‘Body shopping’: The loophole in H-1B hiring raising wage concerns

The United States Department of Labor has identified “body shopping” as a key concern in the H-1B visa programme, saying the practice may allow employers to pay foreign workers less than similarly employed American workers. The issue has been highlighted in a proposed rule that seeks to revise wage calculations and strengthen protections in both temporary and permanent visa categories.

What is ‘body shopping’ in H-1B hiring

The report explains that “body shopping” refers to a hiring model where outsourcing or staffing firms recruit foreign workers and place them at client companies. In such cases, the outsourcing firm remains the official employer, even though the worker performs duties at another company’s workplace.

Under this structure, wage comparisons are made within the outsourcing firm rather than at the client company where the work is carried out. The Department notes that this can result in foreign workers being compared to others within the same firm who are paid at lower wage levels, instead of being benchmarked against higher-paid employees doing similar work at the client site.


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The report states that this arrangement can “facilitate large pay gaps between outsourced H-1B workers and client-site employees performing substantially similar functions.” It adds that outsourcing firms may rely on this structure to keep wages closer to minimum required levels under visa rules.

Why the US sees it as a wage loophole

According to the Department, the H-1B system requires employers to pay either the actual wage within the company or the prevailing wage, whichever is higher. However, in outsourcing models, the “actual wage” is determined within the staffing firm, not the client company. This limits direct comparison with local workers and allows lower wage benchmarks to be used.

The findings are part of a broader review of wage practices in the visa system. The Department’s analysis shows that wages offered to H-1B workers are, on average, lower than those of U.S. workers in similar roles, raising concerns about wage suppression and labour market impact.

The proposed rule does not directly change how outsourcing arrangements operate. Instead, it aims to address the impact of such practices by increasing prevailing wage levels across visa categories. By raising the wage floor, the Department intends to reduce the gap between foreign workers and U.S. workers, including in third-party placement situations.

The Department has invited public comments on the proposal as it reviews how hiring models like body shopping affect wages and working conditions. The outcome of the rulemaking could influence how companies structure their hiring under the H-1B programme.