What to Do When an Outsourced Employee Becomes a Key Person in Your Business
Outsourcing can be a smart way to handle non-core activities or specialized tasks in Mexico. But what happens when an outsourced worker becomes so valuable that they’re critical to your daily operations?
Having a key person on your team under an outsourcing or contractor model can expose you to misclassification risks, fines, or REPSE violations. In this guide, you’ll learn:
- Why this is a compliance red flag
- How Mexico’s outsourcing reform impacts “key person” roles
- Options to transition outsourced talent legally
- How an Employer of Record (EOR) can help
Why It’s a Risk When Outsourced Workers Become Indispensable
Under Mexican law, companies can’t outsource core activities that are part of their main business purpose. If an outsourced worker handles tasks that are essential to your operations, authorities may reclassify that relationship as direct employment.
Key risks include:
- Fines for misclassification
- Back payments for IMSS, INFONAVIT, and taxes
- Loss of REPSE registration for your service provider
- Labor lawsuits for severance or benefits owed
Read more about REPSE rules in “How the REPSE affects Outsourcing companies”.
Examples of “Key Person” Roles
A few signs that your outsourced worker might be crossing the line:
- They manage other staff or projects critical to your revenue.
- They have client-facing responsibilities under your brand.
- They use company resources (emails, badges) like internal employees.
- You set their schedule and tasks as if they were direct staff.
How to Transition a Key Outsourced Employee
If you’ve identified a key outsourced team member, you have two main options:
✅ 1. Hire them directly:
Bring them onto your payroll under a legal employment contract. This ensures full compliance with Mexico’s labor laws and avoids REPSE conflicts.
✅ 2. Use an Employer of Record (EOR):
If you don’t have a local entity, an EOR can employ the worker on your behalf, handle taxes, benefits, and payroll, while you keep operational control.
Learn how it works in “What is an EOR (Employer of Record) and how can it help your business?”.
When Outsourcing Still Makes Sense
Not all outsourced roles need to be converted. Specialized third-party services that are not part of your core business — like IT support or facility management — can remain outsourced legally if your provider is REPSE-compliant.
Understand legal boundaries in “Differences between legal and illegal outsourcing in Mexico: What you need to know”.
Tips for Managing Outsourced Talent Moving Forward
🔍 Audit regularly:
Check which contractors are becoming critical to operations.
📃 Review contracts:
Make sure they clearly define non-core activities and responsibilities.
✅ Keep REPSE updated:
Verify your providers remain registered and compliant.
💼 Plan succession:
Don’t rely too heavily on one outsourced individual for strategic tasks.
Conclusion
Outsourcing gives you flexibility — but when a contractor becomes a key person in your business, ignoring it can put you at serious legal risk in Mexico.
Be proactive: transition key talent properly, ensure compliance with labor laws, and consider an EOR solution if you don’t have a local entity.
