H-1B Visas Gone; Few Options Left

Unless the federal government decides to raise this year's cap on H-1B visas, employers will be left with only a few alternative means of hiring overseas labor, none of which is ideal.

These alternatives - which include hiring overseas employees to work in foreign offices and raiding other companies for H-1B staff - are limited to workers in a particular region or to those who have fulfilled certain conditions of employment. But many employers are under increasing pressure to find any means of hiring technical talent. The nation's unemployment rate hit a 30-year low last month of 3.9%. Moreover, as many as 800,000 high-tech positions will go unfilled over the next 12 months, according to a recent study from the Information Technology Association of America.

The labor shortage extends to international workers. Employers exhausted the H-1B limits by March 21, and many are pinning their hopes on pending legislation that would lift the H-1B visa cap.

The H-1B quota is set at 115,000 for the federal government's current fiscal year, which ends Sept. 30, and 107,000 for fiscal 2001. More than half of these visas are granted to systems analysts and programmers, according to the Immigration and Naturalization Service (INS).

Two pending bills seek to raise the cap to roughly 200,000 over the next three years, while one proposes lifting the cap altogether. Though most observers expect a law to raise the H-1B cap, not everyone thinks the government will do so this fiscal year.

Like many employers, KPMG Consulting Inc. in New York relies on the H-1B visa to bridge its labor shortage by enabling foreign workers with technology skills to work in the U.S. for up to six years. The company filed 150 H-1B petitions this year on behalf of technical consultants with systems integration skills, said Sean Huurman, the firm's national director for recruiting.

In April, soon after the INS stopped accepting new H-1B petitions for this year, the company recruited three additional foreign nationals, said Huurman.

But these employees work in their native countries, so they don't require visas.

KPMG may file for H-1B visas on behalf of these employees in October, when the INS begins accepting new petitions for fiscal 2001. Alternatively, the company can apply for L-1, or transfer, visas down the road. The cap-free L-1 visa allows multinationals to transfer overseas employees to work in the U.S., but only after they have worked for the company for at least one year.

The L-1 visa option is no panacea. Huurman said it's costly for a U.S.-based firm to hire a foreign worker based overseas. The foreign employee is taxed both in his native country and in the U.S., and the employer winds up paying the U.S. taxes, he said. "It's not a Band-Aid we plan on using more of," he said. KPMG has used this option only to obtain specialized skills in areas such as Internet integration, SAP and telecommunications billing.

Another possibility is to recruit H-1B visa holders already employed at other U.S. firms. Because they already work in the U.S., they aren't counted against the H-1B quota, said Liz Stern, an immigration attorney at Shaw Pittman in Washington. H-1B visa holders don't have to stay with the company that brought them over.

But trolling for existing H-1B visa holders can be tricky, and it's not a quick solution. If companies try to recruit another employer's H-1B visa holder, the worker must remain at his original employer until the government approves his new application so there are "no lapses in work authorized status," Stern said.

Processing these transfers typically takes two to three months.

Under another option, Stern said, the North American Free Trade Agreement (NAFTA) lets employers hire systems analysts, engineers and management consultants from Canada or Mexico to work in the U.S. for up to one year under Trade NAFTA, or TN, status.

That appealed to Austin, Texas-based consulting firm Catapult Systems Corp., which hired about half a dozen Canadian workers under TN status.

But CEO Sam Goodner warned that even if employers have filed the necessary paperwork, TN status may still be denied at the border. "We've had several of our workers denied at one border crossing, and they had to drive several hundred miles to [another]. It's never really a sure thing until they're across," he said.

"Unfortunately, this happens quite a lot," said Los attorney Carl Shusterman, adding that TN-status employees should never say at the border crossing that they have been offered permanent employment.

But some employers see only one realistic alternative to H-1B: luring domestic IT workers who already have jobs. "Everyone is forced to raid other companies for their talent," said Phillip Merrick, CEO of Fairfax, Virginia-based WebMethods Inc. "It's not terribly productive for the economy as a whole."

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