On April 23, 2021, the decree amended, added and repealed several provisions of the Federal Labor Law, the Social Insurance Law, the Law of the National Institute for Employee Housing Fund, the Federal Tax Code, the Income Tax Law and Value Added Tax Law, Federal Law on Employees in the Service of the State, Regulation of Article 123 Section b) of the Constitution, Article 123 Section XIII through Section B, Article 123 of the Constitution of the United Mexican States, on issues relating to the outsourcing of labor has been published in the Official Gazette of the Federation.
The legislative changes contained in this decree came into force the day after its publication, with the exception of the amendments to Tax Regulations 1, which will come into force on August 1, 2021, and the amendments to the laws that regulate the industrial relations of employees in the service of the state as well of the Central Bank of Mexico and the Banking System 2, which will come into effect in fiscal year 2022.
Prohibited outsourcing and specialized services
This decree prohibits the outsourcing of personnel (understood as the number after which a person makes available, or makes available, their own workers for the benefit of another person). However, outsourcing specialized services or performing specialized work that is not part of the business purpose or the predominant economic activity of the recipient of the service is permitted provided that the services are provided by a contractor listed in the register registered by the Ministry of Labor and Social (“STPS”).
PTU
The process for determining the amount of employee profit sharing (“PTU”) will also be modified to set a maximum of the amount that is cheaper to the employee between three months of the employee’s salary and the average of the PTU received over the past three months Years.
Transition times
The STPS has a transition period of 30 days to enact general rules for the registration of specialized outsourcing service providers and a period of 90 days from the enactment of these rules for the persons providing these services to obtain their registration. A transition period of 90 days from the entry into force of the decree also applies to companies providing outsourcing services in order to transfer their staff to the companies that benefit from the services without having to transfer their assets, provided that all labor rights of the transferred workers are in place recognized. After this period, the employer replacement will not be considered effective if the company’s assets are not transferred to the replacement employer.
Violations
Violations of the provisions of the new personnel outsourcing system are punishable by fines and the loss of tax rights, for example the right to deduct the consideration paid or to offset the value added tax associated with this consideration.
Joint liability
It is established that the recipient of specialized services or the performance of specialized work is jointly and severally liable with the employer providing the services in the event that the employer fails to comply with labor, tax or social security obligations.
Duties and requirements for specialized services
In addition to the specific nature of the services that can be outsourced, companies providing such services are required to: 1) register in the STPS registry and keep this registration in effect, which will be valid for three years; 2) Submit quarterly reports to IMSS and INFONAVIT with information on concluded contracts; and 3) provide a copy of (i) tax receipts for payment of salaries, (ii) payment receipts issued by a banking system to the recipient of the services in relation to the employees with whom he or she performed the service or performed the related work provide establishment of withholding tax from these workers, (iii) payment of employer’s social security contributions and payment of INFONAVIT contributions and (iv) VAT return and confirmation of receipt of payment according to the period in which the contractor has made the payment of the consideration and the VAT transferred to the contractor.
Tax considerations
It is also determined that no tax deductions or credits will be granted for: 1) payments or considerations for the outsourcing of personnel to carry out activities related to the business purpose and main economic activity of the contractor; and 2) the services in which personnel are made available or made available to the contractor if (i) the workers originally provided by the contractor were employees of the recipient of the services and were transferred to the contractor by means of such the legal person and ( ii) the staff provided cover the main activities of the contractor, with the exception of payments or considerations for subcontracting specialized services or performing specialized work that is not part of the business purpose or the predominant economic activity of the service recipient and provided that the obligations mentioned in the previous paragraph are fulfilled.
Specialized services between members of the same group
Finally, it is also noted that complementary or shared services or work performed between companies of the same group of companies are also considered to be specialized. However, it is assumed that these services are not part of the business purpose or the predominant economic activity of the receiving company, which makes this provision unclear.
Given the importance of outsourcing services in Mexico, this reform will affect a large number of businesses.
We strongly recommend a detailed review of the scope and potential impact of this reform, especially for companies that have HR outsourcing systems, whether within a group or with third parties, and for groups of companies that operate with or without formal outsourcing systems . Have situations in which employees from one company in the group provide services for another company or another company in the same group.
It is very important to assess the need to take action within the 90 day transition period in view of this reform. Such measures may include, but are not limited to, amendments to the articles of association defining the corporate purpose of the companies, mergers between companies that provide personnel outsourcing services with companies that receive such services, or the replacement of contractors by employers for the company that receives the services, include.
Click here to download Work Outsourcing Reform PDF in Spanish.
1 Federal Tax Code, Income Tax Act and Value Added Tax Act,
2 Federal Act on Workers in the Service of the State, Regulation of Section b) of Constitutional Article 123 and Regulation Act of Section XIII through Section B, Article 123 of the Political Constitution of the United Mexican States.
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