H1B Employee – A Cash Cow

H1B employee is a cow for H1B employer that produces lots of money instead of milk !Most of H1B employee’s hourly pay is approximately $50+ per hour.
For specialized skill set such as Oracle Finance, ERP, TeraData, Business Objects it goes as high as $125+ per hour.

You need to know how your employer earns the money and their modus operand. So don't start dreaming that if you have been offered $60K per annum means you will get $5K or around Rs. 2.2 Lakh per month in your pocket.

Salary Calculation using $60000 Gross Annual Salary
Let us take an example; suppose you being an experienced J2EE programmer with good PL/SQL experience, your rate of pay will be usually around $70 per hour.

Your H1B sponsoring company has agreed to pay you $60,000 per year with 10 paid vacation days + health insurance benefits.

Your Gross Annual Salary being $60,000 per year means $5000 per month. This is the salary without any tax, no matter in which state you are, your paycheck will always show the following entries.

  • Employer pays Social Security tax 6.2% and Medicare tax 1.45% and your employer will also contribute/match Social Security tax 6.2% and Medicare tax 1.45%. Don’t worry your employer will NOT take out employer’s match out of your salary. That’s the employer match that the employer will come up with.
  • You being H1B employee, your employer must require that it provides you with Health Insurance Coverage. Usually you pay 20% to 25% of premium and your employer pays rest of the premium. So health insurance premium is $800, you pay $200 a month (25%) and your employer pays $600 (75%) of premium.
a. Employee’s Tax (Annually) on $60,000 Gross Salary
a. Employer’s Tax (Annually) or Expense when paying you the $60,000 Gross Salary
b. 6.25% Social Security Tax = $3750
b. 6.2% Social Security Tax=$3750
c. 1.45% Medicare Tax=$870
c. 1.45% Medicare Tax=$870
d. 25% Employee’s Share on Health Insurance Premium=$2400
d. 75% Employer’s Share on Health Insurance Premium=$7200/td>
e. Approximately 15% is Federal Tax = $9000 ( this is a very approximate number)
e. Employer’s Federal Tax : Varies
Total (a + b + c + d + e ) = $16,020 Annually the employee will pay from his OWN salary.
Total (a + b + c + d + e ) : $11,820 Annually the employer(H1B visa sponsor) will pay from its OWN wallet.
You real annual salary is : $60,000 – $16,020 = $43,980 = approximately 44K annually
In order to pay $60,000 annual salary to you, your employer need to shell out $11820 ( see above total) + 10 Paid Vacation Days (1/2 Month of Salary: $2500) = $14320 from his own pocket.
So your full and final salary for your employer including all expenses is: as follows :
a.
$60K ( the money that an American/Desi employer pays to you)
b.
$14320 ( Money spent by your employer in paying employer’s tax, health benefits and vacation)
And your monthly salary ( net take home pay after tax would be) would be $44,000/12(months) = $3666
The full and final cost for your employer to have you on their payroll is ( a +b ) : $74,320

picture shows how your Employer fills when you are working for them

Above picture shows how your Employer fills when you are working for them.

After tax your take home pay would be around $3600 to $4000 per month (assuming your earning is $5000.00 gross per month).

If a J2EE programmer works for the direct client for a year at $70 per hour, his H1B Company would have billed total $131,600 to the direct client in 12 months.

The total of $131,600 is simply derived by multiplying hourly rate ($70) with total annualized hour (1880).

With $60,000 per year salary as an employee, your employer enjoys the benefits using following formula.

  • A The gross income $131,600 you generated for this Desi/American employer
  • B Your fully loaded expense (including salary + benefit + tax) =$74,320 (See Salary Calculation Table) to your employer

Gross profit to your H1B employer (A- B) =$131,600 – $74,320 = $57,280 gross profit!!

And sometime, when rate offered by client is poor or there are too many middleman involved. It may significantly reduce your employer’s gross profit. And remember not a single employer in the USA will hire you and continue to suffer the financial loss.

Analyze the following table , it would help you to analyze what your employer’s gross income is just because you are working for them and providing your valuable IT professional services to them.

In Greed We Trust
In Greed We Trust
is the logo of majority of DESI employers in USA
Hourly Rate of Pay
$40—->
$41—->
$42—->
$43—->
$44—->
$45—->
$46—->
$47—->
$48—->
$49—->
$50—->
$51—->
$52—->
$53—->
$54—->
$55—->
$56—->
$57—->
$58—->
$59—->
$60—->
$61—->
$62—->
$63—->
$64—->
$65—->
$66—->
$67—->
$68—->
$69—->
$70—->
Gross Annual Income ( Hourly Rate X 1880 Hour)
$75,200
$77,080
$78,960
$80,840
$82,720
$84,600
$86,480
$88,360
$90,240
$92,120
$94,000
$95,880
$97,760
$99,640
$101,520
$103,400
$105,280
$107,160
$109,040
$110,920
$112,800
$114,680
$116,560
$118,440
$120,320
$122,200
$124,080
$125,960
$127,840
$129,720
$131,600

Beggar

This is what you need to practice before asking for Salary Raise while you are on H1B visa !

Now, if you ask your US-based employer for a salary raise, you will be denied out right or threaten to cancel your H1B visa and other scary tactics.
Even most H1B employer will not even pay any certification cost or any company-paid seminar or workshops.

In most of the cases, these companies would love to keep you on their payroll. Because you are earning money for them, more you work, more the money you will make for the company. And more your hourly rate , the better the bank balance of your employer would be.

Now you should be able to understand that you are a CA$H COW for your USA based employer. In the above mentioned example on the annual investment of $74,320 your employers is getting back $59,780 back and guess what that $74,320 also came from ? Obviously, from your work! Don’t you think even if your employer is just making $20,000 in gross profit overall then also you deserve a fair treatment from your employer?

Taking action against a greedy employer is not your trait; also, your employer who made a lot of money through your work will go an extra mileage to scare you. Don’t forget that certain portion of that huge profit of your employer may have been specially allocated toward legal expense to keep you under their toes, and some employer are not easy to deal with and they will spend money behind legal cost to scare you by providing a notice and many other scary tactics.

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See Also