In 2021, the Mexican government passed a federal labor law to create REPSE, or Registro de Prestadores de Servicios Especializados o de Trabajos Especializados (Registry of Providers of Specialized Services or Specialized Works).
The purpose of REPSE was to eliminate an abundance of tax evasion opportunities from both contractors and companies that hire contractors. Many companies were hiring contractors and treating them as full-time employees. The prevalence of this practice was common in Mexico. Consequently, many workers were not paying their taxes and thus not receiving proper pay or benefits.
In this article, we’ll break down exactly what REPSE means for labor laws in Mexico, what you’ll need to know if you’re planning to outsource work, and how to remain compliant as you build your Mexican team. The registration must be renewed every three years.
The REPSE in Mexico is a registry listing companies and individuals that provide specialized contracting services or (in the case of individuals) are considered self-employed. Companies that want to outsource and hire contractors can only hire people who are registered on the list.
This legislation isn’t new and was first proposed in 2012, as part of a reform in Mexico, with the aim of promoting transparency and accountability in the provision of specialized services (contractors).
However, back in 2012, there were about 900 contractors that were considered specialized, and only 100 of them were registered with the IMSS (Mexico’s social security) and the Servicio de Administración Tributaria (Mexico’s tax registry). Because of the large number of contractors operating in this way, the Mexican government gave companies and specialized service providers until May of 2021 to register and become compliant with this legislation.
To be included in the registry, providers must meet certain requirements, such as:
Having a tax ID number
Being registered with the Ministry of Labour
Complying with safety and environmental regulations, and
Providing evidence of their technical and financial capabilities
One of the main reasons the Mexican government established REPSE was to cut back on further corporate tax evasion. Private sector companies were writing off contractors and not complying to employment and labor regulations. Many contractors were using their self-employment status to avoid registering or paying taxes on their earnings.
Most importantly, the REPSE was created in the hopes of reclaiming the rights of workers and regulating companies who weren’t treating their employees right. The law was passed for both tax and social protections.
Thanks to the REPSE, if a contractor is actually a full-time employee, they will be entitled to their mandatory benefits, including 13th-month salary, paid vacation, and proper registration with the IMSS.
The REPSE has clear regulations about who is considered an employee and who is considered eligible for outsourcing.
If most of the following apply, then the person is an employee:
The employee receives instructions on how and when to carry out their day-to-day activities
The employer provides the tools necessary for the employee to carry out their tasks
The employer issues IDs that identify the employee as part of the company
There is a constant periodical economical compensation (weekly or monthly pay)
You’ll need to prove that you have a corporate purpose in hiring a contractor over an employee. The government established these regulations in hope that most companies will hire employees directly instead of dragging them along as contractors.
Contractors have to meet certain legal regulations to be registered with the REPSE in Mexico.
Here are some of the key components of specialized service registration:
Requirement to be registered: Companies that provide specialized services must be registered in the REPSE in order to contract with the Mexican government or private companies that operate in these sectors. Only firms that have no debts with the IMSS, Infonavit, or SAT can register to be a specialized service provider.
Compliance with technical, financial, and safety standards: Providers must meet certain requirements related to technical, financial, and safety standards. This means that companies must ensure they meet these standards in order to be eligible for inclusion in the registry.
Competition: The REPSE is designed to promote competition among contractors of specialized services. This means that companies that are registered in the REPSE may be more likely to be awarded contracts, as they have been certified as meeting the necessary technical, financial, and safety standards.
Accountability: The REPSE promotes transparency and accountability in the provision of specialized services. Contractors will need to make sure they are registered with the IMSS, the SAT, Infonativ (National Workers Housing Fund) and the Ministry of Labour. They should expect to always be prepared to show their taxes and justification for self-employment.
Private sector companies will need to carefully review the project or tasks they need outsourced before making the decision to hire a specialized service provider. Compliance is always one of the most important parts of outsourcing contractors.
Companies should consider:
Employee or contractor: Companies should think about these questions when they need projects completed. Can we finish this project using an existing employee? Do we need a specialized service provider? How long will the contractor work for us? Would they meet any of the requirements for full-time employment?
Reporting: Companies must submit a report every 4 months to Infonavit that includes: details of employer compliance, data on contracts, employee information, and salary or project payments.
Using the registry: Private sector companies that must use a specialized service provider may only use contractors and businesses that are registered with the Ministry of Labor on the REPSE website.
Liability: Both the contractor and the firm they are working for are liable if any compliance problems arise. Fines for non-compliance with REPSE regulations can range up to $4,434 MXN or $246,640 USD
An easy way to avoid the compliance problems that arise in Mexico when hiring contractors and full-time employees is to partner with an EOR service provider like Via.
Via's team of legal team of experts in Mexico can give advice and assistance if and when you need to hire a specialized service provider.
As a global EOR provider, Via makes hiring Latin American talent and building your global team seamless and fast. Via helps you manage local HR processes for direct employment such as work visas & permits, benefits, payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts ensure that your company remains compliant while expanding abroad. As your employer-of-record/entity in Latin America, Via assumes responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team.
With Via’s transparent pricing, you can pay full-time employees or contractors in Latin America with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace.