Companies are forced to redesign their payroll

Note published on April 7 in Reforma, Negocios [Business] Section by Verónica Gascón.
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Note published on April 7 in El Norte, Negocios [Business] Section by Verónica Gascón.
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Note published on April 7 in Mural, Negocios [Business] Section by Verónica Gascón.
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The Agreement According to the agreement reached between businessmen and the Government, the bill to amend the Federal Labor Law:
§ Eliminates Articles 15A and 15D that allow subcontracting (outsourcing) in Mexico.

§ Allows subcontracting of specialized activities as long as the company providing the service is registered in a public registry (Article 13).

§ Allows subcontracting of shared activities among companies within a group, as long as they are not the main activity.

§ Establishes a cap on profit sharing. Whichever is highest between 3 months of salary or the average of profit sharing of the last three years

(Article 127).






Some sectors will increase profit sharing because they will include all workers in their payroll.





*Without oil and gas


Source: STPS [Department of Labor and Social Welfare]

Days paid in profit sharing

Mining *                                                       93

Manufacture of Machinery and equipment                                                 60

Food Industry                                                      52

Manufacture of computer and measurement equipment                      27

Specialized construction works             5

Radio and Television                                                   3



Companies will have to conduct internal reengineering to eliminate all subcontracting schemes and keep subcontracting only in specialized services or works that are not part of the company’s main activity.

External subcontracting, known as outsourcing, and the internal scheme, or insourcing, which includes the creation of companies within the same group for the parallel administration of the payroll will be eliminated.

Specialists point out that insourcing is one of the most widespread practices and, in order for companies to transfer staff to the main payroll, they will have to conduct an employer substitution procedure before the IMSS.

Employer substitution is an agreement between employers or corporate names to transfer workers, maintaining their rights.

Once the reform on outsourcing matters comes into force, companies will have three months to migrate workers under the concept of employer substitution, according to the draft bill for the amendment of the Federal Labor Law that will be discussed by Representatives.

Ricardo Martínez, a lawyer at the De la Vega & Martínez Law Firm, explained that under the insourcing scheme, which is in operation in many of the large companies, one or more company names were created within the same group in order to avoid the high cost of employee profit sharing.

The reform seeks that the workers of those companies are absorbed by the main company and that they become part of its payroll.

The destination company must acknowledge their labor rights, including seniority and occupational hazards.

“In my opinion, this term is too short, because it is not only necessary to transfer the workers, but a very complete analysis of the corporate purposes of the contracting party and the contractor must be conducted”, said Martínez.

Jorge Sales, a labor lawyer at Sales Boyoli, stated that employers will have to conduct an integral reconfiguration of compensation plans to compensate for the impact that profit sharing will have.

“Employers will have to reconfigure benefits, they will have to find how to compensate for the payment of profit sharing, a payment they didn’t make before. This could be by using resources from other social welfare benefits, such as meals, food aid, or bonuses.”

For the experts, these reforms will constitute a challenge for small and medium-sized enterprises, because they will now have to absorb subcontracted personnel and include them in profit sharing.

“The first thing that will be required is that there are profits, this will be difficult with the burdens of IMSS [Mexican Social Security Institute], Infonavit [National Workers’ Housing Fund Institute] and teleworking , all of these burdens that are imposed on the employer, and now the need for it to register as a contractor before the IMSS, this is a bureaucracy that generates more costs”, Martínez said.

For Germán de la Garza, lead partner of labor services at Deloitte, the situation of the smallest companies, who are unable to share profits, is being neglected.

“Small businesses with the obligation of paying 10 percent of profit sharing, plus other operating, social security, taxes and other expenses are not being taken into account; in many cases it could result in their seeking ways of evading responsibility or they could even close their doors”, he stated.

He said that these companies could resent the effects of the reform, because their profit margin would be at risk.