“I’ve decided to take advantage of outsourcing. My next novel will be written by a couple of guys in Bangalore, India.”
“The other part of outsourcing is this: it simply says where the work can be done outside better than it can be done inside, we should do it…”
Understanding the concept of outsourcing is no hard task when related to productivity, globalization, specialization and making the best of the resources at hand in any given business. Nevertheless, the above-mentioned quotes point to two undeniable facts of the outsourcing industry that are one in the same truth, existing as the two faces of the coin which are: Not all jobs are subject to being outsourced, and all of those that entail a specialized task or performance that can be made more efficient or productive outside, must be in consequence outsourced.
Mexico is no beginner when it comes to these kinds of companies, but does in fact differ greatly in terms of how the industry is understood and legally regulated. There has been a complete misperception (maybe not for all the right reasons) between outsourcing as understood elsewhere and attempting to subcontract the entirety of the workforce formerly employed by any given employer. Outsourcing companies in Mexico do not only exist as specialized businesses that provide specific tasks, but more over exist as businesses that contractually retain all employees as a third party “employers” attempting to rid original employers of all social security, tax and labor obligations. It is these practices that have been used at large and have created massive corporations with “cero employees” but with high contingencies and compliance issues. In the USA this can be easily understood and classified per the department of labor´s estimation about misclassification of employees and the financial, social and legal impact that this entails.
Unlike popular estimation, Mexican legislation does not frown upon this specific industry, in fact since 2012, Mexican Federal Labor Law was updated to include outsourcing and the rules by which it may be applicable. Actually, it could be argued that legislation promotes legitimate and old fashioned outsourcing in reasonable and valid occupations as stated by the three simple rules that concern this matter:
- The entirety of the workforce may never be subcontracted.
- Outsourcing any given job may be acceptable only due to specialization.
- Outsourced Jobs may not be similar or identical to those carried out in the workplace, which entails that core positions or occupations may not be outsourced.
These principles are the pillar upon which any employer or entity in Mexico must operate when subcontracting. It will be a common occurrence (derived from outsourcing sales teams) that any given entrepreneur learns that Mexican outsourcing companies rid employers of contingencies due to the fact that employment agreements are signed and social security quotas paid for, and that if case be, the legal team of the subcontracting company will defend both the contracting party (original employer) and the third party service provider (outsourced employer) if a law suit exists. Reality is that when the three simple rules mentioned above are not respected, there is a principle of equal liability that states that no matter the contract or factual situation, both, the outsourcing entity and beneficiary are equally liable before law for any and all overlooked, disregarded or slighted, labor/employment and social security obligations.
This creates a serious responsibility for all employers to comply with the simple standard truth of outsourcing maintaining as was stated, that: “Not all jobs are subject to being outsourced, and all of those that entail a specialized task or performance that can be made more efficient or productive outside, must be in consequence outsourced.”
In conclusion, to avoid legal contingencies and equal liability with service providers, all investors or companies in Mexico must outsource only specialized tasks (never the entirety of workforce), and focus on those tasks that are not essential to the underlying nature of the business. Furthermore, as business advisors, it is our recommendation to only hire trustworthy and serious providers that have the means to support and demonstrate compliance and legality in all their business as to avoid any contingency per the equal liability principle.