LEGAL ALERT – Changes to Outsourcing.
On April 14, 2021, the Mexican Congress approved a bill that amends the rules regarding the outsourcing of personnel and employee profit-sharing. The amendment adds and amends several provisions and laws.
The amendment amends six different laws: the Federal Labor Law, the Social Security Law, the Housing Fund Law, the Federal Tax Code, the Federal Income Tax Law, and the Federal Value Added Tax Law.
- Prohibits the subcontracting of personnel.
- Allows subcontracting specialized services or execution of specialized work, provided that the service provider complies with rules to be published and secures a registry before the Labor and Employment Department (“Labor Department”).
- Allows subcontracting of specialized services between entities that are part of the corporate group, also known as insourcing, provided that the service provider is registered with the Labor Department, and the applicable requirements and conditions.
- Allows subcontracting of services of recruitment, selection, training, and professional development.
- Limits or caps the amount that an employee will receive as profit sharing.
- Conditions employer substitutions to the transfer of assets of the employer that is transferring the employees.
- Establishes various fines and penalties.
- Eliminates the fiscal effects (e.g. tax deduction, value-added tax credit) of the tax invoices related to subcontracting of personnel services.
- Considers the simulation strategies for the subcontracting of personnel as organized crime.
- Fines ranging from 50 to 5000 times the UMAs (“Unidad de Medida y Actualización” or “Unit of Measurement and Update”), MX$89.22 per UMA for 2021), to those employers that refuse or obstruct subcontracting of personnel inspections and surveillance.
- Fines ranging from 2,000 to 50,000 UMAs, to those who, in violation of the above, use or gain benefits through subcontracting of personnel, and to the companies that provide specialized services and operate without the corresponding registration.
- Elimination of tax deduction and any tax credit for expenses related to the subcontracting or for those services that personnel is provided.
- Using deceptive practices to provide specialized services or the execution of specialized works, or the subcontracting of personnel would result in tax fraud.
DEADLINES TO CONSIDER:
- Once the Mexican Senate approves the bill, it will be sent to the President for his signature and publication, which is expected to be May 1, 2021.
- Rules to be issued: 30 days. The Labor Department has to publish the rules for securing the registry for specialized services, including insourcing companies.
- Registry: 3 months. As of the date in which the rules for the registry are published, the specialized services and insourcing companies have to obtain the registry before the Labor Department.
- Immediately within the following 3 months as of the amendment is published in the Federal Gazette, to carry out the employer substitution without having to transfer the assets of the company that will transfer the employees.
WHAT DO WE HAVE TO REVIEW IN OUR OPERATIONS?
- For those companies of the same corporate group, review the operations between them to determine if it is necessary to carry out a restructuring of the corporate operation and organization.
- Analyze and review outsourcing agreements to determine the actions that need to be taken.
- Analyze the insourcing services to confirm if they comply with the requirements and conditions and implement the corresponding registry.
- Analyze the contracts for specialized services or works and ensure they do not consist of activities related to their corporate purpose or economic activity.
- Surveillance and ensure that the specialized services and works companies, comply with the registry, and meet the new requirements that the Labor Department will issue. Also, they must comply with the new labor, social security, and tax obligations.
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