Image credits: Jon Tyson on Unsplash
News Article

Outsourcing Reform Advances

By Rodrigo Brugada | Fri, 07/09/2021 - 19:23

Changes to the outsourcing regulation led to the creation of the new legal figure of "specialized services," which encompasses 4.5 million service providers, ranging from conventional cleaning, airport and maritime security to telemarketing and electromedicine. 

After the publication of reforms to this type of work in April, four out of 10 companies have been rejected from the Registry for Providers of Specialized Services and Specialized Works (REPSE). Other companies operating for years have also been denied registration with the Ministry of Labor and Social Welfare (STPyS) for negative taxes or noncompliance with IMSS or INFONAVIT.

Before the reform, the personnel was made available for whatever the client needed. Now, there is a distinction between activities that client already does and activities that provide specialized services. After the reforms, 8,000 companies have already registered under the new regime of the Specialized Services of the Ministry of Labor and Social Welfare, and 65,000 more queries have already been made, as reported by El Sol de México.

As mentioned in a report by UAM, under the outsourcing scheme, simulation practices in labor relations and evasion of worker-employer contributions have permeated, directly affecting workers. There have also been tax fraud practices and a general precariousness of labor. Or, as stated by Nacla, "subcontracting has dispossessed workers of their legal entitlements while also defunding public institutions, such as IMSS, by not registering their personnel in the system. By avoiding registration, companies avoid paying their share of social security contributions, including those for accident, injury and sickness benefits as well as old-age, disability and survivors' pensions."

According to a document published by the OECD, the countries with the highest growth in outsourcing activities since 1995 among its members are the Netherlands and Mexico. The latter, recorded a 10 percent share of outsourcing of total employees in administrative and support services activities, while the Netherlands had a 12 percent share. This figure contrasts with the 3 percent recorded in countries such as Poland and the Czech Republic.

The type of jobs included in outsourcing are mainly security, cleaning, building maintenance services and employees hired by a third-party company. These types of jobs have almost doubled in most OECD countries.

The organization classify janitors and security personnel as generally middle- and low-wage occupations. However, these types of workers for cleaning and security are only two small typical cases of subcontracting, which is becoming increasingly common in other occupations but it is not as easy to detect for measurement purposes. For example, the outsourcing of cooks and waiters is challenging to detect, among many other occupations.

The situation is complex. As mentioned by OECD, "there is a reasonable a priori case that firms outsource workers to realize productivity gains. If true, outsourcing holds the potential to benefit OECD economies. For workers, if outsourcing is accompanied by better pay and benefits, it is likely a welcome development. If, on the other hand, earnings and workplace amenities are reduced, this could lead to distress for many workers and possibly a rise in inequality overall."

The data used in this article was sourced from:  
El Sol de Mexico, UAM, NACLA, OECD
Photo by:   Jon Tyson on Unsplash
Rodrigo Brugada Rodrigo Brugada Journalist & Industry Analyst