Initiative on Outsourcing Reform: What does it mean for employers in Mexico?
On November 12, 2020, the President of Mexico, Mr. Andrés Manuel López Obrador, submitted before the Congress an initiative on Outsourcing Reform, which is seeking to protect workers by eliminating Outsourced Services or Subcontracting.
To learn about the scope of this initiative, we would like to share the following points:
- The initiative expressly prohibits the subcontracting of personnel, so that companies located in national territory could not continue with this hiring scheme.
- The initiative is seeking to regulate the contracting of services and specialized works, in order to avoid simulated practices of these special services and works.
- Service and specialized works providers must request and obtain the Ministry of Labor and Social Welfare (STPS) authorization, which accredits them with this special degree. Such permits must be renewed every three years.
- Quarterly notices must be submitted to the STPS detailing the type of contracts entered into with other companies.
What happens if once the reform is passed, I continue to maintain the subcontracting regime?
- The Mexican government will apply fines, equivalent to 2,000 to 50,000 times the UMA (Unidad de Medida y Actual), which calculation, expressed in Mexican pesos, may account for $173,760.00 (one hundred and seventy three thousand seven hundred and sixty pesos 00/100 M.N.) to $4,327,500.00 (Four million three hundred and twenty seven thousand five hundred pesos 00/100 M.N.).
- The use of simulation schemes for services rendering and/or execution of specialized works will be considered as a crime of qualified tax fraud.
The outsourcing reform initiative is to be discussed and most likely approved by the Federal Congress in the next period of sessions, which begins on February 1, 2021.
What can I do if the reform is passed and becomes a Law? What will be my duties?
- Migration of outsourced workers to the parent company.
- Monitoring full compliance of labor- employer contributions.
- Evaluate if currently outsourced services are justified due to their specialty.
- Verify if outsourced companies rely on sufficient resources of their own to comply with their employer-employee obligations.
- Confirm that my trading activities concur with my corporate purpose and check the trading practices of the companies with which I have a relationship.
We hope that this information will be useful to you and for any further questions or comments, please do not hesitate in contacting us. Here, you can find an overview of our legal consulting services.
