What is the Cost of an H-1B Employee?

Companies need to hire the right candidates for their positions. A candidate must have the necessary education and skillset to be successful and provide the best service to clients, whomever or whatever that may be. A dedicated and clear staffing strategy is critical.  While developing the staffing strategy that works best for your company, a thorough analysis of the budget required to recruit, train, and retain a competent workforce is key.

Enter in a foreign national candidate that possesses the desired educational background and skillset that your company is seeking. You interview them, and they’re a perfect fit! What does this mean in regards to your company’s staffing strategy and budget? Many company executives and HRs cite the costs of sponsoring an H-1B employee as a deterrent to hiring, as they’re unsure of the government and legal fee costs.

What does it mean budget-wise to sponsor an employee for an H-1B visa?

Recruiting and hiring the right candidate

When running a business, it takes money to make money. Companies make decisions every day on what to invest their money in. Based on a study conducted by the Society for Human Resources Management, the average cost to hire a new employee is on average $4,129 with the average time to fill the position taking 42 days. A similar study conducted by the National Association of Colleges and Employers determined that the average cost for a new hire is $7,645.

If you’re replacing an already exiting position instead of just filling a new position, it would take up to 50 to 60% of an employee’s annual salary to find a direct placement. These costs include external hiring team (for small businesses and start-ups), internal HR and recruiting teams (for larger businesses), career events (i.e. career fairs and recruitment events), job board feesbackground checks, and on-boarding and training. With employees switching jobs on average ten times between the ages of 18 and 37, these costs can begin to add up.

The on-boarding and training of a new candidate takes many hours on the part of the new hire, their manager(s), and the HR team. Lost productivity resulting from the learning curve for new hires and transfers was between 1% and 2.5% of total revenues, research shows. Turnover costs can exceed 90% to 200% of an employee’s annual salary when all said and done.

What is the actual cost of an H-1B employee?

While it can be difficult to pinpoint the exact amount prior to a legal consultation, typically the cost of sponsoring an H-1B employee can range anywhere from $5,000 – $7000 in legal and government filing fees based on the size of the company and whether a response to an application is needed quickly from the government. Typically three years of H-1B status is granted for each approval.  Extensions of H-1B status can range anywhere from $3,500 –  $5,000.

Based on the numbers above, 50 to 60% of an employee’s annual salary to find a direct placement,, the company would be spending the same amount of money to recruit a new hire to fill the position that had been vacated by the H-1B employee. Research has shown that on average, the company is spending the same amount of money, and at times less, to extend the H-1B visa for an employee than it would cost to recruit, hire, and train someone to fill in the position.

 What is the cost of keeping an H-1B employee around?

An H-1B employee is permitted a stay of six (6) years in H-1B status.  If a company wishes to keep this employee beyond the employee’s six year period, then they must sponsor the employee through a PERM green card permanent residency process. Once they get to the second stage of the process which requests an approval of an I-140 Form, the H-1B individual would be allowed to continually extend their status for three years at a time while they wait for a green card to be available.

Once the employee obtains permanent residency, the petitioning employer does not have to continue to extend the H-1B visa. Thereby, eliminating an expense while keeping a valued employee.

“So—what does this mean for my business then?”

Certain companies are looking for certain skill sets. At times, these skill sets cannot be found through  U.S. At this point, the employer has no choice than to look for it alternatives such as foreign professional workers, which is why the visas like H-1B (and L-1) are essential for the U.S. economy and workforce. Therefore, budgeting for the cost of an H-1B in their staffing strategy and hiring practices are cost effective based on the benefit the skillset that the employee brings to the company in generating revenue and repeat customers.

No matter how you choose to run your business, finding an employee that has the necessary skillset, knowledge, and is willing to work for your company long-term is the most critical aspect of a company’s functionality. Sometimes utilizing the H-1B professional worker visa system is a necessary and critical operational expense for US companies.

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