The short version. On August 25, the Department of Homeland Security (DHS) proposed a new fee: $103,265 on every new H-1B petition that goes through the annual lottery. That is on top of what employers already pay. It is only a proposal so far. Public comments close September 24, 2026. If the rule is finalized as written, it would hit petitions filed in the 2027 lottery. It does not touch renewals, transfers, or the people already on your team. It does touch every new hire you planned to bring into the United States through the lottery. Big companies are far more likely to fill those seats through offices they already have abroad. A company with no office abroad can fill them the same way through Midwestern. The engineer is a Midwestern employee in Brazil, embedded on your team, under one US contract. No petition gets filed, because nobody moves.
What DHS proposed
On August 25, 2026, DHS published a proposed rule. It adds a $103,265 fee to every new H-1B petition that goes through the annual cap, due when you file. Fortune puts the ten-year cost to employers at $74.9 billion.
How they are doing it matters as much as the number. In September 2025, the President tried to add a $100,000 charge by proclamation. That is an order signed by the President, with no public comment step. A federal court in Massachusetts struck it down in June 2026. The government is appealing. This time DHS is using the normal rulemaking process: publish the rule, take public comments, then finalize it. Immigration attorney Elizabeth Ricci told Fortune this version has "a better chance of surviving" in court. In plain terms, lawsuits are expected, and the rule was written with them in mind.
It is still a proposal. Public comments closed September 24, 2026.
If it is finalized as written, it applies to lottery petitions filed in 2027. The start date will come with the final rule. It is not automatically October 1.
Do not plan your 2027 hiring around a court case nobody can predict.
Who it hits: your next hire, not your current team
The fee applies to new petitions that go through the H-1B lottery, including the master's degree cap. It does not apply to renewals, changes, or moves to a new employer for someone who already holds H-1B status. It also does not apply to employers that skip the lottery, such as universities and nonprofit research groups.
So if you have engineers on H-1B today, their renewals are not the problem. The problem is every engineer you planned to bring in through the lottery next spring. If the rule is finalized, each of those hires would cost you six figures before you pay a dollar of salary.
Why startups take the hardest hit
DHS ran the small-business numbers itself. Of the small companies it studied, 11,051 would feel what DHS calls a "significant economic impact." That is 76 percent of them.
The reason is structural. Britta Glennon is an assistant professor at Wharton who studies this. She told Fortune that when big global companies can't get H-1B visas:
"…they actually become much more likely to open a foreign affiliate abroad or expand hiring of their foreign affiliates."
A company with a few thousand engineers already has an office in Vancouver or Toronto. The same engineer does the same work for the same company from a different desk. The petition never gets filed.
A forty-person company does not have a Vancouver office. As the rule is written, most startups see four paths:
Pay $103,265 per hire.
Hire only people who can already work in the United States.
Use an employer of record. That is a company that puts your hire on its own payroll in that country, while you still find, vet, and manage the person.
Set up a company of your own abroad.
What it takes to build that yourself
To employ someone in another country legally, you need a registered company there. You need local payroll and tax accounts. You need employment contracts and benefits that follow that country's labor law. And you need someone on your side who knows that law well enough to keep you out of trouble. It takes months to set up, and it never stops costing money. That is why the companies that have it are the ones with a legal department.
An employer of record is the shortcut most startups know about, and for some companies it is the right one. It employs the person through its own company in that country. What it does not do is find the engineer, vet them, or manage them. You still run the search, judge the technical interview, and own the day-to-day. It is payroll for a person you already found.
Put the $100K into your product istead
Get the senior talent without the visa lottery or foreign entitiy.
What Midwestern does instead
Midwestern opened a permanent branch in Brazil earlier this year. The engineers there are Midwestern employees. They are hired through the same process as every engineer we place: a culture screen, a technical interview with one of our own senior engineers, and reference checks. When one of them joins your company, they stay employed by us in Brazil. They work embedded on your team, in your standups and your repo.
What that means against the fee:
Nobody is moving to the United States, so there is no H-1B petition to file and no lottery to wait on.
You sign one contract with Midwestern, a US company. There is no foreign company to set up, no employer of record to manage, and no international payroll to run.
The legal risk of employing someone in another country is ours. Payroll, compliance, and labor law stay off your books.
Our embedded engineers typically join a team in under 15 business days.
Brasília is one to two hours ahead of New York. An East Coast team shares almost the whole workday. A West Coast team shares the morning and early afternoon. Either way, the person is in your standup.
Right now the concrete version of this is Brazil.
What this does not solve
If a role needs someone in your office, or on US soil for a customer or contract reason, an engineer in Brazil does not help you. If you already have a candidate in mind, here or abroad, that person's visa status is a question for your immigration lawyer. We are not immigration lawyers. This article describes one way to hire. Anyone already in your pipeline belongs with your lawyer.
What it does solve is the common case. You need a senior engineer. The best person you can find is not in the United States. And you would rather spend $103,265 on the product than on the petition.
FAQ
Is the $103,265 H-1B fee in effect?
No. As of September 2026 it is a proposed rule. Employers are not paying it. If DHS finalizes it, the fee would apply to lottery petitions filed in 2027.
Does it apply to my current H-1B employees?
No. Renewals, changes, and moves to a new employer for people who already hold H-1B status are excluded in the proposal. The fee is aimed at new lottery petitions.
Is an engineer employed in Brazil a contractor?
No. People at Midwestern's Brazil branch are Midwestern employees. Their employer is Midwestern. You hold one contract with us, a US company.
What if the role has to be in the United States?
Then the seat is a recruiting problem, and one we also handle. We fill full-time roles in under 20 days.