H-1B Lottery 2026: Wage-Based Strategy for Employers

Grace Shie: Welcome to The Inside Track. Today, my partner Max Del Rey and I will be examining the new H-1B weighted selection rule that was issued by the Department of Homeland Security last year. We plan to share the final rule, how the agency landed on the changes to H-1B registration this year, and provide some tips on how employers should prepare for the upcoming lottery this year. Thanks for being here, Max.

Maximillian Del Rey: Thanks, Grace. Happy lottery season.

Grace Shie: Indeed, it's about a month away. So we are definitely, work is underway. So let's start with the final rule. This new regulation changes how the annual H-1B visa quota will be allocated this year and also for future years. And previously, the selection process was based on a random selection. But under the new rule, the chances, the selection odds, if you will, are different this year. Will you give us a sense of what those changes are?

Maximillian Del Rey: Yeah, so the pivot here, Grace, is replacing a lottery system that was based basically on two categories. One, lottery run for US master's degree holders and above, and a second lottery run for everybody else. So this is how the Department of Homeland Security and USCIS would select about 85,000 new H-1B cap subject visas per year. So a two-tiered system has become, with the final rule in essence, an eight-tiered system based upon wage levels. And we'll get into this in the nitty-gritty, but in essence, the higher the wage level, the more you pay the sponsored individual, the better your chances of lottery selection.

Grace Shie: And that's why they're calling it weighted system. It's weighted in favor of higher wage earners or higher wage levels. Is that right?

Maximillian Del Rey: Exactly. So, you know, let's go through this. The Department of Labor divides occupations into four tiers and assigns wage levels to each of those tiers, levels one through four. Level one is the lowest wage level category and in essence aligns with your entry level positions in any given occupation. And then you have level two, level three, kind of increasing in responsibility, experience requirements, all the way to level four, which is your highest, most experienced type of professional in any given occupation. Okay, so you have these levels one through four, and what Department of Labor does every year is it surveys different markets, different industries, and assigns the appropriate, what they call, prevailing wage levels at each of these tiers, levels one through four. And that is, in essence, how the lottery will be run. Level 4 gets you 4 entries into either the Masters lottery or the regular lottery. Level 3 gets you 3 entries. Level 2, 2 entries. And level 1 gets you 1 entry. So that's 4 tiers right there. So you have a Masters lottery run and then a regular lottery run, meaning basically there are 8 tiers now, replacing what was just 2 before.

Grace Shie: So the main decision factor for employers now, if they have a software engineer, and let's say they have a software engineer, one is more experienced or they're planning to pay a wage level four, and then they have a fresh grad that would be coming here in at a level one, under the prior system, both candidates, both positions would have equal odds because they have one entry into the system that's counting the master's degree. But under the current system, the person at level four would be entered into the lottery four times. So the selection odds are higher than the level one engineer who will only be entered into the lottery once. Is that what employers are considering now?

Maximillian Del Rey: Exactly. That's definitely, I'll say the primary consideration, is wage level. But there are others that we're going to talk about today, geographic and then occupations for different candidates as well.

Grace Shie: So let's talk about, let's see, we've talked about wage level. We've talked about sort of selection odds by wage level. Is there anything you wanted to mention in terms of sort of selection odds if you have one entry versus, four entries that would be relevant for the audience?

Maximillian Del Rey: Yeah. So something I thought was really interesting in the final rule is that the Department of Homeland Security used previous year's data to predict how this lottery with the new weighted system would look in terms of outcomes at different wage levels. So, know, as you said, Grace, in previous years, regardless of wage level, level one, two, three or four, your odds of selection were the same. And those odds last year were about 30%, again, regardless of wage level. Under the new system, the Department of Homeland Security has predicted kind of different odds of selection based upon wage level. so, again, using last year's data and what they saw in terms of wage level in H-1B petitions, they predict this year that if everything were to remain the same in terms of wage levels submitted, which we'll talk about. Second. I don't think they will. Your level one folks, those with your entry level lowest paid individuals have a 15% chance of selection. Yeah, their chances of selection, again, according to DHS would be reduced by 50%. But every other wage level will be the same or better. So level two, DHS predicts the odds of selection are about the same, maybe a little bit of a better chance of selection. from like 30 to 31% odds of selection, again, using old data. Level three, you see an increase to about 46%, so a significant increase in odds of selection. And then at level four, DHS is estimating that you would have a 61% chance of selection this year, so better than a coin flip, which is more than you could have said about the chances of selection in any recent previous H1B lottery.

Grace Shie: So we figure that employers, if they know that those are the selection odds, that more experienced software engineer position is going to be much more attractive in terms of select by that criteria selection odds than 15% for a level one entry level software engineer.

Maximillian Del Rey: Exactly right. Exactly right. So there is an incentive for employers to submit at a higher wage level. We'll say that and everything that follows. mean, a wage level is associated with the ultimate salary. You will pay somebody, right? So the incentive here is to pay better in essence. Those percentages that I mentioned, the reason why I had a little bit of skepticism about them is, this action, this final rule will create a reaction from the industry and the industry will be incentivized, like we're saying, to submit more registrations at higher wage levels. So we may see more level four registrations, for instance, than DHS predicts, more level three, maybe less level two, less level one, because that would be to the benefit of your odds of selection. So, you know, my example here, is, well, what are the odds of selection if all of the registrations are level four, right? There is no increase. It would be the same as last year in terms of those odds. So we'll see how it actually plays out. know DHS is doing their best in terms of trying to predict, and definitely we completely get it, right? The incentive is to submit at the highest wage level possible.

Grace Shie: So wage level is one of the areas for employers to consider. Let's next talk about geography, the location of the work site, because that's also very relevant and also tied to salary and wage level.

Maximillian Del Rey: Yeah. Okay. So, like I was mentioning before, know, Department of Labor assigns these wage levels based on geography. So different markets have different wage levels assigned in various occupations. And I'll use a real life example. So I just got a question from a potential lottery registrant. So the employee of one of our clients who asked about wage levels in different counties in the Bay Area. there was a San Francisco Bay Area,

Grace Shie: San Francisco Bay Area.

Maximillian Del Rey: Yes. So there was a significant difference in a certain occupations wage level in the city, in San Francisco, as compared to in Palo Alto, California, Silicon Valley. And so the employee was asking because this would matter very significantly for their chances of selection. In one county, it was a level one wage. In another county, it was a level three wage. So it's a big deal, right? You're talking about three times the odds of selection in, I think it was in San Francisco as opposed to in Silicon Valley. So that's an example of choices that employers will have to make. And this employer happens to have an office in both locations, right? So there is, there's a choice there, but where you will place this employee and the downstream effects on H1B lottery selection rate.

Grace Shie: So, you know, we've talked about location, we've talked about wage levels. Now, how would an employer make these types of decisions? For example, are all of these decisions within the employer's control or are there other relevant, whether it's regulatory criteria or business criteria that they have to consider?

Maximillian Del Rey: Right. So to some extent, these decisions are all within the employer's control. But of course, like you're saying, Grace, they have to fit within certain criteria. So let's talk about the different ways that we can work or lawyers can work with employers and how employers can figure out for themselves also how to classify individuals to kind of optimize selection rates. So one is geography. Like we're saying, the example I gave is very narrow, know, the San Francisco Bay area. But of course, you have the entire United States in terms of wage levels to choose from. You the Bay Area of San Francisco is one example, you know, national employers could choose to place someone there or anywhere in the U.S. where wage levels are significantly less. So that's one ⁓ selection point is, you know, where you will place somebody. Another is the occupation that you ultimately identify for as appropriate to classify a given role. So, Grace, you and I would certainly be classified in an occupation of lawyer, right? But other occupations could be classified in a number of different ways based upon the nature of the job description, the requirements of the role, the duties of the role, these kinds of things. And a typical example, you know, for many employers is in IT, right? You have the job that we talk about.

Maximillian Del Rey: IT professionals who work in different specialties. Someone may be a software developer, another may be a database developer, another may be a data scientist. And there are occupations that kind of combine all of those things into one. So there is a calculation there based upon the different wage levels in those different occupations as to how you want to go forward and classify somebody. And the rule speaks to this point, and we'll talk about that and how employers should make these choices. But in essence, these are the decision points that employers have to make.

Grace Shie: So, under the new rule, employers have to, when registering an employee, they have to provide the same data points that they did previously, but now they additionally have to identify the job code that applies to this person. They have to identify the wage level for the position, and they have to provide the location. that, know, we know based on the announcement made last week that the registration window opens March 4th. So again, in a very short time period from today, the recording of today's podcast, it opens from March 4th to the 19th. And then if someone is, say, selected because they were entered at level 4, an employer is ready to file the H-1B petition during the petition filing window. Is an employer able to make amendments, change its mind, or simply make different decisions about the job code, the wage level? And the location at the time of filing the petition, a variance from what they previously used during the registration.

Maximillian Del Rey: So the lawyerly answer is it depends. Yes and no, So, okay, certain things the employer has to choose upfront, right? In terms of this wage level calculation, there may be some decision points like I was mentioning before in terms of which occupation to select or which geography to select. And what I'll say is an employer can, to an extent, change their mind on these things. But when there is doubt going into the registration about whether a job will fall in one occupation or another, or it will be based in one geography or another, the rule states that employers must register with kind of the least favorable data in mind. So the lowest wage level, for instance. So if there is a choice to be made later on, there has to be some anticipation of that choice in the lottery registration process because it can be very difficult to ⁓ pivot from a more favorable lottery selection situation to a less favorable lottery situation ⁓ later on. And we'll talk a little bit more about that as well. One other point I wanted to make, ⁓ it's kind of ⁓ a nerdy point, but what I'll say is ultimately, an employer can choose to pay a lower skilled person, an entry level person at a higher wage level. But if they're selected at the petition stage, ⁓ use an LCA, a labor condition application, again, kind of nerdy, I'm sorry, everybody, ⁓ at a lower wage level. ⁓ So, four tiers. You have to prove that someone is paid at least at the threshold you are saying, so they are paid at least level one or at least level two. But there is no prohibition on paying significantly above a wage level threshold. So ⁓ someone may make a salary that reaches above the level four threshold, but the job duties, the requirements of the role are more aligned with an entry level position, a level one. That can be registered as a level four position. But then when it comes time to file the H1B petition, can be a level one position based upon job duties and skill. The salary in both situations would be the same, but the level in terms of what the person is doing can be described as lower level, if that makes sense.

Grace Shie: That's an interesting nuance we'll see play out. You said something early about the lowest controls. And I suppose in using your San Francisco Bay Area example, I can also envision an employer where the job that they're seeking to fill is in fact a dual location role. Sometimes they need the software engineer in San Francisco proper, and sometimes they need that individual to be in Palo Alto. Therefore, it's the same job, it's the same salary, but in the two locations, in one location the salary is level three and the other, I forget what we said, level one versus three. And in that situation, for the same person, what level does the employer enter that person as?

Maximillian Del Rey: Level one. those are the choices that we're working through with clients right now. The other thing I wanted to just mention, Grace, is I thought the final rule was also really interesting because it provided estimates as to the additional time, money that this would require. So you mentioned additional data points, right? There's a couple of additional data points required for lottery registration. In previous years, the lottery registration had required just kind of basic biographical information, like name, date of birth, sex, passport information. And then finally, whether someone has a US master's degree or not. Yeah. And so this year you're adding on to that, like you said before, occupation, geographic location, and wage level.

Grace Shie: Because the truth is a lot of race.

Maximillian Del Rey: Department of Homeland Security in the final rule estimates that each registration will require employers to spend about 20 extra minutes per registration. And based on last year's data, that's about 160,000 more hours across the industry. So a significant expenditure of time and effort to register. So just wanted to kind of call that out. Employers should budget.

Grace Shie: Well, that's really important because the window for filing didn't get enlarged. It's March 4th through March 19th, same period of days, business days, and frankly, weekend days that we had previously.

Maximillian Del Rey: Exactly right. Exactly right.

Grace Shie: So we've covered a lot of ground. Let's see. You know, with our employers and the companies that we're counseling now, we know that a level four wage has a higher chance of being selected in the lottery. And historically, many of the H-1B candidates in the lottery were fresh graduates, new graduates from US universities. And if they were a graduate from a US master's degree program, they had essentially two lotteries, two chances at selection because of that master's degree. But that type of fresh graduate or early graduate might also be early career and be a level one. So the recruitment process, would think, is different this year in terms of the pipeline for employers choosing which candidates to shepherd through that H1B process. We do see employers, how are they making these types of decisions with respect to entry level positions or the fresh graduates?

Maximillian Del Rey: Well, I'll say, you know, there's still significant demand for H1B visas. Many student visa holders are still going through that pipeline. But we're seeing, frankly, are just different considerations for how to hire these people and how to compensate these individuals. I've worked with employers to, frankly, increase their offers to certain employees based upon chances in the lottery based upon those four percentages I gave you that DHS shared with us. So I've seen that happen. And then also, you know, these questions about geography and occupational classification as well. We're working with employers to basically provide them with kind of a menu of different choices and help them kind of adapt their offers, their positions to kind of the best choice that best fits. Their situation and that could be again selection of a couple of occupational classifications. It could be ⁓ selection of a couple of different geographies. So we're working through those new types of factors that are pushing employers in different directions. I'd say that's the biggest thing. know overall, just based on this final rule or other changes in immigration, we haven't seen a change really in the volume of registrations for your kind of US-based employers sponsoring US-based candidates. But yeah, that's it.

Grace Shie: Yeah, well, we'll kind of see how the final numbers play out once they're released at the end of the registration period. Yeah, we will. So, you know, just to make clear, are there any types of H-1B petitions that are not subject to these rules changes? I think we should be clear on that as well.

Maximillian Del Rey: We'll take that. We'll take that. Yeah. For sure. And something maybe we should have said right at the front is, you what is this lottery we're talking about? So, you know, every year by law, there are only a certain number of new H-1B visas available to U.S. employers that are subject to what this cap, this limitation on the number of new H-1B visas. That number is 85,000. Of that 85,000, 20,000 are reserved for those U.S. master's degree holders and above. But to your point, Grace, there are some employers that are not subject to this cap. They are what's called cap exempt. So you have institutions of higher education. So your colleges and universities primarily, nonprofits associated with those institutions. You have certain government entities and organizations affiliated with them. Those are examples. There are others, but that gives you a sense. So your general, your average for-profit employer in the US is subject to this cap. And demand from that employer pool is usually significantly higher than 85,000 per year. Last year, for instance, we were approaching nearly half a million registrations for those 85,000. And the year before that was like 700,000 something. So significantly more demand typically than there are available H1Bs. And that's why there is a lot of

Grace Shie: Yeah. So as we wrap up, why don't we share some practical tips for employers as they're looking to navigate this new environment, these new requirements, particularly as we are now one month away from the registration window.

Maximillian Del Rey: Yeah, you I just wanted to reiterate some things that aren't new, right? So employers want to maximize their odds of selection in the lottery. And that is completely legitimate and understandable. But employers have to remember that they have to kind of stick with these commitments through this process. So if your candidate is selected in the lottery, you'll have to file an H-1B petition with the immigration service that confirms that indeed the employer will pay this salary. To the employer and they will be based in this particular geography. And so that's not new. That remains the same. But what the final rule addresses are situations where the Department of Homeland Security perceives that employers are using certain data for the lottery and then changing that data later on in a way to increase lottery selection chances. Even where the facts of someone's employment don't really support that. you know, in my example before, registering someone in San Francisco for higher chance of selection, and then after the lottery, moving them to Palo Alto and amending the H-1B petition. The Immigration Service is going to provide those kinds of circumstances with more scrutiny. And their final rule speaks to the fact that they could frankly, revoke H-1B approvals for individuals or for employers where they feel that kind of situation is going on. know, employers really have to kind of commit to these choices for, in my recommendation, frankly, the validity period they request in the H-1B petition, which is typically three years. So it's just something to keep in mind. A lot of that is not new, but in the context of the new lottery, and these new considerations for selection, it is new.

Grace Shie: So, understanding that those decisions being made now, and for some employers, these might be decisions made in rushed fashion because the final rule came out at the end of the year last year and the registration window opens March 4th. So, decisions on where the job, where they're going to place the employee, the wage level, and the code, that's going to carry on through the H1B filing later this year and like you said, out of an abundance of caution throughout the three-year approval period of that H1B. That's very important. Anything else before we wrap up?

Maximillian Del Rey: No, I think that's it, Grace. know, again, happy lottery season to everybody and I hope everyone's kind of up and running.

Grace Shie: Well, thanks for joining me today. Here at Mayer Brown, we will continue to track H1B developments this year, in particular this cap season. And I can assure you that Max and I will be back at the end of the registration season, possibly the end of the cap filing season, with a recap on this year's outcomes. Whether 20 minutes was the right guesstimate per the regs, and whether the selection odds were in fact what they were outlined to be.

Maximillian Del Rey: Very curious about that. Yeah, I hope to be able to share some data next time on that.

Grace Shie: Well, thanks for joining us on this episode of The Inside Track.