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News Article

Progress After Outsourcing Reform

By Miriam Bello | Mon, 07/12/2021 - 15:49

On April 23, Mexican labor law changed to prohibit outsourcing or subcontracting. The reform meant to avoid abuses and violation of workers' rights, as well as tax and profit evasion by businesses. Two months after the reform was approved, Mexico’s business sector keeps adapting to its changes.

While outsourcing is a popular figure in Mexico, it is not without controversy. For instance, MBN reported that former Amazon workers in the country had complained of mistreatment or unfair dismissals after being recruited through outsourcing practices to work in warehouses. According to the article, workers expressed irregularities regarding long working hours that may have exceeded a 60-hour workweek, being paid barely above the minimum wage, unwarranted outsourcing practices through recruitment agencies like Adecco and DHC and predatory practices regarding documentation.

The outsourcing work modality was added to the federal legislation in 2012. According to the last Economic Census prepared by INEGI, 4.6 million Mexicans work under this scheme and about 860,000 of them are registered at IMSS at a lower wage than they actually receive, which affects their pensions and other benefits. Additionally, the Ministry of Labor and Social Provision estimates that another 2.9 million people work under illegal outsourcing figures.

Prior to the reform’s approval, Carlos Salazar Lomelín, President of the Business Coordinating Council (CCE), said that an agreement had been reached on outsourcing reforms that will benefit the country and its workers without affecting competitiveness. “It is a unique agreement and businessmen have always been against companies that abuse the system, in this or any other year. We disavow any Mexican, whether a businessman or otherwise, who does not comply with the law.”

As reported by MBN, Carlos Martínez, Director General of the National Workers' Housing Fund Institute (INFONAVIT) said this reform opened the door for INFONAVIT’s contributions to increase by MX$2.8 billion (US$56 million). “We have estimated that employers are saving MX$3.8 billion (US$76 million) in dues payments through abusive schemes,” he said.

The reform does permit practices like the subcontracting of specialized services or the execution of specialized work that is not part of the company's corporate purpose. But subcontracting must be formalized in a written contract, which must note the objective of the services or works to be executed, as well as the approximate number of workers who will participate in said contract.

After “two and a half months from the entry into force of the reform, 830,000 workers have left the scheme and have been recognized and registered by their real employers, they will have access to profit sharing for the first time," said Luisa María Alcalde, Minister of Labor and Welfare Provision. She added that the salary of these workers increased by up to 11 percent with this recognition.

Miriam Bello Miriam Bello Journalist and Industry Analyst