Pursuant to the Mexican Federal Labor Law, companies are required to share 10 percent of their annual profits with their employees, with certain exceptions.
As previously mentioned in a 2020 Alert, Mexico’s executive branch submitted a bill to the Mexican Congress that intends to reform various laws regarding outsourcing of personnel. On December 7, 2020, the executive branch issued a press statement indicating that, given the importance of outsourcing of personnel, it would take into consideration the recommendations of participants from different industries.
On March 19, 2021, the Ministry of Labor held a virtual meeting with attendees including employers and unions. Agreements and conclusions reached in the meeting will be submitted to the Mexican Congress for their approval in the following weeks. Below is a summary of some of the most relevant matters discussed during the meeting.
Profit Sharing and Services Providers
Pursuant to the Mexican Federal Labor Law, companies are required to share 10 percent of their annual profits with their employees, with certain exceptions. During the meeting, it was agreed that the Federal Labor Law should be reformed so that profit sharing is limited to a maximum of three months’ salary for each employee, or the average of profit sharing received in the last three years, whichever is more favorable for an employee.
Importantly, the purpose of this provision is to continue with the amendments to Mexico’s personnel outsourcing regime so that operating entities that make profits are able to directly hire employees instead of retaining their services through outsourcing companies.
Furthermore, with respect to services rendered and works executed by service providers to third parties, the Ministry of Labor is still proposing that these activities should be provided on a specialized basis for them to be legal. This means that such activities should be different from the corporate purpose or the economic activity of the contracting party, and they should be agreed to in a written contract that should further establish the purpose of the services or works to be provided, as well as the number of workers that would carry out such services or works. Additionally, service providers would need to register with the Mexican Ministry of Labor.
For More Information
If you would like further information about this Alert or other matters pertaining to outsourcing or labor issues in Mexico, please contact Eduardo Ramos-Gómez, Rosa M. Ertze, Miguel de Leon Perez, Luis Duhart, any of the attorneys in our Mexico Business Group or the attorney in the firm with whom you are in regular contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.