by Franklin Delano Frith
Human Resources Mexico, S de RL

Employee Leasing / PEO (HR Outsourcing)  type services have been provided in Mexico for years.  Maquiladoras for example, are known to utilize the HR Outsourcing services for costs savings and risk reduction purposes.

Some HR Outsourcing companies have been misclassifying the employees for tax purposes with the IMSS (See below for key background info). The HR Outsourcing companies would classify all of their employees as administrative level I employees instead of a higher classification level relating to manufacturing for example.

The problem really isn't too much different that an American company classifying employees as clerical when in fact they were drivers for workers compensation premium purposes.

To address the issue in Mexico, the Mexican Congress approved amendments to the Social Security Act in Mexico which became law on July 10, 2009. Basically, the amendments can be summarized as follows:

- The beneficiary or client company is liable for the social security taxes if the employee leasing company fails to pay its taxes.

- The contracts between the employee leasing company and the client company must be reported to IMSS every quarter of each year.

- The employee leasing company can have different risk premiums for each of its client locations for the employees

I can understand why greater controls are needed to put an end to blatant misclassification and non-payment of taxes. However, we shall see how the implementation and enforcement of this law unfolds.
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Key background information for this article:
Instituto Mexicano de Seguro Social (IMSS) - is the Federal Agency for the social security system in Mexico. Unlike the United States, IMSS in Mexico provides public health services / care, worker injury related services / care, and additional services to the Mexican population.

There is no workers compensation insurance in Mexico. Instead, the employees are classified according to risk and the employer pays a premium on payroll dollars for the risk classification.

There are five (5) classification levels. Level I being the least job type risk and V being the highest level job risk. So let us say that you have 15 administrative employees (Classification Level I and you have 10 construction employees (Classification Level V).

An employer must pay the level V risk charge on all of the employees. Not just the construction employees.
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Franklin Frith is the General Manager and Principal of Human Resources Mexico, S de RL - Born and raised in the United States and currently lives and works in Mexico. Franklin speaks Spanish fluently and has more than 20 years experience in HR outsourcing and business development.

With our “hands on” approach we handle your Mexican business goals and needs full time, right here in México. You will find that our staff is "on the ground and in the trenches" to help you accomplish your business goals.