Image credits: Gerd Altmann
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News Article

Profit Sharing Reaches Record High After Outsourcing Prohibition

By Anamary Olivas | Thu, 07/07/2022 - 15:54

Profit sharing, one of the employee benefits stipulated in the Federal Labor Law, rose 109 percent following the prohibition of outsourcing in Mexico. Total profit payments reached US$8.8 billion in 2021, according to the Ministry of Labor.

 

In Mexico, companies are required to share profits with workers who worked a minimum of 60 days in a given year. The elimination of outsourcing for non-specialized services closed one of the ways with which entrepreneurs excused themselves from paying profits. Profit sharing is not mandatory for companies with less than one year of operation, nor for firms that had a declared annual income of less than US$14,285.

 

According to the Ministry of Labor, profits went from US$4.4 billion in 2020 to US$8.8 billion in 2021. Similarly, the number of companies that complied with this obligation increased from 89,038 to 153,584. Minister of Labor Luisa María Alcalde Luján said this growth is due to the labor reform through which 2.7 million workers left the outsourcing scheme to be recognized as part of their parent companies.

 

The sector that increased its profit distribution the most in 2021 compared to the previous year was the pharmaceutical sector, with an increase of 264 percent. In second place was wholesale trade, which reported an increase of 167 percent, while copper and nickel mining ranked third, followed by sales of smartphones and department stores.

 

Despite the record numbers regarding compliance, the Ministry of Labor will carry out around 11,000 inspections to verify that employers have eliminated the outsourcing scheme for good. “Cases have been found of companies that do not comply with the law. When these inspections are finished, we will be able to publish the data,” mentioned Alejandro Salafranca, Head of the Dignified Work Unit, STPS.

 

 

Photo by:   Gerd Altmann
Anamary Olivas Anamary Olivas Journalist & Industry Analyst