The new Outsourcing Reform and its effects on Mexico and the rest of the world
By Prof Sergio Guerrero Rosas, Guerrero y Santana, S.C.
In 2021, the Mexican government enacted labour and tax law reforms that prohibit the outsourcing of workers. The new Outsourcing Reform was published in the Diario Oficial de la Federación (Federal Offcial Gazette) on 23 April 2021.
This reform amends and derogates provisions such as, among others, the Ley Federal del trabajo (Federal Labour Law), the Ley del Seguro Social (Social Security Law), the Código Fiscal de la Federación (Federal Tax Code), the Ley del Impuesto sobre la Renta (Income Tax Law), and the Ley del Impuesto al Valor Agregado (Value-Added Tax Law).
Originally this outsourcing reform was to go into effect on 01 August 2021, however, with approval by the United Commissions of Labour and Social Welfare and Finance and Public Credit of the Chamber of Deputies, the new legislation went into effect on 01 September 2021.
Reasons for the reform
Over the years, companies in Mexico have abused the term “outsourcing” by not providing all the benefits that workers are entitled to by law. This has enabled employers to evade certain labour and tax obligations, mainly to the detriment of workers as they are registered by the IMSS (Mexican Social Security Institute) with lower salaries, which affects their pensions, housing credits, maternity or disability leave, and lowers employee compensation amounts in cases of liquidation. For those companies that do operate properly under this scheme, the non-compliance of others has created unfair competition.
In order to limit the contracting of specialised services or the execution of specialised works, and to prohibit the subcontracting of personnel, the Mexican government, made amendments to current labour and tax legislation.
Implications of the reform
The outsourcing of personnel is prohibited when an individual or legal entity provides or makes available its own workers for the benefit of another.
Individuals or legal entities that provide specialised services or perform specialised works and that wish to provide such services or specialised works to a third party (contractor) and for this purpose make their own workers available to the contractor, must be registered with the Secretaría del Trabajo y Previsión Social (STPS) (Ministry of Labour and Social Welfare).
The following is regulated and allowed:
- Employment agencies or intermediaries.
- Complementary or shared services rendered between companies of the same group, as long as they are not part of the corporate purpose or the main economic activity of the company that hires them.
- Subcontracting of specialised services or specialised works, which are not part of the corporate purpose, nor of the main activity of the beneficiary thereof.
Employee profit sharing
Payment of ten percent of the profits or accruable income obtained by the company in the immediately preceding fiscal year 2020, with a limit of up to three months of the worker’s salary.
There will be no deduction or crediting in subcontracting when:
- The workers were originally the beneficiary’s employees and have been transferred;
- There is joint and several liability for the contributions made by the employees (ISR, IMSS and INFONAVIT).
It is considered a qualified crime to use subcontracting schemes or to simulate specialised subcontracting.
Prof Sergio Guerrero RosasGGI member firm
Guerrero y Santana, S.C. Advisory, Auditing & Accounting
Corporate Finance, Law Firm Services, Tax
Tijuana, Baja California, Mexico
T: +52 333 120 05 38
Guerrero y Santana, S.C. provides its clients with a wide range of tax, legal, and consulting services. The firm has been helping clients – from individuals and small local businesses to major corporations and multinationals – to achieve their smallest aims and grandest ambitions. They are committed to providing specialised, personalised services to all those seeking reliable and up-to-date tax, legal, and business support.
Prof Sergio Guerrero Rosas, Managing Director at Guerrero y Santana, has over 25 years’ experience advising companies from SMEs to multinationals, as well as individuals, on tax and estate planning. He is also Global Vice Chairperson of the Trust and Estate Planning Practice Group and Latin American Chairperson of the GGI International Taxation Practice Group (ITPG).
Published: Employment Law Newsletter, No.11, Autumn 2021 l Photo: Marcos - stock.adobe.com