Nearshore Americas
Mexico labor

Mexican Businesses Cut Salaries as Labor Outsourcing is Shunned

Thousands of workers in Mexico have had a cut in their monthly wages since May this year, as their employers struggled to comply with the country’s new regulations over labor outsourcing.

Mexico prohibited subcontracting labor to third parties, such as staffing agencies, in a historical reform passed by Congress in April this year.

More than 2.5 million outsourced workers were hired directly by their bosses in the initial three-month transition period, according to data released by the country’s Institute of Social Security (IMSS).

Of those workers, 77 percent saw a slight increase in their salary, with the remaining having a reduction in pay.

As many as 50,000 businesses were yet to comply with the law as of August  20, despite the fact that September 1 is the deadline to do so.

According to local media reports, most of these subcontracted workers are serving in sectors such as construction, transportation, and trade.

Some officials at the Institute of Social Security (IMSS) are threatening that they would investigate the pay cut, arguing that employers are deliberately avoiding providing employees with all the benefits they are entitled to.

Another reason why Mexican businesses avoid hiring employees directly is that, under the country’s labor law, they should share their profits with their employees.

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Therefore, analysts believe that at least 10% of workers who are currently subcontracted could ultimately lose their jobs.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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