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Why Are US Firms Hiring in India After H-1B Visa Changes?
- Saransh Garg
- Aug 18
- 9 min read
Every new H-1B petition filed for a candidate outside the United States now carries a one time $100,000 government fee, on top of the $2,000 to $5,000 employers used to pay in legal and filing costs. We started getting calls from US clients within two weeks of that fee taking effect, and we have signed several new mandates from companies that had never worked with an Indian staffing partner before.
What Changed in H-1B Hiring, and Why It Matters Now
The number every CFO now asks about is $100,000. A presidential proclamation introduced this fee for new H-1B petitions where the candidate is outside the US and will go through consular processing. It does not apply to extensions, amendments, or most transfers for people already working inside the country. That distinction matters because it hits exactly the group companies used to sponsor most often: fresh hires from India, the Philippines, and other outsourcing hubs who were never going to be inside the US when the petition was filed.
A separate rule replaced the random H-1B lottery with a wage weighted selection process, which now favors the highest paid petitions. Registrations had already dropped sharply due to anti fraud screening before the fee even applied, and we expect further declines now that cost and selection odds are both working against mid level roles.
For a product company in the US, the math used to be straightforward. Sponsor an H-1B, pay standard legal fees, wait for the lottery. Now a single new hire from outside the country can cost six figures before that person earns a single dollar of salary.
Which Indian Cities Have the Talent to Fill These Roles
Not every Indian city can absorb this demand equally. Bengaluru has the deepest bench for backend, cloud, and platform engineering, largely because its dense cluster of product companies and global capability centers already run the same AWS, GCP, and Kubernetes stacks that US product teams use. Hyderabad has pulled ahead specifically for data engineering and AI or ML talent, driven by the large capability centers that Microsoft, Amazon, and Google have built there. Pune and Chennai offer strong full stack and QA automation talent at a lower salary band than Bengaluru, without a real drop in code quality for mid level roles.
What most candidates already bring to a US team is not usually the question. Engineers placed through experienced offshore recruitment agency partners have typically worked with US clients before, understand IST to EST or IST to PST overlap, and are comfortable with US style sprint cadence and code review. What we actually test for is ownership under ambiguity.
Engineers who spent years inside large service companies are used to well scoped tickets. A lean product team expects someone to make an architectural call from a vague Slack message with no formal spec. In one recent mandate for a US fintech client replacing two planned H-1B hires, our first two submissions failed exactly this test in a live coding round. We added a short unscoped systems design exercise to screening, and the next three candidates cleared on the first pass.
US Firms Hiring in India After H-1B Visa Changes: The Compliance Checklist
Choosing India over H-1B sponsorship does not mean leaving US law behind. It means adding Indian law on top, and most first time employers get the structuring decision wrong before they meet a single candidate.
India's four consolidated labour codes came into force recently, replacing 29 older central laws. The change that affects payroll immediately is the wage rule under the new Code on Wages: basic pay plus dearness allowance must equal at least half of total compensation. Companies still using the old structure, where allowances are inflated to lower statutory contributions, are now out of compliance, and provident fund, gratuity, and bonus calculations shift upward as a result. Central and state level rules are still being finalized in stages, so payroll structuring should be reviewed state by state rather than assumed to be uniform across the country.
The most common mistake we see is a founder trying to skip the legal complexity by hiring an Indian engineer as an independent contractor, paid by wire transfer, with no local registration and no statutory compliance at all. This works only until it is audited. An engineer working fixed hours, using company equipment, and reporting to a manager is functionally an employee under Indian law regardless of what the contract calls them, and misclassification exposure lands on the entity standing in as employer, not on an offshore shell company.
Contract Hiring vs Full-Time Hiring in India: Which One Fits
This is the question we get on almost every first call, and the answer depends on how certain you are about the role.
Contract hiring works well when you need a specific skill for a defined project, when budget needs to stay flexible quarter to quarter, or when you are testing whether an India based team fits your workflow before committing longer term. Contractors typically cost slightly more per hour than an equivalent full time salary, but they carry no long term statutory obligation and can be scaled down without a formal termination process.
Full time hiring through an EOR or your own entity makes more sense when the role is core to your product roadmap and you expect the person to stay for years, not months. Full time employees get provident fund, gratuity, paid leave, and other statutory benefits under the new labour codes, which improves retention meaningfully in a competitive market like Bengaluru or Hyderabad.
Most of our clients start with one or two contract hires to validate the model, then convert successful contractors to full time roles or open new full time requisitions once the pod proves out. Both paths run through the same sourcing and screening process on our end, so switching from one to the other later is a contractual change, not a fresh search.
Cost Comparison: H-1B Sponsorship vs Hiring in India
Cost Component | H-1B Route | India Hiring Route |
Government fee | $100,000 for new consular cases | $0 |
Legal and filing fees | $3,000 to $8,000 | $0 to $500 for contract review |
Time to productive start | 6 to 14 months | 3 to 6 weeks through an EOR |
Mid level engineer, annual cost | $110,000 to $140,000 | roughly $21,500 to $33,500 |
Senior engineer, annual cost | $150,000 to $190,000 | roughly $42,000 to $66,000 |
Lead or architect, annual cost | $190,000 to $240,000 | roughly $72,000 to $114,000 |
Compliance exposure | Visa status tied to employer | Statutory compliance carried by EOR or entity |
A senior engineer typically costs $175,000 to $220,000 all in through the H-1B route once the fee is amortized into year one, against roughly $48,000 to $77,000 all in through an Indian EOR. That gap is why offshore hiring stopped being an optional cost saving move and became, for many companies, the default plan.
How the Hiring Process Actually Works
Our standard timeline for a first time client using an EOR is four to six weeks from signed engagement to a working engineer. Role scoping and calibration take about two weeks, sourcing and technical screening run in parallel with EOR account setup, and the final week covers offer, background verification, and onboarding. Companies setting up their own Indian entity instead should plan for eight to twelve additional weeks for incorporation, banking, and statutory registration before hiring can begin at all.
One recent case involved a Delaware incorporated healthtech company with three approved H-1B slots that suddenly cost $300,000 combined in new fees the week the fee took effect. They needed three backend engineers live before a funding milestone review. We built the pod in Hyderabad through an EOR partner, and it almost went wrong at the compliance stage. Their legal team initially wanted to pay the engineers as contractors to keep things simple, which we flagged as a misclassification risk given the fixed hours and daily reporting structure.
We restructured the engagement as EOR employment instead, adding about a week to onboarding but removing the exposure entirely. All three engineers started within five weeks, at a combined annual cost of roughly $165,000 versus the $300,000 they would have paid in H-1B fees alone.
Salary Ranges for Indian Tech Talent
Here is what the three engineering tiers actually cost for the roles seeing the most H-1B displaced demand: backend, cloud or DevOps, and data engineering.
Mid level engineer, 3 to 5 years experience: ₹18 to 28 lakh per year, roughly $21,500 to $33,500
Senior engineer, 6 to 9 years experience: ₹35 to 55 lakh per year, roughly $42,000 to $66,000
Lead or architect, 10 or more years experience: ₹60 to 95 lakh per year, roughly $72,000 to $114,000
Add employer side statutory contributions of roughly 13 to 17 percent of total compensation under the new Social Security Code, plus an EOR management fee that generally runs 8 to 15 percent of gross salary depending on headcount, or a flat payroll outsourcing fee if you already run your own entity.
Even after stacking every one of these costs, a senior India based hire lands at roughly a third of the fully loaded cost of a US H-1B hire once the fee is factored in. Most clients are not pocketing that difference. They are reinvesting it into larger teams or extra runway they did not have in their original budget.
Conclusion
Demand is no longer limited to backend and cloud roles. AI and machine learning hiring out of India has grown the fastest of any category we place for, as US companies build model evaluation, fine tuning, and MLOps functions inside Indian teams rather than trying to sponsor scarce AI talent into the US. Cloud and platform engineering demand remains steady, but clients are increasingly asking for engineers who can also own cost optimization and security posture, not just deployment.
We expect the wage weighted lottery to push even more mid level roles out of the H-1B pipeline, since the system favors the highest paid petitions and structurally disadvantages the salary band where most backend and data roles sit. Whether the fee itself survives ongoing legal challenges or gets renewed, the underlying calculation does not look likely to reverse for most companies.
The offshore first mindset that US firms hiring in India after H-1B visa changes have adopted this cycle is not going away even if the fee eventually does, because it forced CFOs to model true cost per engineer in a way that sticks. In our live mandates right now, we are seeing a second wave: companies that made a defensive India hire last year are now coming back to build full pods, because the first hire worked.
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FAQs
1.Does the H-1B fee apply if we are extending an existing employee's visa?
No. The fee applies to new petitions filed for candidates outside the United States who need consular processing. Extensions, amendments, and most transfers for employees already working inside the country on valid status are exempt. If an existing employee travels internationally and their status changes, the exemption can get more complicated, so check with an immigration attorney before international travel near a status change.
2.How does the wage weighted H-1B lottery affect mid level engineering hires?
The new system favors higher paid petitions over lower paid ones, which structurally disadvantages roles in the lower to middle salary bands, including most backend, QA, and support engineering positions. If your open role sits at the lower end of the typical wage scale, your realistic selection odds have dropped even before accounting for the added fee, which is why offshore requests are skewing toward exactly these roles.
3.Can we bring an India based engineer to the US later if we hire them through an EOR?
Yes, but treat it as a separate process. Hiring someone through an Indian employer of record does not create any US immigration status for them. If you want to relocate that person later, you start a standard visa process from scratch, including any applicable fees. Some clients use India hiring as a deliberate trial period before deciding whether relocation is worth sponsoring.
4.Who carries compliance liability under India's new labour codes when we use an EOR?
The EOR is the legal employer of record in India and carries direct statutory compliance liability, including provident fund contributions, gratuity, and the new wage structuring rule. Your company remains the client in that relationship and typically carries contractual liability rather than statutory liability, which is why misclassifying someone as a contractor removes that protective layer entirely.
5.Which Indian cities have engineers already comfortable working with US teams?
Bengaluru and Hyderabad have the largest concentration of engineers who have worked inside global capability centers or supported US product teams remotely, so they are already comfortable with US style code review and overlap hours. Pune and Chennai offer strong benches too, generally at a slightly lower salary band for comparable experience levels.
6.What is a realistic timeline to get an India based engineer working if we start today?
Through an employer of record, most clients go from signed engagement to a working engineer in four to six weeks, with sourcing and screening running in parallel with account setup. Setting up your own Indian entity instead adds eight to twelve weeks upfront for incorporation and statutory registration before hiring can begin.
7.How do we handle intellectual property ownership when engineers are on an Indian payroll?
IP assignment needs to be written into both the employment contract and the agreement between your company and the EOR, because Indian default law does not automatically assign employee created work to a foreign parent company. Explicit IP assignment and confidentiality clauses should be included in every contract before an engineer starts.
8.Is hiring through an EOR cheaper than absorbing the H-1B fee for critical roles?
For most roles, yes, often by a wide margin once salary, statutory costs, and fees are compared side by side. The exception is a genuinely rare, highly specialized role where the specific candidate's expertise cannot be found in the Indian market and physical relocation carries real strategic value. That applies to a small minority of roles companies are reconsidering right now.
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