Break The Five Most Common Outsourcing Reform Myths

Break the five most common outsourcing reform myths

With 41 days to comply with the new regulation on Outsourcing, which comes into force on July 24, five myths prevail among Mexican companies. The new regulatory framework applies to companies of all sizes, however, SMEs are under more pressure because they do not have great internal support or consulting firms to carry out this transition.

In addition to the rush to comply with the new regulations, it must be taken into account that there is some confusion about the functions that can continue to be contracted through outsourcing. For SMEs, companies from 10 to 200 or 300 employees, internalizing the functions that were traditionally handled in outsourcing is complex and represents a challenge. Automation and support are key to successfully undergo this transformation and avoid the associated fines.

To dispel the main myths that exist regarding the new regulation, Business Republic organized a webinar to offer real facts and advice for the new regulation. At the event, Carlos Marina COO of Worky , Lorena Atondo and Gabriel Fernández, both from Reynoso & Atondo, Abogados, SC, agreed that this situation is significant, since it impacts more than 4.7 million workers, 17% of the formal jobs in the country.

And it is that urban myths and fake news abound that cause uncertainty and concern among clients and prospects, Carlos Marina warned.

The myths:

  1. “I can continue with my current outsourcing scheme, since the authority does not have the resources to detect it.”
  2. “I can avoid the new regulations by passing my collaborators to schemes of incorporation into the tax regime, fees, cooperatives or unions.”
  3. “We can pay a minimal amount in cash and the rest of the compensation can be handled through bonuses, commissions and vouchers.”
  4. “I don’t worry about the compensation schemes of the past, as there are no retroactive effects.”
  5. “The internalization of the payroll is too expensive, I better risk possible fines”

Each of these statements are not only false but risky. The specialists clarified that the new regulations are designed to improve the conditions of the workers and that in that spirit, the authority has organized itself to avoid precisely any act of simulation. At this juncture, solution providers have emerged that seem miraculous, but in reality only expose the company and its human capital to unnecessary risks.

Advice

“My advice to all employers is to take preventive measures to comply in a timely manner and to focus on the positive aspects that the internalization of staff brings in terms of employee satisfaction, loyalty, and company productivity,” commented Lorenia Atondo .

For his part, Gabriel Fernández, added that the sanctions are structured to promote broader compliance, since they range from 178,000 pesos to more than 4 million and even criminal sanctions are contemplated. It states, “The authority has full visibility of these myths and others, and is organized to detect and punish through mechanisms of collaboration between institutions and information exchange.”

The internalization of workers represents a change of capital dimensions for companies that currently depend on outsourcing for the management of their human resources. “For small and medium-sized companies, which do not have specialized departments or the support of consultants and law firms, this transition becomes even more delicate,” commented Marina, highlighting that Worky is dedicated precisely to companies with 20 and up to 200 employees for whom offers support throughout the internalization process with a 100% Mexican management platform designed to be affordable and relevant for this segment.

Hanz Dieter Schietekat, CEO of Business Republic and who moderated the event, ended the session by urging attendees to act promptly. “I hope it has become very clear that compliance with the new outsourcing standard is imminent and mandatory. Remember that if a solution sounds too good to be true, it probably is. With less than a month and a half remaining for compliance, it is imperative to have the right tools and advice. ”

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Source: Break the five most common outsourcing reform myths

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Critics:

Outsourcing is an agreement in which one company contracts a service bureau to be responsible for a planned or existing activity that is or could be done internally, and sometimes involves transferring employees and assets from one firm to another.

The term outsourcing, which came from the phrase outside resourcing, originated no later than 1981. The concept, which The Economist says has “made its presence felt since the time of the Second World War”,often involves the contracting of a business process (e.g., payroll processing, claims processing), operational, and/or non-core functions, such as manufacturing, facility management, call center/call centre support).

The practice of handing over control of public services to private enterprises, even if on a short-term limited basis,[7] may also be described as “outsourcing”.

Outsourcing includes both foreign and domestic contracting,and sometimes includes offshoring (relocating a business function to a distant country) or nearshoring (transferring a business process to a nearby country).

Offshoring and outsourcing are not mutually inclusive: there can be one without the other. They can be intertwined (offshore outsourcing), and can be individually or jointly, partially or completely reversed,involving terms such as reshoring, inshoring, and insourcing.

  • Offshoring is moving the work to a distant country. If the distant workplace is a foreign subsidiary/owned by the company, then the offshore operation is a captive, sometimes referred to as in-house offshore.
  • Offshore outsourcing is the practice of hiring an external organization to perform some business functions (“Outsourcing”) in a far-off country other than the one where the products or services are actually performed, developed or manufactured (“Offshore”).
  • Insourcing entails bringing processes handled by third-party firms in-house, and is sometimes accomplished via vertical integration.
  • Nearshoring refers to outsource to a nearby country.
  • Farmshoring refers to outsourcing to companies in more rural locations within the same country.
  • Homeshoring (also known as Homesourcing) is a form of IT-enabled “transfer of service industry employment from offices to home-based … with appropriate telephone and Internet facilities”.[16][17] These telecommuting positions may be customer-facing or back-office,and the workers may be employees or independent contractors.
  • In-housing refers to hiring employees.
  • An Intermediary is when a business provides a contract service to another organization while contracting out that same service.

See also

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