The law on outsourcing will benefit workers in the acquisition of a home

Note published on September 13 in Milenio, Especiales [Special] Section by Franco Piña.
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Every deadline will arrive. The reform on outsourcing entered into force on September 1, which means that companies must have already incorporated into their payroll employees that they used to subcontract. According to data by of the Mexican Social Security Institute (IMSS), 2.7 million workers have been migrated from subcontracting schemes to the payroll of their true employer.

Óscar de la Vega,  Labor Law lawyer  says that this reform is very extensive, as it covers labor, union, tax, benefits, housing and social security aspects.

In regard to workers, the litigant adds, it is beneficial. For one part, it provides legal certainty to them, and it guarantees their right to social security. It also ensures profit sharing, the benefits required by law, the acknowledgment of their seniority on the job and, above all, the opportunity to have the payment of IMSS dues made based on their real salary. “This helps them to have access to a housing credit and also to save more in their main Afore [Retirement Funds Administrator] account by the time they retire”, De la Vega states.

170,390 mortgage loans have been placed in Mexico in the first semester of 2021; out of these, the Infonavit [National Worker’s Housing Fund Institute] had a 54% market share, with 1,558 million pesos (mdp) in mortgages, followed by banks and the Fovissste [Housing Fund of the Institute of Social Security and Services for Government Workers] with shares of 36 and 10%, respectively.

According to the IMSS [Mexican Social Security Institute], with the regularization of people working in outsourcing companies, employees received a salary increase of between 5 and 12% compared to their prior salaries; just as an example, a worker that had a base salary used for the payment of social security dues of 475 pesos under the third-party hiring scheme, will now have a base salary of between 498 and 532 pesos.

This increase is due mainly to the fact that employers regularized their workers and stopped practices such as the sub-valuation of income, that is, when they register their workers at the IMSS with a lower income than the one they actually receive, a method through which over 3,000 mdp in employer contributions were evaded each year, according to calculations made by the National Worker’s Housing Fund Institute.

Higher income, certainty of having a home

The housing market is closely linked to formal employment. Employees depend on their fixed formal income for the payment of their dues in the Infonavit.  “The base salary and the time during which they have paid dues have an influence on the maximum amount of credit granted by the institute and, therefore, the manner in which people are employed has a direct influence on the demand for loans, the price of the housing that is bought and the term”, said Carlos Martínez, director of the Infonavit, during a conference.

For his part, Óscar Vela, General sub-director of Financial Planning and Control at the Infonavit states that “this reform is designed to ensure that workers registered at a company with an Employer Registration Number (NRP) before the authorities will effectively receive the full benefits granted by law in accordance with their salary and one of these benefits is access to mortgage loans.

Additionally, having a higher salary, employer contributions to the housing subaccount will be larger, which will have an effect on the saved amount when requesting a mortgage loan. The worker will have more money available to buy, build or make improvements to his home, said the Infonavit sub-director.

“A person who receives deposits in his housing subaccount in line with the true base salary used for the payment of dues registered by the company will obtain a mortgage loan more quickly; the speed with which he will be able to use it as a down-payment is faster.”, says Martínez during a conference.

Between May and August, the Infonavit received savings from workers in the amount of 200 mdp, involving close to 250,000 people, mainly from services, construction and commerce companies, who now have the possibility of buying a house.

“This is thanks to the companies who made contact and regularized their situation; the resource is now part of the housing subaccount”, says the sub-director of the Infonavit. Additionally, the institute ensures that workers that were part of subcontracting or outsourcing schemes will keep the credit points that they had prior to the migration of the companies in which they work under the specialized services regime.

“The Infonavit established special criteria to allow their keeping the points that they had prior to the company migration.”, says Angélica González, IMSS-Infonavit coordinator at the Tec de Monterrey, after many of these companies carried out adaptations to employee payrolls and registered them at the NRP to comply with the tax obligations of the reform to outsourcing.

However, under the special criteria, workers will keep their points in order to be eligible for a mortgage loan or other type of loan, “as long as the NRP to which they were assigned is associated to the business group that they work for.”, explains the specialist from the Tec de Monterrey.

For this year, the National Chamber of the Housing Development and Promotion Industry (Canadevi) estimates that up to 250,000 new homes will be built, a number that is between 5 and 7% higher in comparison with last year.

Gonzalo Méndez, president of the Canadevi, notes that the placement of new housing could benefit from the incorporation of thousands of workers to financing options such as the Infonavit, which could mitigate the impact of the reform. “There will be 4 million new workers with social security, many of them with a better salary, this will increase the number of employees who will use their credit”, he says.

According to a study among 67,000 people, conducted by Perfilan, a company that specializes in real estate consulting, at the closing of the first semester of this year, the preference for paying for housing using mortgage loans taken from banks had a dropped by 11.6%, in average, while the Infonavit gained ground in mid-range and residential housing.

“Interest rates are descending; Bank loans are taking a risk by lowering them and this should be reflected in an increase on preference. In the Infonavit, we see that there are several credit restructures that have a positive impact for the client.”, says Eduardo Aranda, director of Innovation at Perfilan.

Some delays

From May 26, when company registration at the Regime for the Provision of Specialized Services (REPSE), to August 31, when the term ended, the Infonavit reviewed a total of 77,592 Federal Taxpayer Registries (RFCs). However, of  the total number of companies who sought a favorable opinion from the Institute, only 51,192 obtained it (74%) and were included in the REPSE, while the rest, 26,400 companies, which have debts with the institute are still in the regularization process, says Vela Treviño, of the Infonavit.

Francisco Solares Alemán, president of the Mexican Chamber of the Construction Industry (CMIC), points out that the labor reform of third-party hiring is positive but, nevertheless, he notes that there is still ambiguity in subcontracting among foundations, finishes, coatings, plumbing, urbanization, electricity and other companies that share a corporate purpose and which cannot make deductions before the SAT [Tax Administration Service] in light of the reform. Therefore, it is planned to take additional measures to be implemented in the more than 9,000 companies that are part of the CMIC.

In this sense, Héctor Márquez Pitol, president of the Mexican Association of Human Capital Companies (AMECH), says that the law also has a disadvantage, given that not all companies have the necessary resources and infrastructure to comply with the reform and directly hire the employees that they had subcontracted. At a prior date, he had warned that this new regulation would further open the door to informality. Today, he believes that the effects of the reform will be seen in the next few months.