US suspension of PERM applications unlikely to impact Indian IT firms significantly: Kotak

New Delhi: The US decision to suspend new and pending labour certification (PERM) applications involving six major Indian IT companies is unlikely to have a significant impact on their operations or earnings, according to a report by Kotak Institutional Equities.

The US Department of Labor (DoL) has stopped accepting new PERM applications and processing pending applications involving TCS, Infosys, HCLTech, Wipro, Cognizant and Capgemini.

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However, the department has not clarified how long the suspension will continue or how it will affect applications that have already completed the PERM process.

"We do not expect a meaningful impact on delivery or earnings," Kotak said, noting that Indian IT companies have significantly increased local hiring in the US over the past several years.

The report said employees dependent on work visas account for a relatively small and declining share of the US workforce of Indian IT companies. The number of employees with pending PERM applications is even smaller.

Kotak expects Indian IT companies to further reduce their dependence on H-1B visa holders by limiting new visa applications and shifting towards local hiring and delivery.

The report also noted that companies may increasingly rely on subcontractors to meet immediate project requirements, which could raise costs in the near term. However, greater offshoring of work to India and other locations is expected to help offset these costs over time.

The suspension could also affect employees seeking to extend their H-1B visas beyond the standard six-year limit, as qualifying PERM or I-140 filings can help them secure such extensions.

However, employees with approved I-140 petitions are likely to face limited direct impact, as the current suspension relates to PERM processing and does not revoke existing H-1B visa approvals. The treatment of pending PERM applications remains unclear, the report said.

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PERM is a labour certification process required for many employer-sponsored green card applications in the US. Under this process, employers must determine the prevailing wage, conduct recruitment and demonstrate that there are no sufficient qualified and available US workers for the permanent position.

After receiving PERM certification, employers can file an I-140 immigrant petition with the US Citizenship and Immigration Services (USCIS). However, PERM certification alone does not provide work authorisation or permanent residency.

Kotak said the risk to Indian IT companies would become more significant if US immigration restrictions were extended to existing work authorisations, deployment of employees at client locations or outsourcing arrangements.

"A more material risk would arise only if immigration restrictions extend to existing work authorization, client-site deployment or outsourcing. The present measure does not reach that threshold," the report said.