Index Insider: Rising H-1B Wage Floors Could Reshape Hiring Economics

Hello. This is Stanton Jones and Steve Hall with what’s important in the IT and business services industry this week.

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What You Need to Know

As we wrote about last September, the administrative overhaul of the H-1B program began with the new $100,000 fee on certain new petitions filed abroad. We noted then that the U.S. Department of Labor had been directed to revise prevailing wage levels upward. That directive has now published as a Notice of Proposed Rulemaking – you can find it here. If implemented, it will significantly change the economics of H-1B hires and related visa pathways.

Background

The department is proposing a recalibration of the four-tiered prevailing wage structure used for the H-1B program, as well as other visa programs and pathways. The proposed rule shifts the wage floors significantly higher across the wage distribution levels: 

• Level I (Entry): Moving from the 17th to the 34th percentile.
• Level II: Moving from the 34th to the 52nd percentile.
• Level III: Moving from the 50th to the 70th percentile.
• Level IV (Fully Competent): Moving from the 67th to the 88th percentile.

This regulation is the follow-through to the Presidential Proclamation we watched closely in late 2025. In our previous brief, " H-1B – What We’re Watching," we highlighted that the process would soon be weighted to favor more certain business cases and higher-skilled talent.

This directive appears to codify that shift. By raising the Level II and III roles to the 52nd and 70th percentiles respectively, it will have a big impact on the levels that IT services providers hire for most often.

The Impact

While the new prevailing wage levels have not yet been published, the likely impact can be estimated using wage data distributions from the U.S. Bureau of Labor Statistics:

• For example, a Level III software developer in Charlotte, NC currently carries a prevailing wage of $133,536. That’s aligned to roughly the 50th percentile.
• Under the proposed structure, that role would now align closer to the 70th percentile.
• Based on BLS wage distributions, this implies a salary in the range of ~$150,000–$155,000.

This suggests an increase in the mid-teens for this role and location. At a program level, the Department of Labor has indicated an average increase of approximately $14,000 per role annually.

Like the $100,000 fee for new petitions announced last year, the department of labor has indicated that the new prevailing wages are not retroactive for existing H-1B holders. However, it’s important to keep in mind that any change to work location or role requires a new labor condition application (LCA), which will trigger the new prevailing wage tiers.

Guidance for ISG Clients

Near-term industry impact is likely to be limited. Providers have been reducing their use of H-1B over the last ten years and have focused instead on more local, nearshore and lateral hiring. Combined with the current low single-digit growth environment, providers are relatively well positioned to absorb incremental changes to U.S. visa programs.

On an individual client basis, the guidance we posted last week still holds. But one additional factor to consider is attrition. Given the high cost of new petitions, lateral hiring for in-demand H-1B talent is likely to increase. In these cases, the new prevailing wage applies, but the petition fee does not.

This creates two potential outcomes. Enterprises may proactively raise compensation for existing H-1B employees toward new prevailing wage levels to retain key talent. At the same time, providers may seek rate increases to offset higher wage requirements. If enterprises don’t make these adjustments, or allow their providers to, someone else will, and the talent will likely follow.

We’ll talk more about the impact of these changes on the 1Q26 ISG Index Call on April 16. You can register here.