Labor & Workforce

Mexican gov’t signs agreement on subcontracting with private sector, unions

Mexico City, Dec 9 (efe-epa).- Mexico’s government on Wednesday signed an agreement with unions and a portion of the private sector that includes a commitment to regularize subcontract labor and eliminate abuses.

As part of the deal, the signatories decided that debate on and eventual passage of a highly contentious bill to outlaw outsourcing would be postponed until February 2021, when the national legislature convenes following its winter recess.

While subcontracting involves hiring an individual or company to perform work that cannot be done internally, outsourcing is typically a cost-cutting strategy whereby work previously performed in-house is assigned to outside individuals or companies.

Joined by representatives of the different sectors at Mexico City’s National Palace, President Andres Manuel Lopez Obrador said the agreement was reached after the parties had called for a dialogue and consultation process to be held on the twin issues of labor subcontracting and profit sharing.

Profit sharing is a major issue for Mexican companies because firms are required by law to share 10 percent of their taxed profits with their employees.

Labor and Social Provisioning Secretary Luisa Alcalde said the four-point agreement includes a commitment to solve the problem of subcontracting abuses and requires companies to launch a process to regularize staff in keeping with current labor law.

A new profit-sharing scheme that is less onerous for companies also will be discussed as a means of halting outsourcing and ensuring that payrolls are well-defined.

The agreement gives companies time to assess the operational impact of the changes and establishes that debate in Congress on an bill to ban outsourcing will take place in February 2021.

The goal is for the legislation to be passed within 30 days after the debate begins.

Carlos Aceves, head of the Confederation of Mexican Workers (CTM), said that not all labor subcontracting is fraught with irregularities but called for the elimination of abuses such as laying off workers in December (and rehiring them the following year without any seniority) to avoid paying them end-of-year benefits and having to include them in profit-sharing arrangements.

For his part, the president of the Business Coordinating Council (CCE), Carlos Salazar, said companies now have a better understanding of how contracts can be modified in the future, adding that they always will oppose any measure that negatively affects workers.

But other private-sector associations – the National Chamber of Industry and Transformation (Canacintra), the National Agriculture Council (CNA) and the Employers Confederation of the Mexican Republic (Coparmex) – all rejected the agreement signed on Wednesday.

In a joint statement, they argued that the initiative “aims to restrict the freedom to subcontract” and infringes upon the creation and preservation of formal jobs that provide economic sustenance to Mexican families.

Those business chambers said they support legal practices that promote job creation and socially oriented investment but rejected what they said was an attempt to stigmatize business leaders as tax avoiders and labor-law violators.

On Nov. 12, Lopez Obrador introduced a bill in Congress aimed at barring outsourcing, a practice that he termed abusive and a legacy of Mexico’s “neoliberal period.”

But although an Open Parliament process was launched to evaluate labor subcontracting in detail, debate on the bill has stalled in the lower house.

Mexico’s Attorney General’s Office says more than 6,000 companies engage in illegal subcontracting practices that facilitate more than 21 billion pesos ($1.05 billion) annually in tax evasion.

In January, the leftist president, popularly known as AMLO, created an interagency task force to address subcontracting irregularities blamed for some 380,000 job losses in 2019.

Outsourcing became established in Mexico following the overhaul of labor law enacted in 2012 by rightist President Felipe Calderon.

“It was abused,” AMLO said of the law in late October. “They are the so-called structural reforms, which were not done thinking about the benefit of workers, not done thinking about the benefit of the people. They were done thinking about the benefit of one group, a minority.” EFE-EPA

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