New Government Should Focus on Modernizing Labor Framework

The outgoing administration of the federal executive power in Mexico made labor issues one of its most significant and impactful banners, as evidenced by the changes that were promoted and approved within the regulatory framework related to issues such as freedom and democracy within unions, expedited labor justice, NOM-035 on the prevention of psychosocial risk factors, NOM-037 on remote work, minimum wage, outsourcing of specialized services, profit-sharing, and vacation entitlements. These changes primarily aimed to reduce significant backlogs and ensure compliance with obligations and commitments as a country under various international treaties and global guidelines concerning work and labor relations.

During the latter half of last year, the current federal government introduced additional labor reform initiatives, which are still pending discussion in the chambers of deputies and senators. These discussions may potentially take place during the upcoming legislative session starting on September 02nd. These initiatives include:

• Changing the number of days for holiday bonuses from 15 to 30 days for employees.

• Increasing the percentage of vacation premium pay from 25% to 50% for employees.

• Extending the number of days for seniority pay from 12 to 15 days per year worked starting from the 13th year of tenure.

Apart from these pending initiatives, the future administration of the federal executive power must not lose sight of significant unresolved issues that have persisted for years. One such issue is the high number of workers engaged in informal employment in Mexico. According to INEGI figures, informal employment averaged 30.7 million people in the fourth quarter of 2018. Contrasting this with April of this year, where informal employment reached 32.6 million, indicates a growth in informal labor by at least 1.9 million people.

Moreover, according to figures from INEGI and IMSS, Mexico has over 3.2 million employers, of which around 1.07 million (approximately 3 out of every 10 employers) provide social security to their employees. Of these 1.07 million employers, approximately 95% are micro and small enterprises.

Considering the aforementioned figures, the incoming administration must focus its strategy and efforts on four objectives:

1. Adapt or redefine existing regulatory frameworks with mechanisms that drastically reduce informal employment in Mexico.

2. Design programs that incentivize employers in Mexico to formalize their operations.

3. Flexibilize the labor market to include all schemes related to non-traditional forms of work.

4. Eradicate practices that promote evasion, avoidance, and simulation of labor relations definitively.

Additionally, the incoming government must recognize that the global workforce is undergoing dramatic transformations influenced by globalization, skill changes, technology, and social and demographic shifts. As the world of work evolves, the employer-employee relationship is also changing accordingly.

Therefore, it must recognize and accept that the design of working life is becoming more fluid. It is necessary to understand that the talent supply chain encompasses more than just full-time workers; it must also include self-employed individuals, temporary employees, independent contractors, consultants, freelancers — all talents who are remunerated for performing specific tasks or for the time spent on activities defined by an organization.

In conclusion the new federal executive administration must develop policies that facilitate the integration of all economic actors in Mexico into the new labor landscape to enhance productivity and competitiveness. This objective should be pursued through a robust regulatory framework that minimizes violations of workers' rights, prevents damage to public finances and impacts on social security institutions, eliminates non-compliance with laws and regulations, enhances agility, responsiveness, and competitiveness across various sectors. Furthermore, it should aim to improve the generation, utilization, and transfer of knowledge and skills, thereby fostering a higher level and quality of human talent in our country.