The US Department of Labor has proposed new rules with a near 11% increase in base wages for new H-1B visa applicants, a move that could raise costs for large information technology (IT) services firms which deploy significant visa-linked talent.
As per a 26 March notification, the changes would lift pay benchmarks by at least $14,500 across entry-level and experienced hires, as Washington said it looks to curb “misuse” of the visa programme and bring foreign worker wages closer to parity with those of US employees. Going by this, an employee working on an H-1B visa in the US, who earned a base wage of $133,850 last fiscal year, would now earn about $148,439.
The department has invited feedback on the new rules on or before 60 days of publishing of the draft.
H-1B visas are non-immigrant visas that allow foreign nationals to temporarily work in the US in specialized occupations, including IT services-related work.
The US department said the move aims to curb abuse of such visas "by reducing the incentive to displace American workers with low-wage foreign visa holders.”
“This proposed rule will help ensure that employers pay foreign workers wages that reflect the real market value of their labor, in addition to protecting the wages and job opportunities of American workers," said Lori Chavez-DeRemer, US Secretary of Labour, as part of the Labour Department’s press release dated 26 March. "The continued abuse of the H-1B program by certain bad actors will no longer be tolerated,”
An expert said this was a routine change in law. “Nothing suggests that the department has circumvented or exceeded powers within its domain," said Russell A. Stamets, partner at Circle of Counsels, a New Delhi-based law firm.
“The primary way to show resistance is for affected employers such as the software companies to communicate with their lawmakers and regulators to see if certain parts of the rules can be changed," added Stamets. "Litigation may be an option if the affected parties are dissatisfied with the final rule."
If these rules take effect, the profitability of the country’s largest IT services companies, which are also the biggest users of these H-1B visas, might come under strain.
Salary costs comprise more than a third of their expenses and an increase in base wages for H-1B visa holders is likely to hike their costs and hurt margins. However, an expert said homegrown IT services companies have found an antidote.
“Clarification that the policy applies only to new applications is likely to ease the immediate pressure on margins. Also, most companies have turned to nearshore and offshore hiring, recalibrating the hiring strategies and delivery models,” said Namratha Dharshan, chief business leader of ISG, a Stamford, Connecticut, based IT research firm.
These companies are posting employees in nearshore locations such as Canada and Mexico to offset high costs and protect margins. According to a Mint report of 28 October 2025, five of the country’s 13 largest IT solutions providers had attributed higher operating margins in the three months ended September 2025 to this increased offshoring and nearshoring.
Tata Consultancy Services Ltd, Infosys Ltd and Cognizant Technology Solutions Corp. ended last year with operating margins of 24.3%, 21.1%, and 16.1%, respectively. While TCS’s operating margins declined 30 basis points on a yearly basis, Infosys and Cognizant’s numbers rose 40 basis points and 140 basis points, respectively.
TCS and Infosys follow an April-March fiscal year, whereas Cognizant follows a January-December calendar.
TCS, Infosys, and Cognizant got 1,518 visas, 1,139 visas, and 980 visas in FY26, respectively, taking them to the list of 10 top beneficiaries of H-1B visas for the fiscal year so far. The US government follows an October-September fiscal calendar.
The wage increase proposal is the latest in a slew of measures introduced by the Donald Trump administration in the last 12 months to clamp down on non-immigrant work visas.
On 19 September 2025, US President Trump signed a Presidential Proclamation requiring firms to pay $100,000 annually for every new foreign worker brought in under H-1B visa, up from $1,000.
Less than a week later, on 24 September, Republican senator Charles E. Grassley and Democratic senator Richard J. Durbin wrote joint letters to K. Krithivasan and S. Ravi Kumar, chief executives of TCS and Cognizant, respectively, seeking responses on the claims of race-based discrimination and substituting American workers with low-cost H-1B employees.
A week later, Tom Cotton, Arkansas’ Republican senator, introduced the Visa Cap Enforcement Bill in the Senate, aimed at removing the long-standing exemption for colleges, non-profits and research institutes from annual H-1B visa limits.
Earlier that same month, Ohio senator Bernie Moreno proposed the Halting International Relocation of Employees (HIRE) Act to increase taxes on firms hiring offshore employees from their IT vendors.