As we wrote about last September, the administrative overhaul of the H-1B program was just beginning with the new $100,000 fee. 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.
What’s Happening?
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 I floor to the 34th percentile, the department is effectively pricing out entry-level roles that do not truly meet the "specialty occupation" threshold.
Guidance for ISG Clients
Initial analysis of the regulation indicates that it will not impact existing H-1B holders and will apply only to pending and new applications. However, should the regulation move forward in its current state, it could significantly change the per-role economics of the H-1B program. Enterprises should consider the following:
Map risk exposure: Identify internal use of H-1Bs and assess service providers reliant on new H-1B petitions. The $100,000 fee combined with these new proposed wage tiers will dramatically change the economics of H-1B hires.
Evaluate location impact: Determine the impact of higher onsite costs to your service delivery continuity. For example, the Labor Department estimates these adjustments could increase the average certified wage by approximately $14,000 per year. This could push more jobs into lower-cost office space away from headquarters, given that levels are calibrated based on the location where the work takes place.
Consider AI adoption and pricing: We’re seeing significant levels of price productivity in newly signed agreements based on the understanding that AI will take on an increasingly large role in service delivery. Ensuring this is codified into new agreements may help reduce dependency on specialized resources as the regulatory environment continues to take shape.
Longer term, as more of the lower-wage and entry-level work shifts to AI, this will likely reinforce the use of H-1Bs in higher-skill areas where shortages are more acute. The long-term impact of both AI and the H-1B policy changes point to the fact that the industry needs a new approach to developing early-career talent, as these roles have historically been the path for promotion and skill development in the IT and business services industry.
About the author
Stanton Jones
Stanton helps enterprise technology leaders, IT service providers and buy- and sell-side professionals make sense of the global IT services sector. Stanton's weekly briefing - the Index Insider - is read by thousands of industry stakeholders each week.
