US freezes PERM applications: Why Indian IT firms may escape major impact

The US decision to suspend new and pending labour certification 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 and processing pending PERM applications involving Tata Consultancy Services (TCS), Infosys, HCLTech, Wipro, Cognizant and Capgemini. However, the department has not clarified how long the suspension will remain in place or how applications that have already completed the PERM process will be treated.

“We do not expect a meaningful impact on delivery or earnings,” Kotak said, citing the significant increase in local hiring by Indian IT companies in the US over the past several years.

The assessment suggests that the immediate financial risks for India’s major IT services companies remain limited, despite the uncertainty surrounding employment-based immigration procedures in the US, one of their most important markets.

Local hiring to cushion the impact

According to Kotak, 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 smaller still, limiting the potential impact on overall operations.

The brokerage expects Indian IT companies to further reduce their dependence on H-1B visa holders by limiting fresh visa applications and increasing local hiring and delivery.

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This shift could help companies manage immigration-related uncertainties while maintaining their ability to serve US clients. Indian IT firms have increasingly relied on locally hired professionals to meet client requirements, reducing their dependence on employees who need to be deployed from India.

Companies could also turn to subcontractors to meet immediate project requirements. While this approach could raise costs in the near term, Kotak expects a greater shift of work to India and other offshore locations to help offset some of the additional expenses over time.

H-1B visa extensions could become a concern

While the brokerage expects a limited impact on corporate earnings, the suspension could create challenges for some employees seeking to extend their H-1B visas beyond the standard six-year limit.

Qualifying PERM or I-140 filings can help eligible workers secure extensions under US immigration rules. A prolonged suspension could therefore complicate immigration planning for employees whose applications are still being processed.

However, employees with approved I-140 immigrant petitions are likely to face limited direct impact from the current measure. The suspension relates to PERM processing and does not, by itself, revoke existing H-1B visa approvals.

The treatment of pending PERM applications remains unclear, Kotak noted. The eventual impact will depend partly on the duration of the suspension and any further clarification issued by US authorities.

What is PERM and why is it important?

PERM, or Program Electronic Review Management, is a labour certification process required for many employer-sponsored green card applications in the US.

Under the process, employers generally need to establish 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, an employer can file an I-140 immigrant petition with US Citizenship and Immigration Services (USCIS). However, PERM certification alone does not grant work authorisation or permanent residency.

What could make the suspension a bigger risk?

Kotak said the risks for Indian IT companies would become more significant if US immigration restrictions were extended to existing work authorisations, employee deployment 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.

For now, the brokerage expects the suspension to have a limited impact on the delivery capabilities and financial performance of the six companies. Nevertheless, prolonged uncertainty could complicate immigration planning for affected employees and encourage IT firms to accelerate their shift towards local hiring and offshore delivery.