Revise profit sharing, specialists suggest

Note published in El Economista, Empresas [Companies] Section by María del Pilar Martínez.
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Options to face labor costs will be needed if subcontracting is prohibited, they say.

Specialists state that having to deal with Employee Profit Sharing (PTU) in companies without losing competitiveness led organizations to search for alternatives that would allow them to cope with labor costs, “this is how insourcing was born”; therefore, the reform to subcontracting makes it essential to revise that percentage of 10% that is currently granted.

As part of the proposals that were placed on the discussion table in regard to the reform on subcontracting matters being discussed in the House of Representatives, we find capping that benefit to the workers at 30 days. However, government representation maintained that this is not the time to address this matter, but rather after the approval of the reform.

At the time, Lorenzo Roel, representative of the CCE [Business Coordinating Council], stated that “the authorities representing the federal government have acknowledged that, in order to have the effects of the reform, it is advisable to establish a cap in regard to profit sharing, a point the sector agrees with.”

In the same vein, Nadia González, representative of Index, said that “the regime of participation of the workers in the company’s profits must be reformed jointly and comprehensively, thus encouraging, once and for all, the use of subcontracting and certain insourcing schemes. To this effect, we propose to limit profits, capping them at 3 months of the base salary or, otherwise, establishing differentiated percentages between industrial sectors and branches. A service company, a maquila company is not the same as hydrocarbon company. Another option is to effectively link PTU with productivity and with the performance of companies and of workers on an individual basis.”

Oscar de la Vega, partner of the D&M Abogados Firm, explained that, given that competitiveness in the country will be affected due to the change in the subcontracting reform, the National Commission on PTU must conduct a serious analysis on the 10% that companies must allocate for the payment of profit sharing to the workers, this percentage has not changed since 1986 and we are in a completely different country.

“Labor costs, 35% of income tax plus 2% in dividends among them, and now we add this 10% in a pyramidal manner, you are talking of a cost of doing business in the country that reaches about 47% for companies which, compared to that of the United states, which is of 20%, makes us lose our competitiveness”, he said.

Therefore, this is why many companies have resorted to outsourcing or subcontracting modes, “very particularly under schemes of service companies within the same group, insourcing, or by third parties, outsourcing, in order to partially lessen the effects of profit sharing and reducing their costs in some of the activities they perform in order to continue being competitive, ensuring their progress and viability.”

He explained that the percentage is not in line with the current situation, “this 10% is extremely high, the Sixth National Commission on PTU should have adjusted this percentage to the current reality, and now we will see how companies have to reinvent themselves.”