How to Underpay H-1B Workers

One of the canards H-1B supporters use is the claim that H-1B is not used to depress wages because the law requires employers to pay the prevailing wage. Yet, whenever the government releases salary figures for H-1B programmers they are significantly less then what Americans make. The following is a real example of how the system can be manipulated to pay H-1B workers significantly less than Americans.

Background

In 2001 Bank of America (BofA) in Charlotte, NC "outsourced" its Human Resources (HR) functions to a company called Exult. As part of the arrangement, the Bank of America employees supporting these functions were made Exult employees.

At the end of 2001, Exult announced it was "outsourcing" its computer programming work to two "H-1B bodyshops", HCL and Hexaware. Unlike in the previous "outsourcing", the existing employees were fired and replaced by foreign H-1B workers. The American BofA/Exult employees were forced to train their replacements in order to collect a severance package.

The affected employees had very specialized skills in that they worked with PeopleSoft and Oracle. The lowest advertise salary we found in the Charlotte for PeopleSoft programmers was $65,000 and the highest was $115,000. This range is consistent with the reported salaries ($70,000-$90,000) of the BofA/Exult employees who lost their jobs.

The Method

Companies who wish to import H-1B workers are required to file a Labor Condition Application (LCA) with the Department of Labor showing that they are, in fact, paying the H-1B workers according to the law. Keep in mind is that the law only allows the Department of Labor to ensure that the LCA form is filled out correctly. The Department of Labor does not validate the prevailing wage.

Attached below is an LCA filed by HCL for some of the H-1B replacements at BofA/Exult. The salary for the H-1B workers is $39,184, about half of what the people they replaced made. So how can HCL claim they are paying the prevailing wage?

The first step used here in the wage depression process is to call the H-1B workers generic "systems analysts". So instead of using the
higher-than-average wage for the specialized skills of Oracle and PeopleSoft, the employer uses the wage for systems analysts as a whole.

The LCA says that the employer used OES (The Bureau of Labor Statistics "Occupational Employment Survey") to get the prevailing wage. OES put the mean salary for "systems analysts" in Charlotte, NC at $60,150, a figure significantly greater than what the H-1B workers were
paid.

The Department of Labor provides an additional service to assist employers to depress wages in their on-line LCA system. There, employers can get a prevailing wage for Level 1 ("Beginning level employees") workers and Level 2 ("Fully competent employees") workers, which in this example are $41,246 and $69,618 respectively. So now the employer claims the H-1B workers are "Beginning level employees" and uses the lower wage as the prevailing wage.

The law only requires H-1B workers to be paid within 95% of the prevailing wage. The employer takes 95% of $41,246 and comes up with a wage of $39,184. Thus, the company is paying the H-1B workers about half of what the workers they replaced made.

Even if the law is not being violated, note that HCL is paying these supposedly "highly-skilled" and "best and brightest" employees the lowest wage it can possibly get away with, right down to the last dollar.

A nice example of typical H1-B abuses.

Here's another little secret concerning H1-B workers..

New H1B Scandal - Tax Evasion!

From the above link;

"Visit most any large American company and you will find two people working on the same computer project. One is a permanent company employee who pays taxes through withholding. The other a temporary employee who enjoys the kind of payday that more than 100 million American workers can only dream about - a full paycheck with zero deductions. "Because they are employed by the consulting firm that recruited them, many of these foreign workers are paid either in cash or by check - and no money is withheld for U.S. income tax, Social Security, Medicare, state, or local taxes... Still others receive a paycheck that is banked in India, and, while they're living and working in this country, they're paid an 'allowance' that is also free of all U.S. taxes."

Barlett and Steele report that this practice first came to light in a lawsuit filed in 1990 by Tata Consultancy Services against Syntel Inc., accusing it of poaching employees. Not every Syntel programmer was paid this way, they say. Some eventually got on the payroll and had taxes withheld. "But court records show that for many, such is not the case. In this, Syntel is not alone." And they cite other examples.

Barlett and Steele add:

Where, you might ask, is the IRS in all of this? The answer is: Nowhere. "Immigration is a big problem for IRS," confided a former high-level Treasury Department official. "It doesn't know how to track foreign workers."