Study shows decline in H-1B denial rates for initial employment: The fear is that this will not continue

The H-1B visa program, a cornerstone for high-skilled foreign nationals seeking employment in the United States (US), has witnessed a significant drop in denial rates for initial employment in recent years. This trend, highlighted in the National Foundation for American Policy’s (NFAP) recent study – ‘H-1B Petitions and Denial Rates in FY 2024’, underscores a shift from the restrictive policies of the previous Trump administration, resulting in greater opportunities for high-skilled workers and their American employers.
As reported by TOI earlier, the immediate impact under the incoming-Trump administration is expected to entail greater scrutiny for new H-1B visa applications (the window for which will open in March 2025) and visa extensions. Scrutiny is expected to cover whether the job qualifies as a specialty occupation and ensuring an employer-employee relationship exists. A rise in Requests for Evidence (RFEs) and denials are expected to be taken in stride. Policy changes relating to the H-1B program that were previously stalled due to court rulings may be reintroduced.
Immigration attorney Cyrus D. Mehta told TOI, “The Trump administration could make it more difficult for employers to renew H-1B visas by requiring artificially high wages and making it harder to prove that the job qualifies as a specialty occupation for H-1B classification.”
H-1B visas for initial employment are for new jobs, as opposed to visa extensions for continued jobs. There is an annual cap of 85,000 (including Masters’ cap of 20,000). However, some jobs such as of research outfits are cap exempt, resulting in a higher annual allotment. Indians especially those in the tech sector are significant beneficiaries of initial visa allotments. According to TOI’s analysis, in FY 2023, Indians were allotted 68,825 initial employment visas which was nearly 58% of the total allotment. In FY 2022, 77,673 visas for initial employment were allotted to Indians which was nearly 59% of the total allotments during this year. Thus, any adverse policy change does have an impact on those who aspire to work in the US.

Key Denial Rate Trends

The denial rate for H-1B petitions for initial employment in Fiscal Year (FY) 2024 was 2.5%, marking a return to levels seen before the Trump administration’s restrictive policies. This is a stark contrast to denial rates of 24% in FY 2018 and 21% in FY 2019. The reduction is largely attributed to court rulings and policy reversals implemented during and after the 2020 legal settlement with the ITServe Alliance, states the NFAP study.

Table 1: Denial Rates for Initial Employment (FY 2015–2024)

The reversal of restrictive policies such as the ‘Neufeld Memo,’ which complicated approvals for IT services firms, and procedural adjustments made by US Citizenship and Immigration Services (USCIS) played a crucial role in bringing denial rates down, states the NFAP study.
As was reported earlier by TOI, in March 2020, Judge Rosemary M. Collyer held as invalid the policy memo issued by USCIS in February 2018, which imposed burdensome requirements on IT service companies. It has also held as invalid a policy memo dating back to 2010 (referred to as the Neufeld Memo), that had created a new definition of employer-employee relationships. In short, these companies, will for now, not have to comply with the onerous requirement of providing detailed customer contracts and itineraries of employees that are deputed to client sites.

Top Companies by Initial Employment Approvals and Denial Rates

The NFAP study showcases the top employers of H-1B visa holders in FY 2024, along with their approval counts and denial rates for initial employment.

Table 2: Top Ten Companies by Initial Employment Approvals and Denial Rates (FY 2024)

This data underscores the consistent demand for high-skilled talent among top technology and consulting firms, with denial rates reflecting robust compliance and preparation by these companies.
Interestingly, the NFAP study points out that Tesla, led by Elon Musk, showed a significant increase in H-1B approved petitions in FY 2024, rising to sixteenth rank on the list of most approved H-1B petitions for initial employment after not appearing in the top 25 among employers in previous years. Given Tesla’s needs in manufacturing, research and development and other areas, the company requested H-1B visa holders to fill many positions for engineering, software, supply management and other specialties. Tesla had 742 approved H-1B petitions for initial employment in FY 2024, more than double its total of 328 in FY 2023 and 337 in FY 2022. Tesla also had 1,025 H-1B petitions for continuing employment (primarily extensions for existing employees) approved in FY 2024.

Broader Implications for US Employers

H-1B visas remain vital for U.S. employers seeking to hire high-skilled professionals. In FY 2024, more than 30,000 employers had at least one H-1B petition approved for initial employment, with over 50% of approvals going to employers filing fewer than 20 applications. This highlights the program’s significance across various sectors, from technology to healthcare.
Approximately half of approved new H-1B petitions in FY 2024 (49.1%) were in professional, scientific, and technical services. Second, with 11.9%, was educational services, which include universities. Stanford had 274 approved H-1B petitions for initial employment in FY 2024, the most among U.S. universities. Third was manufacturing (9.3%). Health care and social assistance (6.5%) was fourth.

Geographic Distribution of H-1B Approvals

California, Texas, and New York led in H-1B approvals for initial employment in FY 2024. The distribution reflects the concentration of industries heavily reliant on high-skilled foreign labour.

Table 3: H-1B Initial Employment Approvals by State (FY 2024)

Conclusion

Making a case for the important contribution by H-1B workers to the US economy, the NFAP study concludes with some interesting takeaways.
-While some contend that H-1B professionals are ‘cheap labour’ the average annual salary for an H-1B visa holder in computer-related occupations in 2023 reached $132,000, and the median salary was $122,000, according to USCIS statistics. Employers are required to pay H-1B visa holders the higher of the prevailing wage or actual wage paid to comparable U.S. workers in that area.
-Legal and government fees for filing an initial H-1B petition and an extension could cost employers up to $34,900, and up to $50,000 if sponsoring an employee for permanent residence, according to an NFAP analysis, these are costs employers do not incur when employing a US worker.
-According to research, restrictions on H-1B visas drive jobs and innovation outside of the US. “Any policies that are motivated by concerns about the loss of native jobs should consider that policies aimed at reducing immigration have the unintended consequence of encouraging firms to offshore jobs abroad,” concluded a study by Britta Glennon, an assistant professor at the Wharton School of Business at UPENN. “When US firms are denied H-1Bs, they go abroad, setting up new foreign affiliates and hiring talent there instead of in the US,” said Glennon. “For the most global multinational companies, this is at almost a 1:1 rate. The results demonstrate an important unintended consequence of immigration restrictions: the movement of jobs and talent abroad, with major implications for US competitiveness.”
Policies toward high-skilled foreign nationals in America remain restrictive compared to other countries that the US competes with for talent. The incoming Trump administration may make US immigration policies more restrictive by implementing measures that officials proposed or enacted during President Donald Trump’s first term.