, plus, we're often paying to relocate them. So H-1B employees are typically much more expensive."

Unrealistic standards

Small businesses are not scale versions of big businesses, with every process, function and role represented in miniature, but the USCIS doesn't understand that, said Thiele.

The H-1B visa process begins with what is known as a "Labor Condition Application," which allows the agency to determine that the employee in question possesses special skills that can't easily be filled by  a U.S.-based employee, that the wage to be paid is equal to or greater than the average for the position in the region and that the employee's sole role at the company will be to perform those specialized tasks for which they were hired. The application invites the agency to meticulously comb your business to make the determination and nothing about the process is set up to allow agents to consider the size of the company, Thiele said.

"They fail to recognize how the modern workplace operates," said Douglas M. Lightman, an immigration attorney as well as founder and principal attorney at the Lightman Law Firm, New York, NY.

For instance, the USCIS assumes that every business, regardless of size or industry, must perform certain tasks and fill certain roles. It assumes that a certain percentage of employee time must be spent performing "non-qualifying duties": photocopies, sending e-mails, filing time sheets, answering phones, ordering supplies, etc. When they consider the application of a three-person company, they want to know who among those three handles those tasks so that the H-1B will be focused solely on their specialized skill.

"They don't recognize that those tasks are simplified by technology and not every company needs an administrative person," Lightman said. "It doesn't take into account the modern workplace or the technology industry. For instance, I recall an application for a software maker where the agency wanted proof of a warehouse space to store the software inventory. I've seen that several times. It's ridiculous. It's irrelevant to the nature of the application."

Ironically, the reduced tension on the quota system has made this scrutiny worse, said Irina Plumlee, an immigration attorney in the Dallas office of Gardere Wynne Sewell.

"With far fewer visa requests being made and those that are submitted come in at a slower rate, it has enabled a far more comprehensive review at the administrative level," she said. "With more time on their hands, the agents are taking a far more critical review of each application and unfortunately small companies are the ones who suffer more under intense scrutiny of their operations, finances, workforce, etc."

 

A process that is measured in months, instead of days, and steeped in uncertainty isn't working, said Salcedo. It is especially inadequate for the technology industry and a disadvantage for small businesses that rely on every role.

"If you are a young, little company, you need to measure your hiring process in days, not weeks. Usually, when you go to hire someone, you needed them in that position yesterday," he said. "The H-1B process isn’t helpful to technology companies. it’s more suitable for lawyers, doctors, engineers and universities, [organizations] that have long hiring windows. For technology, the system is archaic."

The uncertainty is also a factor small businesses can't thrive on, said Thiele. Large businesses, with hundreds, or thousands of employees and hires, can accept an empty position if an H-1B visa is denied; small businesses rely on every role and can't move forward with such uncertainty. That often means declining business and delaying development until the employee is approved, said Salcedo.

"If a larger company invests in this person, and it doesn't work out, they can absorb the blow," said Thiel. "For a smaller business they may have just lost a year they can't make up."

"The H-1B is a shot in the dark," said Salcedo. "If you're growing fast and need to hire people, you can't work that way."

The situation often arises for companies who are trying to hire an employee transferring from an F-1 student visa after they graduate from graduate school, Thiel said. Often they hire the employee, train them and integrate them into their staff under the F-1 visa and hope the H-1B is approved.


Under the current system, the best solution to troublesome H-1B issues is to do your homework. Lots of it, said Lightman. " if you’re working with a lawyer and they're requesting documents that aren’t required -- anything that speaks to the substance of the ongoing business -- provide as much information as possible. They want incorporation documents, promotional materials, tax records, prepare as much as possible. Most want to avoid going into too much detail on the position. They don’t realize how much scrutiny their application is about to receive."

A real solution would be an H-1B process that recognizes conditions in small businesses and reduces the fees and complexity of the process, Lightman said.

Another solution is a separate track for IT, said Lightman, Salcedo and Thiel.

For his part, Salcedo said the H-1B is actually too liberal for the employee, which invites greater scrutiny upon the employer.

"The H-1B is a pretty good foot in the country for the employee, which is why they get away with being so selective in approving it," he said. "A visa with less privileges for the employee might require less scrutiny and make for an easier process."

Until then, he said, the H-1B system is impractical and "holding back business."