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Outsourcing. A Model to Consider
Posted By Ceci On 1 July, 2013 @ 9:15 am In Edition 45,Finance | No Comments
By: Manuel Arango
Professor of Finance and Strategic Planning
ITAM
We have heard a great deal about “outsourcing.” It is such a sui generis topic in the business world that a word has not even been invented to define it in Spanish. In spite of the author’s research and experience on the subject, this is not an academic and informative paper. It is an essay on the true utility, scope and myths in relation to this talked-about topic, which was the pillar of the last reform proposed by the administration of former president Felipe Calderón Hinojosa.
In any planning or strategic planning project, it is necessary to consider the possibility of introducing in the processes of personnel management the contracting of an external company to provide these services. And it is important to fully analyze the benefits and obstacles that this formula offers.
This personnel recruitment program is really a scheme of subcontracting employees who generally work for a customer or third party. The model is mainly developed in three broad areas of action. One is when a business or company solicits an outsourcing company. From now on, we will refer to the personnel management of the “Customer” as the “Third Party.” Another is when the “Third Party” – in addition to being the personnel manager – is the employer and therefore the signatory of individual or collective labor contracts. And the last one to fall into this concept is the company that performs independent external activities, which are usually not strategic or specialized, for the customer.
The first scenario involves the processes required for personnel management. That is, the calculation of the payroll: payment or retribution for salaries and wages that an employee receives for services rendered in the scheme of subordinated work, the compulsory retention of Income Tax (ISR), which is the tax on the Products of the Work and the Social Security Law, SUA for the retention of the worker-employer quota, as well as income and deductions of the company: bonuses, overtime, salary increases, union dues, INFONAVIT, FONACOT credits, life insurance, savings fund. This activity also involves the follow up and monitoring of the admissions, cancelations and salary modifications before the Mexican Social Security Institute, as well as the calculation and payment of the benefits required by law – always taking into account that the employees belong to the Customer, and the Third Party only handles the administration, charging a percentage or amount negotiated.
The second scenario involves all of the first formula with the difference that the employees work for the Third Party, which means it acquires the rights and obligations of an employer. In the daily operation, the following scheme may be present: this company contracts, supervises, trains, promotes and fires, under the instruction of the Customer, and in other cases the Customer itself conducts these activities.
The third scenario is when a company contracts the services of a third party. Generally those services or activities – due to questions of development, specialization or because they do not constitute a strategic nucleus – are transferred outside the company. The personnel that work for the outsourcing company can work physically in the Customer’s installations or in a faraway place.
As in any lawful activity, we must consider the legal and fiscal rules; for this reason the changes set forth in the articles of the Federal Labor Law in matters of hiring and/or subcontracting staff apply.
Adhering to this regulation, we found that in Section a) of Article 15-A wording that cannot include the totality of the same or similar activities, a lack of clarity in the wording, non-specification of the maximum percentage of the workforce that can be contracted with this modality, giving rise to a legal interpretation for each contractor. The private -sector has promulgated the issuing of a regulation in this matter to define and avoid arbitrary interpretations that in the end trigger bad legal practices. At this date of publication, it is not known if a rule or distinctive articles in this area have been developed.
Another area of competence concerns matters of the Mexican Social Security Institute, where there are changes in the articles of the law of the institute itself. Cited in this essay are those involved in the recruitment of staff and management relations. The final ruling was decided in the first quarter of 2013.
This comprehensive analysis is focused not only on the reduction in costs, but also the search for the best service, greater efficiency and higher quality that allow us not to invest or become distracted from the objectives presented by the organization, as in the consideration of transferring measured risks outside the company.
Generally, the smaller the business unit, the greater the tendency to lack resources for the adoption of these rules, for instance, the requirement to have auditors to monitor compliance with this law.
Taking into account that outsourcing does not adhere to a one special type of industry, it may be applicable to small, medium or large enterprises. What is important is that operational, labor, fiscal and, above all, financial aspects must be considered. There is no tried-and-true administrative formula.?
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