The debate on the reform on outsourcing is reopened; companies will have a temporary respite

Note published on July 22 in El Economista, Capital Humano [Human Capital] Section by Gerardo Hernández.
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Note published on July 22 in El Mexicano, País [Country] Section by the Editorial Department.
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Note published on July 22 in CEEF, Noticias [News] Section, by the Editorial Department.
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The Federal Congress will have the last word on the extension of the transition deadlines for the reform on subcontracting; legislators must now decide whether the extension will be until September or until January. In both cases, companies that use these schemes will have a temporary respite to comply with the new rules.

This week, senators were the ones who officially opened the debate around the application of the reform on subcontracting promulgated on April 23 of this year. Thus, and if the proposed changes are approved, the initial deadlines provided initially for the transfer of personnel, employer substitution, changes before the Mexican Social Security Institute (IMSS), subscription in the Registry of Specialized Services or Specialized Works (Repse) and the new tax regulations will be extended.

This Wednesday, the Permanent Commission of the Federal Congress received two reform bills to extend the terms for all of these procedures. Senator Ricardo Monreal Ávila (Morena) presented the proposal for the transition period to end on September 1 of this year; senator  Kenia López Rabadán (PAN), for her part, for it to be extended until January 1, 2022. The commissions on Treasury and Labor of the House of Representatives will be responsible for ruling in regard to the proposals.

When the bill by senator Monreal Ávila became official, the head of the Department of Labor and Social Welfare (STPS), Luisa María Alcalde, acknowledged in her social media that the approval of this bill could extend the term of regularization for companies. “To this date, one million 600,000 workers have left the subcontracting schemes and their rights have been acknowledged by their employers”, she added. This is equivalent to one third of the universe of 4.6 million people that are estimated to have been working on this modality before the reform.

Ricardo Monreal added that, after listening to several of the parties involved, he believed that it was appropriate to propose an extension of the deadlines of the reform in order to allow a better execution of the new rules.

For her part, Kenia López stated that an extension of more than one month is required for companies to be able to comply with the provisions for the transition, in addition to an improved participation by the IMSS, the National Worker’s Housing Fund Institute (Infonavit) and the Tax Administration Service (SAT), in order to prevent the subscription into the Repse, which is administered by the STPS, from becoming a “Bottleneck”.

In the original form of the reform in force, the deadline for companies with outsourcing or insourcing schemes to transfer personnel into their central payrolls is this Saturday.  That is also the deadline for businesses in the transition phase to request the cancellation of their employer registers by class from the IMSS and the assignment of a new one.

Meanwhile, starting on August 1, companies will no longer be able to deduct or accredit payments for the concept of supplied personnel. Additionally, the simulation of subcontracting of specialized services will be considered as a crime equal to a tax fraud.

Employers support the extension

The business sector requested a longer transition time since before the approval of the reform. In this sense, José Medina Mora, president of the Employers’ Confederation of the Mexican Republic (Coparmex), requested that this new opportunity be used to thoroughly analyze the term granted to companies for their regularization. Even though he acknowledged that any extension is good, the best scenario is the one that considers January.

“We would like for this discussion to be made good use of, it is an acknowledgment that in fact, the term that had been established is insufficient and that it has to be extended. In this discussion, we hope that the Legislative power addresses the deeper issue; that is, that this extension of the term for registration be made to January 1, 2022, just as it has been established for the public sector”, he said in an interview.

Medina Mora pointed out that, as time has progressed for companies to regularize themselves, some complications that make it difficult for businesses to be regularized within the initially established terms have been detected.

“The system has not been sufficiently agile and there are requirements made by different agencies, this is why we insist on the need for the term to be extended. Of course, we agree that the reform on subcontracting be applied as it was approved; we simply pointed out, since the beginning, that if anything was needed it was that the deadlines for registration be extended”, he said.

In this manner, president of Coparmex ruled out that the business sector would take advantage of this discussion to request amendments to the regulatory framework and said that they will limit their request only to the extension of the allowed term. “We believe that the law, as approved, is right and it is only a matter of more time being required.”

Meanwhile, the Business Coordinating Council (CCE), headed by Carlos Salazar Lomelín, considered that the bills for the extension of the transition period of the reform for the private sector and having more time for adapting to the new rules are positive moves, just as it has been established for the prohibition of labor subcontracting for government agencies, for which the deadline for implementation is January 1, 2022.

“From the CEE we reiterate our willingness for a dialogue that permits finding the longest possible term in benefit of workers and that ensures the efficacy of the law”, stated the business agency in its Twitter account.

Necessary time extension

Specialists consider that the extension of the transition period is necessary, as the reform on subcontracting entails significant internal restructuring within companies, in addition to the complications and confusion that have arisen in the months of regularization. Nonetheless, they believe that extending the term until September, as proposed by Morena in the Senate, would provide too little time.

“It is a small respite, but the rhythm of work to become regularized is the same because we are reorganizing and restructuring foreign companies that operate in Mexico”, Carlos Ferrán, directing partner of the Ferrán Martínez Abogados Firm, pointed out.

He felt that the regularization of companies has involved a period of sensibilization, which has not been easy, because the modifications are equivalent to “major surgery”.

For his part, Óscar de la Vega, partner of the D&M Abogados Firm, said that a 30-day extension is positive for the transition, but that it is insufficient. “It is a palliative in the process we are immersed in because these are immensely complex corporate restructures for the companies.

From the point of view of the specialist, the extension is a response to the number of registries that have been received. However, even with the extension, he added, it is important to have a greater clarity in regard to the new rules in order to avoid confusion.

Both lawyers considered that subscription into the Repse has presented several complications for companies, but they acknowledged the good disposition of the authorities in clarifying questions.

The reform on subcontracting amended seven pieces of legislation, thus closing the door on outsourcing based on the supply of personnel and regulated the provision of specialized services under new criteria.

For his part, Alfonso Bouzas, coordinator of the Citizen Observatory of the Labor Reform, believes that the extension was not necessary and that it could even be a time used for the design of new mechanisms for evasion.

“This reform should have entered into force on the next day of its publication and not be working under the idea of a little more time and a little more additional time; this blurs the importance of the reform. I do not agree with the manner in which it is being extended because this is ultimately damaging to workers”, he said.