Cultural change in companies will be crucial for the reform on outsourcing: executives

Note published on August 30 in El Economista, Empresas [Companies] Section by María del Pilar Martínez.
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As of the first day of September no subcontracted workers must exist in the labor market. At the conclusion of the extension for companies to modify their labor schemes, now the almost five million workers who were under insourcing and outsourcing schemes must clearly know the corporate name of their employer as well as their employment contract.

While the extension allowed subcontracting companies to move on to offer the provision of specialized services, it also forced them to decrease their staff or, in some cases, to cancel agreements.

Given the above, companies, both contractors and service providers, had to face a series of modifications within a period of three months while, the government, as an employer, has until 2022 to make the changes.

In accordance with executives from companies like Adecco and Kelly Services, there will undoubtedly be an impact on employment and the challenges that will have to be faced include not only companies but the government itself.

“In my opinion, the first challenge is a change in the mentality of companies and entrepreneurs, we must understand that the rules have changed and that, even though they may not be what we want, they are what they are, and we must comply with them. Companies, both the users of the service and those of us who offer it must focus on truly working under specialized services schemes and not seek simulations”, said Francisco Martínez Domene, CEO of Adecco Group México.

He said that the second challenge is the auditing conducted by the authorities and that it will undoubtedly help in there not being companies that seek to simulate. “I am convinced that in the measure that the authority applies sanctions to those companies, both clients and suppliers who seek to continue using bad practice or simulations, the reform will be strengthened, and it will be able to bear the fruit expected of it, which is preventing tax evasion and fraud and the improvement of the labor conditions of the Mexican people.

Repse, between chaos and the only way out

Gabriel Aparicio, director at Kelly Services México, recalled that, as of the first of September, what enters into force are all of the provisions of the laws relating to the Income Tax Law and the Added Value Tax Law and “no contracting party or contractor of services may have personnel subcontracting services.”

The executive said, in an interview, that companies that continue having a subcontracting service “must ensure that they work with a contractor that is formally registered with and authorized by the Department of Labor and Social Welfare through the Registry of Specialized Services or Specialized Works (Repse); otherwise, they will be subject to sanctions, which range from the non-deductibility of the invoices of the received service to substantial fines, depending of the magnitude of the sanction and/or be comparable to a tax evasion crime.”

Óscar de la Vega, partner at D&M Abogados, said, in the webinar “The true magnitude of the reform on subcontracting”, that at this time, of 100,000 companies that would have to be registered in the platform enabled by the STPS, only 20,000 have obtained authorization, less than 20% and it is therefore important to understand the origin, scope, decrees and provisions of the reform, as well as who has the obligation to register.

He stated that there are still many cases of uncertainty in which companies do not know whether they need to register at the Repse or not: and, on the other hand, there are companies that, have to obtain registration for each specialized activity that they perform, which has detonated the largest number of employers.

New rules around the corner

  • In order to be legal and tax deductible, all subcontracting must be for specialized services and can only be provided and invoiced by companies authorized by the Repse.
  • No contracting party and services contractor may acquire/market personnel subcontracting services.
  • Parties contracting personnel subcontracting services will have to consider the transformation, together with their suppliers, toward a relationship that provides specialized services and/or specialized works, which will represent considering a re-design of the social architecture of contracting parties and contractors. The contracting party subcontracting specialized services must be sure to work with a contractor that is formally registered with and authorized by the Department of Labor and Social Welfare.
  • Anyone contracting services without registration in the Repse will be subject to the sanctions established in the Federal Labor Law that was published on April 23, 2021 which range from the non-deductibility of the invoices of the received service to fines, depending on the magnitude of the sanction and/or be comparable to a tax evasion crime.”