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To Pay or Not to Pay: Cost Distribution of the U.S. Employer-Based Sponsorship Model

The United States’ temporary and permanent employment-based visa systems are difficult processes to navigate. The cost of visa sponsorship and the mechanics of cost-sharing between employers and nonimmigrant workers further complicates an already hard process. Simplifying and streamlining the costs of temporary and permanent visa sponsorship may enable America’s small and startup businesses to petition for needed foreign workers under the H-1B and permanent immigration programs, allowing them to sustain their business through human capital and helping them to compete in the global market. Additionally, a streamlined cost for a temporary and permanent visa system might provide foreign workers with higher mobility and decrease the dependence of the workers on their employers for their status, while encouraging employers to maintain good working conditions to incentivize longevity.

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U.S. Employer-Based Sponsorship Model

Petitioning for foreign workers in the H-1B and permanent employment-based visa sponsorship processes can be an expensive. Sponsoring a nonimmigrant employee for the H-1B can cost anywhere between $1,250 to $4,500 in filing fees alone, not including fees paid to attorneys to facilitate the process. Sponsorship for employment-based permanent residency, especially for those who have been previously sponsored by the same employer under the H-1B program, can add more cost to the employer-based visa sponsorship process.1

While the Department of Labor does not administer any fees for labor certification filings, employers do have to face monetary expenses for advertising the position to find U.S. workers and legal fees associated with the process. On top of the filing fees that the employer may have to pay to U.S. Citizenship and Immigration Services, legal fees and other added costs can depend on several factors including the size of the petitioning employer2, whether the employer chooses premium processing,3 a supplementary Fraud Prevention and Detection Fee,4 and any attorney fees associated with the preparation of the filing of the petition. Attorney fees for filing an H-1B petition can be varied and may cost up to $3000 or more.

According to the Society for Human Resource Management, hiring foreign workers can cost an employer more than three times more than domestic recruitment. Department of Labor regulations prohibit employers from withholding wages from foreign workers for some costs associated with the preparation and filing of the Labor Condition Application, H-1B petitions, and permanent residency. Additionally, employers are not allowed to garnish wages as a part of rebate or reimbursement from the foreign employee to pay any part of the filing fee, any accrued business expenses, or additional fees associated with their sponsorship petition that would depress the worker’s wage below the required prevailing wage rate.

However, the Labor Department does state that additional costs such as premium processing, if requested by the employee, could be borne by the worker. Labor Department regulations also allow employers to recoup some sponsorship fees that are not business expenses and can be paid for by the employee. These types of fees can include translation fees for an employee’s foreign-language documents, legal fees associated with obtaining visas for the employee’s family members, or any other legal obligation of the employee that comes from their residence status or employment status can all be paid for by the foreign worker.

While the Labor Department restricts payment of costs of labor certifications associated with permanent labor certification filings specifically to the employers, with some exceptions, legal fees for attorneys representing the employee can be borne by the foreign national.5 Employers may also recoup filing, biometrics, and attorney fees from foreign employees related to the immigrant petition filed on the employee’s behalf to sponsor the worker, immigrant visa application fee, when the employee is applying from abroad based on an approved immigrant petition, or the adjustment of status fees if the employee is already the United States. According to a survey conducted by Global Immigration Benchmarking Association, out of the more than 200 U.S. firms that responded to the survey, 60% said that they make their foreign employees pay for the medical examination and other ancillary costs, 33% require foreign employees to cover adjustments of status of family members, and 22% and 25% require payment for the employee petition and adjustment of status, respectively.

Challenges with the Current Visa Sponsorship Model

The high cost required to sponsor foreign employees makes it particularly difficult for smaller businesses and start-ups to viably sponsor employees and remain competitive in the U.S. economy. Small businesses and startups may struggle with visa sponsorship due to the complex paperwork process and fees to hire someone under the H-1B program. Moreover, filling the H-1B petition alone does not guarantee success. According to the Migration Policy Institute, 20 companies received more than one-quarter of all approved H-1B petitions in fiscal year 2017. In 2011, of the 70,000 employers who applied for H-1B visas, approximately half had applied for only one, and most applied for less than 10—indicators that many of these may be small businesses or startups. However, with the high rates of rejection of H-1B visas—rates have increased from 6% in FY2015 to 21% in FY2019—smaller companies with limited funds and resources may have to forgo investing in foreign talent, even when the talent is necessary for the companies’ economic growth.

The cost of visa sponsorship, and especially the mechanics of cost-sharing of sponsorship between employer and employee, raises the complicated question about who “owns” the temporary visa and how to protect employers and employees alike. On the one hand, businesses might want some regulation to ensure that employees stay with their firm for the period of the H-1B contract, especially considering the time and financial cost of sponsoring a foreign worker. Some critics, however, have argued that such visa regulations burden the employee since that the employer is the visa holder, not the employee. However, other studies have shed some light on H-1B worker mobility and shown that workers on a temporary visa are not totally restricted to their employer and around 22% of workers on H-1B quit their jobs while remaining in the United States, meaning they have found a different employment opportunity. As such, the question remains whether sponsorship and cost of visas should be the sole responsibility of either the employer or the employee.

According to U.S. labor certification requirements, employer sponsorship permits the foreign employee to work only for the petitioning employer. If the employee wishes to change jobs, they must be able to find another business willing to initiate the sponsorship process anew. For a temporary foreign worker on an H-1B visa, changing jobs is the same as starting a new application with a new employer all over again and can be challenging. However, according to a study released by the National Bureau of Economic Research, foreign workers who enter the United States on temporary visas, who are not on track for permanent residency, change jobs at similar rates to both those with green cards and U.S. workers. A foreign employee who changes jobs after a rigorous and costly sponsorship may further discourage small businesses and startups from sponsoring foreign workers if the employee were to leave the firm after the employer has already paid for the H-1B visa.

If foreign workers face some challenges changing employers after their arrival to the United States on a temporary work visa, for those seeking permanent residency the difficulties and potential costs of changing employers can be greater. According to research published by the National Bureau of Economic Research, temporary workers who are awaiting permanent residency may have a lower rate of job mobility than those working in the United States only on a temporary visa, indicating that prospects of a green card sponsorship and the green card application process may constrain foreign employees from changing employers since that could trigger an entirely new and lengthy application process.6 The spike in the movement of sponsored employees after they receive their green card suggests that there is a reduction in mobility during the application phase by about 20%. Even if the employee can successfully change jobs during the green card process, employers can ask for payback on their application. According to the survey conducted by GIBA, of the 200 employers interviewed, 55% of the companies stated that they require some form of reimbursement if the employee being sponsored leaves the company within a certain period.

Conclusion

The high cost and cost-sharing requirements of temporary and permanent employment-based visas in the United States makes an already convoluted visa process more complicated for employers and employees. According to the National Foundation of American Policy, employers have paid $5 billion in H-1B fees since 1999. Hiring H-1B workers for companies is becoming more expensive with all the additional fees needed to complete the application, making the H1B process unfriendly to businesses and foreign workers. The financial burden becomes even costlier for smaller companies who require foreign individuals to fulfill a niche specialty position given the high rejection rates of H-1B petition and competition with larger firms that end up securing the majority of the H-1B visas each year.

In Canada, by comparison, workers are allowed to self-fund their visas, which gives them greater ability to change jobs and choose employers with more autonomy and gives small businesses a fair chance to compete for human capital. A similar process in the United States could help foreign employees feel ownership over their visas—giving them higher mobility—and assist businesses with the overly burdensome visa process. According to a survey by Envoy International, 74% of companies that were surveyed considered Canada’s immigration policies better for business than the United States. Canada’s easier application, shorter wait times, and simpler adjudication processes are further supplemented by its low visa costs, which are not as burdensome for employers or employees. A similar system in the United States may help better facilitate our temporary and permanent employment-based visa process for businesses and employees alike.

End Notes:

1 Form I-140, which is used to petition foreign workers to permanently work in the United States, costs $700 in filing fees, applying for an immigrant visa from abroad on the basis of an approved I-140 costs $345, and adjustment of status costs $1,225, which includes biometric fees, not including dependents. Filing for Advance Parole in some cases costs an additional $575. *A new fee rule has been promulgated but is on hold with the courts that would increase the adjustment of status costs.
2 Public law 114-113 requires that businesses with more than fifty employees where more than half employees are on H-1B or L-1 status must pay an additional $4000 fee for each H-1B or L-1 employee they hire.
3 Premium processing an additional cost of around $1,500.
4 Fraud Prevention and Detection fee can cost up to $500.
5 5 If the employee and the employer are represented by the same counsel, costs have to be borne by the employer. 
6 6 In some cases, classified as visa portability, employees may change jobs without starting a new process. To meet the visa portability requirement, the foreign employee must have a pending Adjustment of Status or Application to Register Permanent Residence with USCIS for 180 days or more and the new job offer or employer must be of the same or similar occupational classification as outlined in the original Immigrant Petition for Alien Worker form.

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