On April 20, 2021, a decree was approved by the Senate of the Republic that contains the proposal to amend certain laws of the legal system of the United Mexican States to regulate subcontracting, which was published in the Official Gazette of the Federation on April 23, 2021 (the “Reform”), among which are the following: (i) Federal Labor Law; (ii) Social Security Law; (iii) Fiscal Code of the Federation; (iv) Income Tax Law; (v) Value Added Tax Law; and (vi) National Housing Fund Institute Law , among others.

The Reform aims, among others, to prohibit the subcontracting of personnel and allow the subcontracting of specialized services and/or works. Likewise, the services, and/or complementary or shared works provided between companies of the same business group, will also be considered as specialized services, when these are not part of the main activity of the company.

I. Registration.

The Reform imposes the obligation to those companies which purpose is to render services and/or specialized works, and complementary services and/or works to register before the Labor and Social Welfare Ministry (“STPS”), and which will have the following as main characteristics: (i) the registry will be public and will be available to third parties; (ii) it will be renewed every 3 (three) years; and (iii) provide evidence that tax and social security obligations are up to date with. The STPS shall accept or reject the request within a period of no more than 20 (twenty) days.

II. Requirements of the Contract.
The Reform provides that contracts for the rendering of services and/or specialized works, and services and/or complementary works, must mainly meet the following requirements: (i) it must be executed in writing; (ii) must indicate the purpose of the service and/or work to be rendered; and (iii) must inform the approximate number of workers that will be involved.

III. Profit sharing.

A maximum limit is established for the payment of profit sharing of three months of the employee’s salary or the average of the participation received in the last three years, applying the amount that result most favorable for the employee. Although the percentage to be distributed will remain the same (10% of the employer’s profits), it is limited to a maximum amount per employee.

IV. Employer Substitution.
Employer Substitution is considered the migration of employees from a “services” company to one of “operations” as part of the internal restructuring to comply with this new Reform. All companies that operate under the “insourcing” or “outsourcing” model must transfer the “purpose” assets of that company or establishment to the substitute employer, unless the contractor company transfers its employees to the beneficiary company during the term of 90 days and their labor rights are recognized, including their seniority.

V. Disclosure of Information.

The Reform provides the obligation to disclose information to certain authorities so that they are up to date and aware of the subcontracting contracts that are executed.

VI. Notice to IMSS.

Quarterly notice must be given to the Mexican Social Security Institute (the “IMSS”), informing, among others: (i) the parties to the contract, informing the name or denomination/business name of the parties, Tax ID (RFC) and address; and (ii) the purpose, term and relationship of employees who will render their services in each executed contract.

VII. Notice to INFONAVIT.

Quarterly notice must be given to the Institute of the National Housing Fund for Workers (the “INFONAVIT”), in which, among others, must be reported: (i) the general data of the contract; (ii) the amounts of contributions and amortizations; and (iii) determination of the workers’ base salary; and (iv) a copy of the registration with the STPS.

VIII. Sanctions.

The Reform establishes that, in the event of non-compliance with what is established in compliance with the purpose of the Reform, which is to only allow subcontracting for the rendering of specialized services and/or works, and complementary services and/or works, a fine between 2,000 and 5,000 Measurement and Update Units (“UMA”) will be imposed; also, it establishes that in case of not filing the information to the competent authorities, a fine between 500 and 2,500 UMA may be imposed.

If you have questions or require additional information regarding this communication, please contact José Ruiz López (jose.ruiz@rapa.com) and/or Elvia Palazuelos (elvia.palazuelos@rapa.com).