IT Consulting Fee Arrangement and H1B Compliance

A U.S. Customs and Border Protection (CBP) officer will often ask an H1B worker entering the United States whether the worker has ever paid their employer a portion of their salary. U.S. immigration law generally forbids an H1B worker from covering fees associated with the H1B process or otherwise paying an employer. If a CBP officer determines that the H1B worker paid the employer a portion of their salary, then the H1B worker can suffer severe immigration consequences, like expedited removal from the U.S. and a five-year bar on reentry.

An H1B worker in the IT consulting industry risks mistakenly admitting to paying an employer a portion of their salary if the worker misunderstands how compensation models in the IT consulting sector typically are structured. Understanding a common compensation model in IT consulting can assist H1B nonimmigrants with providing accurate information to immigration authorities.

How Consulting Firms Operate

Consulting firms typically function in the business-to-business (B2B) market. In this model, one company (the client) sells professional services to another company (consulting firm / employer). The client identifies a business need, engages the consulting firm, and enters into a contract. The consulting company then provides services under the agreed terms. These relationships are often long-term and can involve substantial financial arrangements between the client and the consulting firm.

Standard Payment Flow

The flow of funds in a legitimate consulting arrangement often consists of a client signing a contract with the firm, an employee of the firm delivering services, and the firm invoicing the client. The consulting firm pays its employees a salary through standard payroll.

Employers Bill More Than They Pay

It is normal for consulting firms to bill clients more than the firm pays the employee delivering the service. This markup covers the company’s operating expenses, including rent, equipment, payroll taxes, employee benefits, administrative costs, professional services, and profit margins.

Revenue Sharing vs. Paying an Employer

Some firms structure compensation in terms of revenue sharing. For example, employees may be told they earn 75 percent of the revenue they generate. This is simply a transparent way to link compensation to productivity; it does not involve the employee paying money to the employer. The remaining percentage of revenue is retained by the firm to cover operating costs and maintain profitability.

Revenue Sharing is a Lawful Arrangement

In a lawful H1B consulting arrangement, the H1B worker is an employee of the consulting firm. The employer is a business entity that provides services to clients. Clients pay the employer, and the employer pays the employee. At no stage is an employee required to pay the employer to work.

Red Flags for H1B Workers

An H1B worker should be concerned if an employer requires them to pay (or reimburse for) H1B filing fees, cover unreasonable or uncustomary payroll deductions, or return part of their salary in cash. These practices typically are unlawful and can result in immigration consequences for the H1B worker.

Conclusion

Working for a consulting firm that charges a client more than it pays an employee is standard business practice and does not mean the worker is paying the employer. An H1B worker should review the employment contract to understand the compensation structure, ensure compliance with H1B regulations, and prepare for questions from CBP or another immigration authority.

It is critically important to be truthful when providing information to any immigration authority. If an H1B worker is uncertain about any aspect of an employment arrangement, the worker should seek advice from a qualified immigration attorney.

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