An analysis of the $100k H-1B announcement through the startup hiring lens

Late Friday, just as we were stepping into the weekend, the White House announced a $100k fee for new H-1B visas. The news rippled instantly and firms who employed those on the visa scheme began grappling with what to advise.

Microsoft sent an internal email telling staff on H-1Bs to stay in the country if possible, or to return to the states ahead of the effective date if they were currently abroad. A San Francisco flight bound for Dubai saw passengers insist on deplaning when the announcement broke as the plane was preparing to take off, and flights coming into the US from India spiked in price pretty much instantly as people rushed to secure a journey back before the change was due to take effect at 12:01am ET on Sunday September 21^st.

The fee’s still surrounded by confusion. The Press Secretary has called it a one-off charge, while the Commerce Secretary described it as annual. For now, the best reading is that it’s a one-time fee, tied to the upcoming lottery cycle, with renewals and current holders unaffected. Transfers aren’t explicitly mentioned anywhere across the proclamation, Fact Sheet or USCIS FAQs.

The proclamation is under executive authority, not an act of Congress, so legal challenges are expected, and it’s open to litigation from employers and industry groups. Aaron Reichlin-Melnick, policy director of the American Immigration Council, called the plan “Almost certainly illegal” in a post on Bluesky, adding that Congress has only authorised the government to set fees to recover application adjudication costs.

But let’s consider that this goes ahead. Here are the scenarios I’d be weighing up if I were hiring for a small or startup-sized tech company today.

The programme’s role in tech

H-1Bs are the bread and butter of hiring in tech. More of these visas went to software developers last year than any other job, and 16 of the top 20 sponsoring firms were in tech or tech consulting. Large integrators rely heavily on it to place contractors into US projects, big tech does too, and its relative affordability and application at all levels of seniority means that startups can benefit from its use too.

Startups often hit bottlenecks where very specific skills are needed. I’ve seen teams completely change trajectory because of hire brought in on an H-1B. These smaller firms are the ones likely to be stung most by this. At the scale of the likes of Amazon Robotics, $100k is manageable. For a growth stage firm it could put a halt on sponsorship altogether.

Pressure points for smaller companies

For most startups a $100k fee isn’t within the budget for a single hire. Firms will ask – is this hire absolutely critical?

By design, the fee is set to ensure fewer international hires are made, but there are instances where the domestic talent pool doesn’t allow for as strong a fit. One advantage of the H-1B has been its ability to bring talent into parts of the US outside of the main tech hotbeds. Someone relocating to the States might be excited at the prospects of settling with a firm in Denver, Pittsburgh, Dallas, so it does great things for encouraging growth in the growing areas for tech innovation. This fee makes sponsorships a tool reserved for only the tech giants, which makes hiring in those regions and growth in those areas harder. Over time this could mean slower growth outside of the likes of California, Boston, the Research Triangle.

And even though clarifications have been issued by the White House since, the panic this weekend showed how people respond before the details become clear. Some employees refused travel, others scrambled to re-enter the country. We can expect to see a lot more cautiousness from holders of any type of relocation visa.

Why we’re here

Job postings for software developers on Indeed are down to about two-thirds of what they were in February 2020. We had a wave of layoffs across 2022 and 2023, even as companies continued to sponsor thousands of H-1Bs. This has given ammunition to critics of the visa programme. The White House itself described H-1Bs as having been “deliberately exploited to replace, rather than supplement, Americans with lower-paid, lower-skilled labour”.

But amongst this we’ve seen other factors impact hiring behaviours:

• Remote work has allowed companies to offshore more work
• A backlog of green card applications has impacted hiring from overseas

The fee might further exacerbate the impact of these factors. More offshoring, more clustering in the established hubs, which means greater difficulty for companies trying to compete.

Planning for the short and long term

In the immediate term I’d be looking closely at how exposed the team actually is. Who today is here on an H-1B, and which roles you were planning to fill this year would have relied on sponsorship. Once you know that you can start having clearer conversations with candidates, rather than being caught off guard when they ask what the policy might mean for them.

Over the next few months, it’s worth playing out some different budget scenarios. If the fee is still in place by the time the next lottery cycle comes around, could you justify it for one or two genuinely pivotal hires, or would that money be better spent elsewhere. If the latter, you’ll want to think about other routes like widening your search in nearby markets, or considering allowing for remote work if you aren’t already.

What’s still unclear

Here’s what we don’t have 100% clarity on:

• Is this a one-time fee or could this be a recurring cost
• Will the courts intervene, and what litigation will we see from employers
• What ‘additional reforms’ are under consideration, as mentioned in the USCIS FAQs

Even in its first few days this single announcement has disrupted international travel, inflated flight costs, and caused major firms to reissue guidance to staff. And on the dawn of the weekend, no less!

The takeaway is that the H-1B, and really any international worker visa scheme, needs to be treated as something that can shift without much notice.