International digital networks/connectivity

Mexican government looks to reform labor subcontracting

Recently, Mexican President Andrés Manuel López Obrador filed a proposal before Mexico’s congress to reform the practice of subcontracting labor. According to the document sent to the legislative branch, the Mexican government seeks to:

  • Ban outsourcing and insourcing by private companies without government authorization
  • Require specialized service* providers to register with the Ministry of Labor and Social Security *Specialized services are defined as projects outside of a company’s line of business
  • Establish the beneficiary of specialized services as jointly liable for the subcontracted employee’s tax and social security contributions
  • Allow employment agencies to intervene only in the recruitment, selection and training of subcontractors, without being considered employers
  • Eliminate the current 6% value-added-tax withholding on services in which subcontracted services are provided

The proposed ban would be enforced by fines or charges of tax evasion.

Similar proposals were also discussed in both the House of Representatives and the Senate, but no vote has occurred. Therefore, this is the third legal reform proposal, but the first filed by the Mexican Executive Power.

How we can help

We regularly monitor the Mexican legislative agenda and can react quickly to any changes that may impact our clients. For clients requiring an analysis of their labor and employment structure to discover how the subcontracting reform could impact their organization, please contact Angel Ramirez.

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