Prohibition staff outsourcing schemes in Mexico: time for corporate restructuring

Recently the President of the Republic, Andrés Manuel López Obrador, and the Morena Parliamentary Group have expressed their interest in the elimination of outsourcing schemes from the Mexican legal system.

It is fundamental to point out that in practice there are different outsourcing schemes, some of them are based on the subcontracting regime foreseen in Article 15-A of the Federal Labor Law, some others on the intermediation regime foreseen in Article 12 of the same law.

Indeed, there are some outsourcing schemes in which a relationship is argued as a " service supply" and, consequently, it is argued that such contractual relationship is not regulated by the Federal Labor Law or by the applicable tax and social security laws, disregarding any labor relationship.

The reality is that, regardless of the name and operation of each variant, the executive and legislative powers are interested in proposing an amendment to different law systems through which they intend to eliminate definitively any outsourcing scheme.

Therefore, it is necessary to analyze new strategies of a corporate restructuring that allow regularizing the compliance of the labor, fiscal and social security provisions in an advanced way to fall into noncompliance and, at the same time, that allows maintaining the operation of the business in the most efficient way.

In GTAX we are committed to our clients, and for this reason, we have developed a series of alternatives tailored to each company, which could be of interest to carry out a corporate restructuring, particularly in relation to their workforce and their lines of business.

One of the main reasons why outsourcing schemes are commonly used in Mexico is due to the high financial costs that are generated for companies when they have to pay the Employees' Profit Sharing ("PTU").

Employees' profit sharing is an annual expense that employers must pay to their employees, and which is determined applying the rate of 10% over the company's taxable incomes (without the possibility of reducing the employees' profit-sharing paid during the last year or the tax loss carryforwards).

The mechanics for determining the payment of PTU is not in accordance with the purpose initially intended by the lawmaker, which consists of granting an economic benefit to the workers due to their productive labor force for the generation of profits in the company since there are concepts that integrate the taxable income base that is not necessarily related or linked to the labor force.

To illustrate the above, let's suppose a company that hires workers to develop dairy production and commercialization activities and, in order to satisfy the interests of the business, the direction of the company decides to sell one of its real estate properties, generating a profit that will become part of its taxable income base for the payment of the PTU.

Certainly, the workers did not carry out any labor activities to generate that taxable income, since it was originated from the sale of real estate properties owned by the company. However, the profit obtained will have to be shared with the workers under the concept of PTU, which is contrary to the economic and contribution capacity of the employing company.

Another reason that we have identified in companies that use this kind of scheme is to limit the liability for obligations arising from labor, tax, and social security matters, since as they have no direct labor relationship, the beneficiary of staff services has limited liability, except for non-compliance with specific events provided in special regulations.

In this context, the corporate restructuring strategies that we have developed in GTAX are mainly aimed to comply with the provisions on labor, tax, and social security matters and, in addition, to fulfill the teleology or purpose that was pursued by the lawmaker when created the concept of PTU. In other words, the workers receive participation -controlled- according to the activities they currently carry out in the company for the generation of taxable income.

Furthermore, our strategies allow maintaining a limited liability according to the activities that the employees develop in the company, which does not imply a liability that must be assumed with all the wealth of the employer. Avoiding arbitrary abuses by workers' unions or business sectors.

Finally, our strategies allow maintaining operational efficiency in administrative matters, especially in the administration of the payroll, generation of withholding certificates, payment of contributions before tax authorities, procedures before labor, and social security authorities, among others.