Personnel Outsourcing in Mexico: What You Need to Know to Comply with the Law
Personnel outsourcing in Mexico has changed radically with the 2021 labor reform, which limited outsourcing and established new rules for subcontracting. Companies wishing to hire specialized services must meet strict requirements to avoid penalties and ensure regulatory compliance.
What is Personnel Outsourcing?
Personnel outsourcing is the practice in which one company hires another to provide workers to perform certain functions within its organization. Before the labor reform, many companies used this model to reduce labor and tax costs, but in some cases, this practice was abused, affecting workers’ rights.
Key Changes in the 2021 Reform
With the amendments to the Federal Labor Law (LFT) published in April 2021, outsourcing of personnel was prohibited with some exceptions. The key points are:
- Ban on Personnel Outsourcing : Companies are now prohibited from hiring external personnel to perform core business activities.
- Permission for Specialized Services : Subcontracting is only permitted for specialized services that are not part of the corporate purpose of the contracting company.
- Mandatory Registration with the REPSE : Companies that offer specialized services must register with the Ministry of Labor and Social Welfare (STPS) through the Registry of Providers of Specialized Services or Specialized Works (REPSE) ( Consult the REPSE here ).
- Joint Liability : The contracting company is responsible for ensuring that the supplier complies with its tax and labor obligations
Requirements for Subcontracting Specialized Services
To comply with the law, companies must:
- Check the REPSE Registry : Only companies registered with the REPSE can contract.
- Ensure Tax and Labor Compliance : They must ensure that the subcontracted company correctly pays taxes, social security, and employee benefits.
- Formalize a Contract : It is mandatory to sign a contract that specifies the specialized activities to be performed.
- Report to the Mexican Social Security Institute (IMSS) and the Tax Administration Service (SAT ): Subcontracted companies must report signed contracts to the Mexican Social Security Institute ( IMSS ) and the Tax Administration Service ( SAT )
Consequences of Non-Compliance
Failure to comply with outsourcing regulations can result in:
- Fines of up to $4.4 million pesos from the STPS.
- Tax penalties from the SAT, including the non-deductibility of payments to companies not registered with the REPSE.
- Legal issues arising from joint liability if the subcontracted company fails to pay social security or taxes.
Benefits of Complying with Regulation
Adapting to the new regulations brings advantages such as:
- Greater legal security : Avoid fines and tax problems.
- Worker protection : Better working conditions and social security.
- Strong corporate image : Compliance with the law improves corporate reputation.
Conclusion
Personnel outsourcing in Mexico is still possible, but under a stricter legal framework. Complying with the 2021 reform is essential to avoid penalties and ensure fair working conditions. Companies like Global Touch can advise you on hiring specialized services legally and efficiently.