A cap on the payment of profits is agreed upon and the reform on outsourcing is unjammed

Note published on March 22 in El Economista, Empresas [Companies] Section by María del Pilar Martínez.
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Note published on March 22 in Factor Capital Humano, Leyes y Gobierno [Laws and Government] section by María del Pilar Martínez.
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The average payment will rise to 57 days, equivalent to an average of 18,557 pesos, which will imply a substantial improvement for sectors such as construction and radio and television, which now receive a PTU of between three and five days of salary.

The dialogue tables between the federal government and the private sector concluded last Friday – after three months – with the agreement to limit Employee Participation in Company Profits (PTU) to three months’ salary, for which they will propose the amendment of article 127 of the Federal Labor Law by the addition of section VIII.

This agreement could aid in the advance of the discussion of the bill for the reform on subcontracting matters sent by the Federal Executive Power to the House of Representatives on November 12, 2020 and which is sought to be approved before the end of the current period of sessions.

According to the proposal presented by the Secretary of Labor and Social Welfare (STPS), Luisa María Alcalde Luján, to the business representatives “we seek to benefit all paid workers and that companies hire them directly without using the mode of personnel subcontracting”.

In such a way that the amendment to the LFT, in Article 127, Section VIII, would establish that “the amount of participation in profit sharing will have, as an upper limit, three months of the worker’s salary or the average of the participation received in the last three years; the amount that is most favorable to the worker will apply.”

The analyses presented by the agency indicate that with the proposal, workers will receive an average of 57 days of salary, which approximately represents an average of 18,557 pesos; “it is 2.59 times more than what they currently receive.”

At the meeting, business representatives were told that “the proposal will facilitate the application of the law and give equal treatment to all sectors … and the ones in which there would be a greater benefit are those who paid PTU well below the national average, and discretionality is avoided therein.”

Alcalde Luján informed that there are subsectors in which the PTU paid is low, even lower that the national average which is of 22 days (equivalent to 2.8% of profits); and this should be higher; for example, in specialized construction jobs, five days are paid; that is, 796 pesos; with the proposal, they would have to pay 83 and the amount would be of 13,526 pesos.

Around six million workers receive profits in the country, which represents 56,121 million pesos, the average for each worker being 7,301 pesos. With the proposal of capping at 90 days, the amount to be distributed on the same current basis of workers would rise to 157,050 pesos, equivalent to 7.7% of the average profits of companies.

The bill for the reform on outsourcing presented last November by President López Obrador proposes the prohibition of subcontracting, limiting it solely to activities that are not core activities of the company in question, in addition to the creation of a public registry of companies that provide this type of services and the creation of the modality of employment agencies which may only participate in the process for the recruitment of personnel.

The STPS provides clarity on the rules

In this regard, Óscar de la Vega, partner at the D&M Abogados Firm, stated that “this is a practical solution that gives a respite to the country’s competitiveness; however, we will have to analyze the legal basis, since the Special Commission has the power to determine the PTU, the definition of the percentage that is set every 10 years and the Sixth Commission set it at 10% (of the company’s profits), which is on the distributable profit in accordance with Section IX of Article 123.”

Germán de la Garza de Vecchi, leading partner of Labor Services at Deloitte México, said that “it is clear that the Department of Labor and the House of Representatives will seek to go forward with the reform on subcontracting; I believe that that to the extent that signs are given as to what its contents will be, it will help to dispel the uncertainty that has been generated, and this is a good thing.”

Ricardo Martínez Rojas, of the De la Vega y Martínez Firm, warned that the announced measure is excessive, as small and medium companies cannot bear a measure of this nature. “Considering three months of salary is an annual salary increase of 20%. Formal companies can no longer cover labor costs, IMSS [Mexican Social Security Institute], Infonavit [National Worker’s Housing Fund Institute], Payroll Tax, Teleworking, the prohibition on subcontracting, this will generate more unemployment in the midst of a severe crisis caused by Covid.”