Note published on April 26 in Factor Capital Humano Leyes y Gobierno [Laws and Government] Section by Gerardo Hernández.
Read original source
The route toward the disappearance of personnel subcontracting started this week; it contemplates a differentiated transition scheme of between one and eight months, depending on the different aspects of the reform
The countdown for the deadlines for the implementation of the reform on outsourcing, regulating subcontracting of specialized services and prohibiting third-party hiring schemes based on the supply of personnel, started on the last week of April.
Personnel subcontracting, understood as the supply of workers from one company for the benefit of another, is an activity that is considered to be illegal and with administrative and criminal repercussions as of April 24. In this sense, no company can sign any new contracts under this hiring scheme.
The new regime through which eight pieces of legislation were amended established different transition periods among them for the regularization of companies that currently have a personnel supply scheme.
With the entry into force of the subcontracting reform, companies must comply with new provisions on labor, tax and social security matters. The federal government will not be exempt from the new outsourcing regime and it is also part of the countdown for the implementation of the legal framework in face of the prohibition of third-party personnel hiring in public entities.
These are the transition events and the timelines to carry them out:
» May 2020 [sic.]
- The Department of Labor and Social Welfare (STPS) must put the registry of specialized services subcontracting companies in operation, defining the general provisions for this procedure (deadline, May 24)
» June 2020 [sic.]
- The National Workers’ Housing Fund Institute (Infonavit) will issue the rules to be followed by subcontracting companies for the presentation of quadrimestral reports on the contracts entered into and their workers’ salaries, among other information; these reports will be submitted in January, May and September of each year (deadline, June 23).
- » July 2020 [sic.]
- Companies with labor subcontracting schemes, either through insourcing or personnel transfer mechanisms, must transfer the workers of the other company to their payroll, without the condition of transferring assets, but recognizing the labor rights of the collaborators, such as seniority (deadline, July 23).
- Specialized services and works subcontracting companies must start presenting, before the Mexican Social Security Institute (IMSS), the reports on their contracts and the conditions of their personnel, which must be shared every four months in January, May and September of each year (as of July 23).
- Companies in a transition period must request the cancellation of their employer registers by class from the IMSS and the assignment of a new one (deadline, July 23).
» August 2020 [sic.]
- Deadline for specialized services and works companies to obtain registration before the STPS to operate under the new rules. Businesses have 90 calendar days to complete the procedure from the date of publication of the guidelines by the agency (deadline, August 22).
Additionally, the tax provisions of the reform enter into force as of August 1, this includes:
- Payments made for the supply of personnel lose tax deduction or crediting effects.
- Companies subcontracting a specialized service are jointly liable toward the contributors (workers) through whom the service is provided.
- Attempting to deduct an invoice for the concept of personnel subcontracting will be an aggravating factor for fines.
- Budget transferred for the provision of personnel will not be creditable.
- The simulation of subcontracting of specialized services will constitute a tax fraud crime.
- The contracting company must verify that the payment of the consideration for the received service is made and it must obtain from the contractor company a copy of the receipts for tax purposes for the concept of payment of salaries to the workers with whom the service was provided.
- If the subcontractor company fails to provide this information to the contracting company, this will be considered as infractions linked to the obligation of payment of contributions; of filing of returns, applications, documentation, notices, information or issuance of certificates, and of entry of information through the Internet page of the Tax Administration Service.
» January 2022
- The federal government must integrate into its payroll all workers that it has subcontracted within the authorized expenditure for the fiscal year (as of January 1).
New rules of the game
According to the new legal framework, subcontracting of specialized services and works is allowed, as long as it is not part of the corporate purpose and the main economic activity of the company that is subcontracting a service.
To ground it on reality, if the business object and the main activity of a business is the sale of hamburgers, it cannot subcontract the people who sell the hamburgers, but it can hire a company to provide specialized cleaning services for the restaurant with its workers or accounting, to mention a few cases.
“The executive order has the objective of strengthening the regulatory framework for labor subcontracting through the application of new obligations and requirements of the individuals subject to the obligations”, the Creel Abogados Firm points out
A change that should not be lost sight of is that companies that subcontract services will become “jointly liable” with the service provider company in the breach of labor obligations toward their workers, warns the D&M Abogados Law Firm.
The amendments made to the outsourcing regime included the obligation for specialized service providers to register in a public registry operated by the Department of Labor and Social Welfare, an agency before which they must choose the activity that they may offer on the market.
Alejandro Salafranca, head of the Unit for Dignity in Labor of the STPS insisted that the registry will operate under good faith, where the subcontractor company will provide information to the agency and the agency will consider the documentation to be truthful. However, he pointed out, inspections will be random or by denouncement and the registry will not be a mechanism to exempt companies in which irregularities are detected from supervision visits.
The Ferrán Martínez Abogados Firm recommended “starting with the implementation of the measures aimed at regulating companies’ hiring methods, in order to avoid violations of the reformed regulatory bodies and be subject to extremely burdensome penalizations.”
The new regulatory framework contemplates fines for non-compliance, the highest one can be of up to 4 million 481,000 pesos for whomever benefits from personnel subcontracting (up to 50,000 UMAs [Units of Measure and Update]) and up to three years of jail for the crime of tax fraud.