When an employer sponsors a foreign national for a PERM-based green card, the employer’s financial ability to pay the offered wage becomes an important issue. This is often referred to as the employer’s “ability to pay.”
In many cases, the offered wage in the PERM process must be at least the prevailing wage determined by the Department of Labor (DOL). Later, when the employer files the I-140 petition with USCIS, the employer must show that it has the financial ability to pay that offered wage.
- Employers sponsoring PERM-based green cards must prove ability to pay the offered wage (at least the prevailing wage) when filing the I-140 with USCIS.
- Ability to pay can be shown by the beneficiary’s actual wages, employer’s net income, or net current assets, usually using tax returns and payroll records.
- Because financial conditions can change during the PERM process, employers should plan ahead and review tax returns, wages, and other financial documents before filing the I-140.
Evaluating the Ability to Pay the Offered Wage
Sometimes, this does not look like a problem when the case first begins. The employer may be doing well, and the offered wage may seem reasonable based on the company’s financial condition at that time. However, the PERM process through DOL can take a long time. During that time, the company’s situation may change.
When the Ability to Pay the Offered Wage Changes
Because of that, an employer that appeared to have no ability to pay issue at the beginning of the case may need to take a closer look at this issue when the case reaches the I-140 stage. In this article, we will discuss three common ways an employer may be able to show ability to pay the offered wage.
Method 1: Showing That the Employer Is Already Paying the Offered Wage
One way to show ability to pay is to prove that the employer is already paying the foreign national at least the offered wage.
For example, if the offered wage is $80,000 per year, and the employee is already receiving $80,000 or more, that can be strong evidence. The employer may provide payroll records, W-2 forms, paystubs, or other wage documents to support this point.
This can be helpful when the foreign national is already working for the sponsoring employer in the same or a similar role. It shows USCIS that the employer is not only promising to pay the wage in the future.
However, the numbers still need to be reviewed carefully. If the employee is being paid less than the offered wage, USCIS may look at the difference. In that situation, the employer may need to show that it can cover the shortfall through other financial evidence.
Method 2: Using Net Income to Show Ability to Pay
Another way to show ability to pay is through the employer’s net income.
This usually means looking at the company’s federal tax return. USCIS will generally look at the company’s income after expenses, not just its gross revenue.
This matters because a business may have strong sales but still show low net income after rent, payroll, cost of goods, marketing, insurance, and other expenses. For ability to pay purposes, gross revenue alone is usually not enough.
For example, if the offered wage is $75,000 and the company’s tax return shows net income of $100,000, that may support ability to pay. But if the company’s net income is only $20,000, that may not be enough by itself.
That is why the tax return should be reviewed before moving too far into the process. The question is not just whether the business is active or has customers. The question is whether the financial documents can support the offered wage.
Method 3: Using Net Current Assets to Show Ability to Pay
If the employer cannot clearly show ability to pay through actual wages paid or net income, another possible method is to look at net current assets.
Net current assets are generally calculated by subtracting current liabilities from current assets. Current assets may include cash, accounts receivable, and other assets that can usually be converted into cash within one year. Current liabilities generally include debts and obligations due within one year.
In simple terms, this method asks whether the company has enough short-term financial strength to cover the offered wage.
For example, if the offered wage is $70,000, and the company has $200,000 in current assets and $100,000 in current liabilities, the company’s net current assets would be $100,000. That may help show ability to pay because the net current assets are higher than the offered wage.
This analysis also usually comes from the company’s tax return, especially the balance sheet section if one is included. However, not every small business tax return includes a full balance sheet. Because of that, this part of the review can be more technical.
Planning Ahead for “Ability to Pay” Challenges
Even if the employer appears to have no ability to pay issue at the beginning of the PERM process, the company’s financial condition may change before the case reaches the I-140 stage.
If that happens, the employer may still be able to show ability to pay through actual wages paid, net income, or net current assets. However, the company’s financial documents should be reviewed carefully before the I-140 petition is filed.
By checking the offered wage, the employee’s current pay, and the company’s tax returns or other financial documents early, the employer may be able to avoid serious problems later in the process.
