Infosys Warns Of Potential Changes In Visa Laws

India's second biggest outsourcer Infosys in a filing with US Securities And Exchange Commission highlighted key to profitability from possible changes in visa laws in its major markets. "Changes in immigration laws in our key markets that would restrict offshore outsourcing or restrict the availability of certain visas thereby limiting our ability to staff the projects in a timely manner and generate revenues. Further, any increase in visa costs or increase in salaries payable to visa dependent employees onsite would increase our cost of doing business onsite significantly impacting our profitability," Infosys said in the filing. In the US, the Trump administration has ordered a review of its H-1B visa system.

Besides changes in immigration laws in key markets, Infosys said "profitability could be affected by pricing pressures on our services, volatility of the exchange rates between the Indian rupee, the US dollar, and other currencies in which we generate revenues or incur expenses, increased wage pressures in India and at other locations where we maintain operations, increases in taxes or the expiration of tax benefits, the size and timing of facilities expansion and the resulting depreciation and amortization costs..."

Infosys recently announced plans to open technology hubs in the US and increase local hiring within the country. This could "increase our cost of doing business onsite and thereby have an adverse impact on our profit margins", it said.

The outsourcer also said that it has recently increased and expects to increase hiring in other jurisdictions, including the UK, Continental Europe and Australia. "This increase has been driven, in part, by recent indications that the visa regulations in these countries could undergo significant changes. Such hiring could result in overall increased wage costs thereby impacting profitability," the outsourcer said.

Infosys also highlighted risks to profitability from increase in minimum wages for certain work permit holders. "In certain jurisdictions in which we operate, legislations have been proposed that requires our non-resident employees working in such jurisdictions to earn the same wages as residents or citizens of such jurisdiction which we have complied with. In case such legislative proposals are adopted by other jurisdictions our operating costs will go up," the Indian outsourcer said.

Citing an example, Infosys said "the minimum wages for certain work permit holders in the United Kingdom have increased recently, and there could potentially be similar measures introduced in the United States, thereby increasing the cost of conducting business in that jurisdiction".

Infosys also referred to the increased political spotlight on outsourcing, by saying: "The issue of domestic companies outsourcing services to organizations operating in other countries is a topic of political discussion in the United States, Europe, Asia Pacific, Australia and other regions in which we have clients. Some countries and special interest groups have expressed concerns about a perceived association between offshore outsourcing and the loss of jobs in the domestic economy."

"This has resulted in increased political and media attention, especially in the United States, where the subject of outsourcing and immigration reform has become a notable topic and where the administration has already issued or is contemplating issuing executive orders related to key immigration regulations. It is possible that there could be significant changes in the existing laws that would restrict offshore outsourcing or impose new standards that have the effect of restricting the use of certain visas in the foreign outsourcing context,"

"For instance, there could be taxes on companies that offshore work outside United States, restrictions on the number of H-1B visas issued, an increase in the minimum wages of visa dependent employees as was implemented in the UK, or an increase in visa fees. Such measures would adversely impact our ability to do business in the jurisdictions in which we operate, and impact our onsite costs and profitability," Infosys added.

Infosys also referred to the Australian government's proposal to replace the 457 visa program, the most commonly used temporary work visa process in that country, with a more restrictive visa program. "The 457 visa program will be completely phased out by March 2018. The Permanent Employer Sponsored Skilled Migration Program will also be restricted as part of this initiative," it said.

In the filing, the outsourcer also referred to moves in some European countries which could hit outsourcing: "The European Union (EU) member states have adopted the Acquired Rights Directive, while some European countries outside of the EU have enacted similar legislation. The Acquired Rights Directive and certain local laws in European countries that implement the Acquired Rights Directive, such as the Transfer of Undertakings (Protection of Employees) Regulations, or TUPE, in the United Kingdom, allow employees who are dismissed as a result of 'service provision changes', which may include outsourcing to non-EU companies, to seek compensation either from the company from which they were dismissed or from the company to which the work was transferred."

"This could deter EU companies from outsourcing work to us and could also result in us being held liable for redundancy payments to such workers. Any such event could adversely affect our revenues and operating profitability."

Singapore also found a mention in the report. "Many countries have introduced new immigration related laws, wherein companies sponsoring foreign workers would be required to demonstrate that there are no qualified and experienced local workers to fill a position to be taken by a proposed visa holder. In Singapore, under the Tripartite Alliance for Fair Employment Practices (TAFEP) regulations, entities with low local hire ratio have been placed on a watch list designed to improve local hiring efforts and to increase training obligations for Singapore citizens and permanent residents," Infosys said. "The Ministry of Manpower has not issued fresh Employment Passes (EPs) for the past one year and is undertaking half yearly reviews on the progress with regard to local hiring and training efforts."