The Law on Outsourcing led companies to hire their employees directly, and employees were benefited with more benefits and salary increases.
The new Law in Outsourcing is already showing benefits for its workers, these are a few of them.
Outsourcing is a type of subcontracting, a labor scheme through which a company contracts hiring through a third party, that is, when a person works at a company but, nevertheless, signs his contract with another company which is an “intermediary”, representing economic advantages for companies and disadvantages for workers. According to information from the World Confederation of Employers (WEC) in 2019, Mexico was the fourth country in the world with the most workers hired through this outsourcing model, with almost 4.7 million employees under this scheme. Likewise, this modality presented some gaps in relation to legal interest, as companies could evade some tax obligations and obligations toward the workers and, thus, work began on the Law on Outsourcing, but, to what end?
Advantages of Outsourcing
Companies were the ones that benefited the most from outsourcing, with a couple of exceptions.
- Reduction in hiring times and costs, as they are conducted by another company and companies do not require to hire their own personnel.
- The businessman focuses on increasing productivity.
Companies count on receiving the best personnel.
- The company doesn’t have the need of providing benefits to its employees, pay taxes or comply with those commitments that are acquired when hiring workers.
- Ease of finding new talent.
- Good opportunity for first jobs.
Disadvantages of Outsourcing
Among the main disadvantages of the outsourcing scheme, we find:
- Low salaries for its employees (payments have to be made directly to the intermediary company)
- Lack of loyalty by the worker (he does not feel as part of the company)
- Workers do not generate seniority (and, therefore, there are no promotions, or it is difficult for promotions to occur)
- Lack of labor benefits
- The employer they work for is not directly responsible for its employees
- The employee does not belong to the company that he works for
- Greater informality
What does the law on outsourcing seek?
According to Capital 21, for the government’s part, the Law on Outsourcing prohibits personnel subcontracting but allows subcontracting of specialized services or of the execution of specialized works that are not part of the corporate purpose or of the main economic activity.
It prohibits the participation of employment agencies or intermediaries in recruitment, selection, training and capacitation and it no longer considers these third parties as employers.
It seeks to benefit workers, giving them the right to social security, the benefits required by law, employee profit sharing, the acknowledgment of seniority, legal certainty, the right to social security. According to the Federal Labor Law, companies must also acknowledge the labor rights of each employee, that is, taking into account their seniority and actual salary so that, in the event of dismissals or resignations, they will receive their corresponding remunerations.
This is how the first benefits of the Law on Outsourcing are being registered for workers
According to Milenio, the reform on outsourcing entered into force on September 1 and, therefore, companies should have already incorporated workers that they used to subcontract into their payroll. According to information provided by the Mexican Social Security Institute (IMSS), to this date 2.7 million workers have been registered, having been migrated from these outsourcing subcontracting schemes to the payrolls of their main employers; this means that each one of them has now been officially hired by its corresponding company, without “intermediaries” and with the other benefits that this entails.
Óscar de la Vega, Labor Law lawyer, mentions that this reform would also help them in having the sufficient credit to buy a house or apartment, in addition to their Afore [Retirement Funds Administrator] account.
“This helps them to have access to a housing credit and also to save more in their main Afore account by the time they retire”, De la Vega says.
Among the benefits shown for workers with the law on outsourcing during the first semester of 2021, we find registration of the placement of 170.390 mortgage loans, of which the Infonavit [National Worker’s Housing Fund Institute] had a 54 percent market share, with an amount of 1.558 million pesos in mortgages, followed by banks and the Fovissste [Housing Fund of the Institute of Social Security and Services for Government Workers] with market shares of 36 and 10 percent.
Likewise, the salary increase for workers that worked in outsourcing companies was of between 5 and 12 percent of their previous salary (according to the IMSS), as companies no longer need to make the corresponding payment for commissions to those who promoted the workers’ services; taking into account that employer contributions to the housing subaccount will increase for each one of the workers, they will have a higher level of capital to be able to buy, build or improve their home. According to the sub-director of the Infonavit:
“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 increases.”
It is also informed that thanks to the regularization of salaries by companies, the Infonavit received savings involving up to 250,000 people who were able to accumulate 200 million pesos. This is why the National Chamber of the Housing Development and Promotion Industry (canadevi) estimates the construction of up to 250 thousand new houses, that is, an increase of between 5 and 7 percent in comparison to last year.
What will happen with Outsourcing companies?
Outsourcing companies whose source of income were “commissions” paid by contracting parties will experience a sharp fall in their income, nevertheless, they will not disappear completely. They will still be capable of providing specialized services to those companies that require them and are not capable of covering said work.
Despite this, this updated Law on Outsourcing will keep companies under close surveillance and, therefore, in case of abuse by companies, they will already be on the sights of employees belonging to them as well as of the corresponding authorities.
The benefits of the law on outsourcing are highly noticeable and employees are already enjoying some of the benefits, among them, the increase in salaries and credits that will enable them to buy, improve or rent a home.