DHS Finalizes Wage-Based H-1B Lottery System for FY 2027: What Employers Need to Know

The Department of Homeland Security (DHS) has finalized a major change to the H-1B cap selection process, replacing the long-standing random lottery with a wage-level-based weighted system. This new approach prioritizes higher-paid positions and will take effect in time for the FY 2027 H-1B cap season, expected to begin in March 2026.

What’s Changing?

Under the new rule, candidates will no longer have equal odds in the lottery. Instead, entries will be weighted based on the Department of Labor’s four-tier prevailing wage system:

• Level 4 (highest wage): 4 entries
• Level 3: 3 entries
• Level 2: 2 entries
• Level 1 (entry-level): 1 entry

Under this change, employers participating in the H-1B cap registration process will be required to identify the Department of Labor (DOL) prevailing wage level that corresponds to the salary they intend to offer each registered beneficiary.

Employers will be required to determine the highest Occupational Employment and Wage Statistics (OEWS) wage level that the offered salary meets or exceeds for the applicable Standard Occupational Classification (SOC) code in the area of intended employment. USCIS will require documentation at the petition stage to confirm the wage level reported. Misrepresentation or reducing wages after registration could result in denial or revocation.

Here, The OEWS wage level identified in the H-1B cap registration is separate from—and does not determine—the wage level ultimately used on the Labor Condition Application (LCA) for a selected petition. In other words, for cap registration purposes, the wage level is tied to the salary the employer intends to offer the beneficiary. By contrast, the wage level used on the LCA is driven primarily by the position’s minimum education, experience, and skill requirements, along with other factors set out in Department of Labor prevailing wage guidance. The new regulatory framework clearly favors higher-paid H-1B cap beneficiaries, reflecting a broader policy emphasis on wage-based selection.

Why This Matters

This regulation significantly changes the dynamics of the H-1B lottery:

• Higher wages - better odds: Employers offering competitive salaries gain an advantage.
• Impact on entry-level roles: Level 1 candidates face lower chances of selection.
• Strategic salary adjustments: Some employers may raise wages to improve selection odds.

Key Compliance Points

• Multiple Worksites: Use the lowest wage level among all intended locations.
• Duplicate Registrations: If multiple employers register the same candidate, the lowest wage level applies.
• Registration vs. LCA Wage Level: The wage level for registration is based on the offered salary, not the LCA requirements.

The $100,000 Fee Still Looms

This rule comes alongside the previously announced $100,000 fee for certain H-1B petitions filed for consular processing or those ineligible for a change or extension of status. While most change-of-status and extension petitions are exempt, liability can vary based on the beneficiary’s circumstances. Employers should assess potential exposure early to avoid unexpected costs.

What Employers Should Do Now

• Start Early: Analyze roles, salaries, and work locations well before registration opens.
• Work with Counsel: Ensure wage levels are correctly determined and documented.
• Budget for Costs: Factor in possible salary adjustments and fee liabilities.

Looking Ahead

The rule is scheduled to take effect 60 days after publication, becoming effective February 27, 2026, but legal challenges could arise. If implemented as planned, USCIS will issue detailed instructions for the new registration process. This system will apply starting with the FY 2027 H-1B cap season in March 2026. Employers who prepare now will be best positioned to navigate these changes and maintain access to global talent.