POTUS Cracks Down on H-1B Abuse to Bolster Domestic Jobs

On September 19th, 2025, the President issued a proclamation restricting entry of certain non-immigrant workers.  In that proclamation:

• $100,000 payment would be required for every H-1B visa recipient starting September 21, 2025 with an annual term.
• Special exemptions by the Secretary of Homeland Security for any individual alien, all aliens working for a company, or all aliens working in an industry, if the Secretary of Homeland Security determines, in the Secretary’s discretion, that the hiring of such aliens to be employed as H-1B specialty occupation workers is in the national interest and does not pose a threat to the security or welfare of the United States.

Intended and Unintended Consequences Abound

Constellation expects three simultaneous responses with the reduction of H-1B petitions:

1. Domestic hiring will increase.  The economics of adding $100k to each H-1B applicant will reduce the number of petitions for special talent.  Companies will prioritize US workers for domestic positions given the huge cost burden.
    
2. Enterprises will accelerate automation and AI.  The baffling existence of BPO amidst a wave of automation and AI will cease to become a mystery.  Savvy organizations will take the opportunity to reduce as much of their labor costs as possible.  Should there be a dearth of talent, then automation and AI investments will accelerate.
3. GCC's will overtake outsourcing.  So after 12/31/2025, if you outsource for a service let’s say $100k to a medical bill or claims processing in India from the US, that full amount is deductible today, providing a $21,000 corporate tax deduction (i.e. assuming a 21% corporate tax rate), resulting in a net cost of $79,000. However, the HIRE act complicates things. 
   
   Under the HIRE act what happens is the $100,000 payment would lose its deductibility while triggering a $25,000 excise tax. The effective after-tax cost would increase to $146,000 — an 85% increase over current costs. So if you have the HIRE Act pass plus less H1-Bs and already in place 1 year vs 15 year depreciation, offshore work will be much less affordable than US based work. This will have a punishing effect on outsourcers but lead to an increase of GCCs in India. 

The Bottom Line: A New World Order In Services Economics Will Emerge

The short term effect for IT Services firms would be an increase of GCC’s in India, more hiring in the US, and certainly more pressure to deliver automation and AI,  Concurrently, expect less outsourcing, less H-1B’s, and less job mobility.  This new world order on services economics could have devastating effects on attracting the best and brightest talent to the US just as countries such as UAE, Qatar, and Kingdom of Saudi Arabia are ramping up a talent war.

Your POV

How will you adjust to these new H-1B requirements? Do you think this will help the US or hurt the US? 

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