Mexico: Extension for the Reform on Subcontracting

An Executive Order was published in the Official Gazette of the Federation on Saturday 31 July of this year amending Transitory Articles One, Three, Four, Five, Six and Seven of the “Executive Order amending, adding to and derogating various provisions of the Federal Labour Law; the Social Security Law; the Law of the National Workers’ Housing Fund Institute; the Federal Tax Code; the Income Tax Law; the Value Added Tax Law; the Federal Law of Workers at the Service of the State; the Regulatory Law on Section XIII Bis of Part B) of Article 123 of the Political Constitution of the United Mexican States, on Labour Subcontracting matters.”

The above with the objective of expanding the established term for compliance with the provisions relating to subcontracting (outsourcing) until 1 September 2021, as follows:

Transitory Article One was amended to establish that Articles Four, Five and Six of the Original Reform Executive Order will enter into force as of 1 September 2021. These articles cover the amendments to the Federal Tax Code, the Income Tax Law and the Value Added Tax Law, respectively.

For its part, Transitory Article Three was adjusted to allow natural persons and entities that provide subcontracting services to obtain registration with the Department of Labour and Social Welfare, provided for in Article 15 of the Federal Labour Law, to 1 September instead of August 2021.

In this vein, Transitory Article Four was amended in order to extend the deadline for the possibility of performing employer substitutions without the need of transferring assets that are the object of the substituted company or establishment to the substituting company to the same date of 1 September.

Transitory Article Five was amended in the same sense, to grant the same extension of the deadline to those employers who, prior to the entry into force of the first Executive Order, had requested from the Mexican Social Security Institute [IMSS] the assignment of one or more employer’s registrations by class for the purpose of subscribing their workers at the national level, now having until 1 September 2021 for deregistering said registrations and, if applicable, requesting employer’s registration from the IMSS.

Transitory Article Six was amended to allow companies that provide specialised services or execute specialised works to provide information in regard to the parties and the key points of the contracts they have entered into.

Lastly, Article Seven extends, to 1 September 2021, the deadline for considering the migration of workers from the companies that operated under the regime of labour subcontracting as an employer substitution, provided that the destination company for the workers acknowledges their labour rights, including seniority and concluded labour risks before the corresponding legal agencies.

Key Action Points for Human Resources and In-house Counsel 

It becomes apparent from the above that the Executive Order published in the Official Gazette of the Federation on 31 July 2021 did not involve any amendments in regard to the essence of the Reform; it does, however, involve the amendment of certain established deadlines in the Reform Executive Order for the elimination of subcontracting published in the Official Gazette of the Federation on 23 April 2021. The above with the objective of giving companies an additional month to be able to comply with the requirements of said Reform.