New contracts, work-from-India, variable pay: How law firms are scrambling to pull tech firms out of H-1B train wreck

The new rule, which mandates that employers pay a staggering $100,000 fee for each first-time H-1B visa applicant, threatens to cost the country’s top IT services companies billions of dollars and has left thousands of employees in limbo. In response, law firms across India are brainstorming on reworking termination clauses, exploring alternate visa routes, and deciding on what happens if an employee on H-1B visa quits mid-way during the US posting. IT services makes up a big chunk of India's broader IT industry.

Arka Majumdar, a partner at Argus Partners specializing in employment law, said his firm is advising companies to tie employee roles to work authorization.

"We are advising to make the role contingent on maintaining valid work authorization and allowing quick conversion to another status or remote arrangement if the visa is refused," Majumdar said. The advice also includes implementing a "variable component" in wages for remote workers, which would only be paid if and when an employee successfully transitions to a US posting.

For IT services companies, the financial hit is immediate and substantial. According to a back-of-the-envelope calculation based on data from the US Citizenship and Immigration Services (USCIS), five of India’s biggest IT firms—Tata Consultancy Services (TCS), Cognizant, Infosys, LTI Mindtree, and Wipro—sent 13,332 employees to the US on H-1B visas in the first half of 2025. At this rate, the new fees could saddle these companies with a combined bill of at least $1.3 billion for the full year.

Queries sent on Thursday afternoon to TCS, Cognizant, Infosys, LTI Mindtree and Wipro remained unanswered.

The new fee has sparked a domino effect that reaches deep into corporate strategy and employee contracts. One major point of contention: who foots the bill if an employee quits midway through their US assignment? The hefty $100,000 fee makes such scenarios far more costly for employers, who are now looking to rework contracts to protect their investment.

As companies rework their contingency plans, a key strategy emerging is a shift toward a "work-from-home-turf" model. Abe Abraham, a partner at Cyril Amarchand Mangaldas, notes that employers will increasingly need to offer alternative arrangements, like remote work from the employee’s home country or a temporary placement in an office outside the US.

This shift is particularly relevant for tech and financial services firms that have been building out their Global Capability Centres (GCCs) in India. Once seen as mere cost-saving hubs, these centres have evolved into sophisticated innovation and R&D hubs. With more than 1,800 GCCs employing five million people in India—over 60% of which are US-headquartered—these units offer a ready-made solution for companies facing visa restrictions. The expanded capabilities of GCCs mean that critical work can continue uninterrupted even if US visas remain out of reach.

The visa crackdown has hit shares of Indian IT companies. The Nifty IT index has fallen 5.5% since the news broke on Friday late evening, trailing the Nifty's 1.7% fall. Derivatives bets indicate that the pain may not be over for IT firms, Mint reported.

The new regulations aren't just a corporate headache; they're a personal blow to thousands of workers. Gerald Manoharan, a partner at JSA Advocates and Solicitors, says employees with offers from US firms who are "on the tarmac waiting for their H-1B visas" are now being presented with two unappealing choices: accept a lower salary or take on a flexible work-from-India role.

This particularly affects a vulnerable demographic: recent graduates and fresh recruits. Many were trained for US-based roles and now find themselves in limbo. The timing couldn't be worse, as a soft job market makes it difficult for these workers to pivot to a new role if their US plans fall through.

Adding to the confusion is a lack of clarity surrounding what happens to the new fee if an employee changes employers. Poorvi Chothani, an immigration attorney and managing partner at LawQuest, highlights this critical ambiguity. "Until now, when there is a transfer of employment, the new employer has to pay all the required fees of a new petition. But now, there is no clarity if the same rule will apply to the new $100,000 fee," she said.

The new rule, therefore, has created a complex web of legal, financial, and employment challenges. While India's law firms are busy crafting new strategies, the ripple effects of the US policy are already reshaping the global tech talent landscape, from corporate boardrooms to the careers of young professionals.

According to brokerage firms tracking the IT sector, the dependency on H-1B visas will be down to a minimum as firms increase hiring in US.

"New petitions have reduced substantially for IT services players. Incremental petitions could now drop to a trickle, in our view, for specific skill-sets where clients are willing to pay. This will make it margin-neutral," noted JM Financial's analysts in a 21 September report.

Analysts estimate that the top-10 IT Services players have 1.2-4.1% of their total employee base on H-1B visas.

Interestingly, Motilal Oswal highlighted that while "H-1B programme is often portrayed as an ‘India IT’ visa channel, in practice, Big Tech companies (Google, Amazon, Microsoft, Meta, etc.) account for a larger share of fresh applications than Indian IT".

ICICI Securities notes that for IT firms, the annual US wage in 2024 was $106,000 for IT firms, nearly the same as the new visa fee. Therefore, IT companies would further reduce dependence on the H-1B visa programme and increase localization".

Over a dozen small- and mid-sized IT and software firms have stated that the stiff fee will not materially affect their operations. IT services firms Sonata Software Ltd, Biralsoft Ltd, Zensar Technology Ltd and Happiest Minds Technologies Ltd, along with data analytics player Latent View Analytics Ltd and business process software firm Digitide Solutions Ltd, said the visa norms introduced by Trump would have no impact on their businesses.

Coforge Ltd, Mphasis Ltd, Persistent Systems Ltd, Firstsource Solutions Ltd, Cyient Ltd and Hexaware Technologies Ltd said they have reduced reliance on such visas over the years and continue to focus on local hiring.