Proposed H-1B Changes: How Weighted Selection May Impact Employer Strategy

The Department of Homeland Security (DHS) has published a proposed rule that may reshape the H-1B registration and selection process. These changes, if finalized, would have implications for employers seeking to hire skilled foreign workers under the H-1B category. Here's what employers should keep in mind about the proposed modifications and how they may affect organizations.

Current System: The number of first-time H-1B petitions usually exceed the year's quota and are selected based on a random drawing. The system is beneficiary-centered, allowing each prospective H-1B worker one entry.

Proposed Change: The H-1B selection would shift from a purely random lottery to a weighted lottery that favors higher-paid positions while still giving all wage levels a chance.

How the Weighting Works

The number of each beneficiary's lottery entries is determined by their offered wage compared to the existing the DOL Occupational Employment and Wage Statistics (OEWS) wage levels (I-IV) for the beneficiary occupational classification in the area of employment.

Here's how it works:

Wage Level Determination Process

1. SOC Code Assignment: The employer identifies the appropriate Standard Occupational Classification (SOC) code that best matches the job duties and requirements
2. Geographic Location: The wage is determined based on the specific geographic area where the work would be performed, as well as
3. Skill/Experience Level: The position is classified into one of four wage levels based on the minimum job requirements:
   • Level I (17th percentile): Entry-level positions requiring basic understanding of duties and close supervision
   • Level II (34th percentile): Qualified positions requiring some experience and limited judgment
   • Level III (50th percentile): Experienced positions requiring sound understanding and considerable judgment
   • Level IV (67th percentile): Fully competent positions requiring advanced knowledge and wide latitude for judgment

Lottery Entries by Level

If the offered salary is equal or higher than:

• Level IV: the beneficiary would receive four entries in the lottery
• Level III: three entries in the lottery
• Level II: two entries in the lottery
• Level I: one entry in the lottery

Other Key Points

• The proposed rule suggests that the resulting number of entries may not be just about the salary amount, but rather it is about how the job requirements and offered wage compare to the DOL's statistical data for that specific occupation in that geographic area. A high salary for a Level I position does not automatically make it Level III or IV; the job duties and requirements must match the higher skill level definitions.
• If a foreign national receives multiple H-1B cap sponsorship offers from different employers, the number of entries allowed to such beneficiary would be based on the lowest wage level offered of all petitions.

Impact: While not eliminating randomness entirely, employers offering higher wages may have better odds of selection. Specifically, Level IV positions would be four times more likely to be selected than Level I positions.

Implications for Employers

Increased Competition and Costs

The proposed wage-based selection system aims to drive up compensation packages as employers compete for priority selection. The proposed rule's economic analysis provides specific cost estimates.

Increased Administrative Burden

• Time requirements: USCIS estimates each H-1B registration would take approximately one hour to complete (increased from current estimates due to additional wage documentation requirements).
• Wage determination research: Employers must spend additional time researching and documenting the appropriate OEWS wage level for each position.
• SOC code verification: Enhanced requirements for accurate SOC code selection and justification.
• Multi-location analysis: For positions with multiple worksites, employers must analyze and document wage levels across all locations.

Higher Labor Costs

• Wage level competition: To improve selection odds, employers may wish to increase offered salaries from Level I to Level III or IV positions.
• Market pressure: As more employers offer higher wages to gain lottery advantages, overall market compensation may increase.
• Strategic salary adjustments: The rule estimates that many employers may voluntarily increase wages to move from one lottery entry (Level I) to three or four entries (Level III/IV).

Additional Compliance Costs

• Documentation maintenance: Employers must maintain and store wage source documentation (such as DOL wage search printouts) for each registration.
• Legal consultation: Many employers may require additional legal guidance to ensure proper wage level determinations and SOC code classifications.
• Enhanced record-keeping: New requirements for maintaining detailed documentation supporting each registration's wage determination and job requirements.
• Verification processes: Additional time and resources may be needed to ensure all registration information is accurate and supportable.

Organizations may wish to budget for these increased administrative, legal, and labor costs when planning their H-1B strategies.

Strategic Planning Considerations

Employers may wish to be more strategic about their H-1B submissions:

• Consider offering Level III or IV wages to potentially improve selection odds.
• Review SOC classifications to support the offered wage while ensuring accuracy / reasonable nexus between the occupation and the offered role.
• Cannot rely on multiple submissions for the same candidate.
• Advanced degree candidates benefit doubly - they get both the weighted system advantage and access to the separate 20,000 visa pool.
• Entry-level positions remain eligible but would face reduced selection odds with only one lottery entry.
• Multiple worksite/role considerations - remember that the lowest applicable wage level would be used when multiple worksites are involved.
• Future roles planning - USCIS may deny subsequent amendment petitions containing lower wage offers, as well as revoke the initial petition approvals, if they find that the conditions of initial offer were determined primarily to increase the chances of selection.

Fraud Prevention and Penalties

The proposed rule strengthens enforcement mechanisms:

• Enhanced verification processes during registration and petition filing;
• Potential suspension from H-1B program participation for fraudulent activity;
• Increased scrutiny of registrations that appear inconsistent with employer size or business needs;
• Cross-referencing with other government databases to verify employer legitimacy; and
• Whistleblower protections for reporting fraudulent activity.

Timeline and Implementation

• Public Comment Period: The proposed rule is open for public comment for 30 days from publication in the Federal Register.
• Effective Date: If finalized, the rule would normally become effective 60 days after the final rule's publication.
• First Application: The new system may first apply to the FY 2027 H-1B cap season (registration period may end in March 2026).
• Transition Considerations: USCIS will provide detailed guidance on system changes and any transition provisions.

Practical Considerations for Employers

Immediate Steps

1. Review current H-1B strategy and assess impact of wage-based selection.
2. Analyze wage levels for planned H-1B positions.
3. Evaluate budget implications of offering higher wage levels.
4. Consider submitting comments during the public comment period.

Long-Term Planning

1. Develop alternative talent strategies that do not rely solely on H-1B workers.
2. Explore other visa categories (TN, O-1, L-1, etc.) for key employees.
3. Consider timing of H-1B submissions based on business priorities.
4. Strengthen relationships with immigration counsel for strategic guidance.

Industry Impact

These changes may affect different industries and company sizes differently:

• Technology companies that traditionally rely heavily on H-1B workers may face increased costs, but may be better positioned to offer higher wages.
• Consulting firms that historically submitted multiple registrations for the same candidates may see reduced success rates.
• Small businesses may face particular challenges competing against larger organizations offering higher wages, though the weighted system still gives them a chance.
• Entry-level/college hiring programs may be significantly impacted as Level I positions would have only one lottery entry compared to four for Level IV positions.
• Professional services firms may need to restructure compensation packages to remain competitive.

Small Business Considerations

The proposed rule acknowledges potential disproportionate impacts on small businesses, which may have less flexibility to increase wages to Level III or IV. However, the rule maintains that all wage levels remain eligible, preserving opportunities for smaller employers while incentivizing higher-skilled positions.

Conclusion

The proposed H-1B weighted selection system represents a significant shift from the current random lottery to a system that rewards higher wages and higher-skill positions, while still maintaining an element of chance for all wage levels. While aimed at improving program integrity and prioritizing more skilled positions, these changes might require employers to fundamentally rethink their H-1B strategies.

Bottom line: The new weighted system rewards higher wages and higher skill positions. Employers should evaluate their H-1B hiring strategy to maximize their chances under the new rules.

Key considerations include assessing wage structures, budgeting for potentially increased costs, ensuring accurate SOC code classifications, special attention to the standardization of job descriptions, as well as talent acquisition and recordkeeping practices and developing alternative talent acquisition strategies. Entry-level positions may remain eligible but might face significantly reduced odds compared to higher-wage positions.