Consensus Emerges on Amendments to Mexico Outsourcing Rules

Representatives from the Mexican Federal Government, Business Sector and Union Groups conferred on April 5, 2021 in an attempt to agree on the terms of new pending federal legislation governing outsourcing in Mexico.

The parties reached the following agreements in their discussions:

1. In general, outsourcing of personnel will be prohibited, including: (i) the hiring of a service provider’s entire workforce to work for the benefit of another company, and  (ii) contracting the services or personnel of a service provider company with the same or a similar purpose or activities as that of the beneficiary of such services.

2. Employers will be allowed to hire outsourced personnel for specialized services if said purpose or activities are not the among the principal activities of the company receiving and benefitting from services.

3. Shared services among companies of the same business group are permitted, so long as such services are not part of the purpose of the recipient and beneficiary of the services, and the companies providing such work are registered as specialized service providers.

4. Specialized service providers must be registered with the Mexican Department of Labor and Social Welfare (“STPS” for its acronym in Spanish) and recorded in the public registry of outsourcing and specialized services companies.

5. A maximum of three (3) months’ salary will be used for purposes of calculating Mexico’s mandatory employer profit sharing (“PTU”) payment. In cases where employees receive a PTU payment exceeding this amount, the amount of the payment will be calculated based on the employer’s median annual profits over the last three (3) years.

6. May 1, 2021 is the approximate date targeted for publication of the proposed amendments to the draft outsourcing decree in the Official Journal of the Federation, with a proposed entry into force date of September 1, 2021.

7. The second transitional article of the amendments provides that within thirty (30) days after the decree’s entry into force, the STPS will issue general regulations on the required registration that outsourcing and specialized services companies must complete.  The third transitional article states that employers will have three (3) months to register themselves with the STPS. The entire process will take four months to complete and will enter into force simultaneously with planned annual tax amendments addressing the outsourcing topic. As a result, employers will have four (4) months to implement the changes and to register themselves in the STPS.

8. If an employer makes the required changes or directly hires employees onto its own payroll prior to the amendment entering into force, then the current law will apply.  However, if an employer’s changes take place after the amendments become effective, then the new rules will apply.

9. If employers currently utilizing outsourcing labor structures do not comply with the new rules, both employers and service providers will be jointly and severally liable for all applicable labor and tax obligations as well as potential sanctions.

10. For all the above reasons it is vital for employers to review their current labor and employment structures, along with all payments they are currently making to labor services providers.

Contact Information:

Pablo Sáenz | psaenz@ccn-law.com.mx  Fernanda Magallanes | fmagallanes@ccn-law.com.mx