50% of Mexico’s manufacturing industry operates with outsourcing

Note published in El Contribuyente, Noticias [News] Section, by Diego Coto.
Read the note in its original source

Last week, President Andrés Manuel López Obrador presented a reform to outsourcing, also known as labor subcontracting. The proposal was received by the House of Representatives and is under review in the joint commissions of Labor and Social Welfare and of Finance and Public Credit.

One of the possible problems with the reform is that it will increase labor costs for industries that rely on outsourcing, according to specialists. For example, 50% of the manufacturing industry and 40% of the automotive industry use this mode, according to the Catch Consulting Firm.

In an interview with Reforma, Rodrigo Arciniegas, director of Catch Consulting, said that the reform could increase costs for all of these industries in an instant.

These costs include:

  1. Social security.
  2. Payroll processing.
  3. The calculation of taxes.
  4. Profit sharing.

In the case of profit sharing, the elimination of insourcing could be the greatest problem. If it is eliminated, companies will have to pay 10% of their profits to the employees. In an interview with the same paper, Óscar de la Vega of the De la Vega & Martínez Rojas Firm, said that even if the measure taken is the right one, this is not the best time to implement it because of the pandemic.

Not only for the manufacturing sectors

According to data provided by the Inegi [National Institute of Statistics and Geography], 30% of the workers in financial and corporate services are contracted through outsourcing. On the other hand, in November 2019, 125 thousand out of 255 thousand of multiple banking workers were subcontracted.

Additionally, in accordance with the Economic Census of 2017, 17.9% of the country’s paid personnel works through outsourcing. Thus, the possible increase in labor costs would affect a large number of companies in the country.

With information provided by Reforma and La Jornada.