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US tightens H-1B visas to crack down on foreign outsourcing companies. Could the UK do the same?

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The US is cracking down on outsourcing highly skilled jobs to foreign workers. Could the UK be next? Or is that just wishful thinking for the thousands of UK freelancers and contractors that have witnessed the UK Brain Drain first-hand thanks to IR35?

Republican US Senator Chuck Grassley, of Iowa, and Democrat Dick Durbin, of Illinois, are proposing a bill to tighten the H-1B visa programme to crack down on foreign outsourcing companies, it has been reported.

“Congress created the H-1B and L-1 visa programmes to complement America’s high-skilled workforce, not replace it,” Grassley said. “Unfortunately, some companies are trying to exploit the programmes by cutting American workers for cheaper labour.”

A push for a highly-skilled and digital workforce, the technology sector is helping to create new companies, jobs and tax revenues, but with a skills gap in coding, software development and cyber security, economies, such as the UK and US have depended on foreign workers to keep up with demand.

The solution? Secondary schools must offer the skills and courses that tap into a digital career path. Have corporations sponsor the technology required to teach students and offer students summer internships.

Does the H1-B visa cap have a chance?

Mark Roberts, CEO of the TechServe Alliance, has expressed that it’s unlikely this bill will become law given the partisan divide on immigration issues, according to Staff Industry Analysts.

“If it were to become law, it would be highly disruptive to the IT staffing industry making access to H-1B candidates more difficult,” Roberts said. “It would exacerbate the challenge in meeting client needs amidst an already severe technical talent shortage.”

That said, US Citizenship and Immigration Services on Feb. 28 announced that it has received a sufficient number of petitions needed to reach the cap on regular H-1B visas of 65,000 and the master’s cap of 20,000 for fiscal year 2022.

What would the “H-1B and L-1 Visa Reform Act,” look like?

According to Grassley and Durbin:

  • Require US Citizenship and Immigration Services to prioritise the annual allocation of H-1B visas to ensure the “best and brightest” STEM advanced degree students educated in the US would receive preference for an H-1B visa. It would also prioritise other US advanced-degree holders, those being paid a high wage and those with valuable skills.
  • Prohibit the replacement of US workers by H-1B or L-1 visa holders and clarify that working conditions of similarly employed US workers may not be adversely affected by the hiring of an H-1B worker, including H-1B workers who have been placed by another employer at the US worker’s worksite.
  • Prohibit companies with more than 50 employees — of which at least half are H-1B or L-1 holders — from hiring additional H-1B employees. This is, the senators said, aimed at outsourcing companies that import large numbers of H-1B and L-1 workers for temporary training purposes only to send the workers back to their home countries to do the same job.
  • Require the production of statistical data about the H-1B and L-1 programmes, including wage data, worker education levels, place of employment and gender.

The bill, which is numbered S. 3720, has been referred to the Committee on the Judiciary.

The text of the bills is here.

IR35’s brain drain effect on the UK talent pool

Companies in certain sectors, such as insurance, banking and IT, have felt pressured and nervous around the private sector IR35 rules and took what they considered the easy route by not creating contracts with outside IR35 parameters, requesting instead to their recruitment firms that all contractors become umbrella company employees.

To make the hiring process less onerous for the recruiters, many have suggested or preferred umbrella companies for their candidates to use. At present, there is no law not allowing recruitment firms to carry out such practices or to be fined for any conflict of interest or paybacks they receive from “preferred umbrella suppliers.”

Many contractors in the IT community have expressed on social media and to The Freelance Informer that their former roles were outsourced outside the UK as a result of the IR35 and Off-Payroll rules. That is a serious blow to the UK talent pool and to the Treasury’s purse.

Outside of training and using niche consultancies to bridge the tech gap, more than a third of digital leaders have widened their geographical net to source new talent, as hybrid working becomes more commonplace, according to Harvey Nash Group.

Not surprising that companies are having to hire non-UK workers to fill the digital skills gap with the onset of new hiring challenges due to IR35 and Off-Payroll legislation. These new rules are already very damaging to the UK’s ability to remain competitive, according to a host of contractor specialists, such as Dave Chaplin of IR35 Shield, and representative bodies, such as IPSE and the CBI.

Chaplin, who has been watching the developments unfold in HMRC and House of Lord committees, told The Freelance Informer that IR35 could be “very damaging” for the UK’s ability to address the digital skills gap in a variety of sectors from finance to construction.

“We are already seeing many in-demand contractors turn their backs on medium or large UK firms and simply offer their services, remotely, for overseas clients. We have a major brain drain on our hands. The reforms are a terrible act of self-harm,” said Chaplin.

Point to ponder: Should countries put quotas on outsourcing talent from non-citizens and non-domestic firms? And how should the skills gap be filled if they do? Please share your ideas and insights in the comments section.

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