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Mexico government’s old-fashioned notions about work are causing challenges both for the staffing industry and workers. The underlying issue: unfair treatment of workers. As a result, Mexico’s president, Andrés Manuel López Obrador, called for a ban on staffing firms last year. Last month, the country’s Congress approved legislation that, while not an outright ban, greatly restricts staffing.

What does this mean for the industry?

“It’s really unusual that you a restrict a form of work that you know is formal,” said Martín Padulla, managing director of staffingamericalatina and an SIA partner. His firm studies the Latin American staffing market.

To begin with, the rules — which take effect in September — prohibit traditional staffing with the exception of allowing companies to supply “specialized services” outside of a client company’s primary business. As a result, client companies will have to focus on a key objective or one competency in order to continue using staffing firms. For example, a company that sells T-shirts might focus on sales, leaving the T-shirts production, washing, logistics, etc. to staffing firms under the specialized services bucket. Staffing firms are not going to invoice personnel, instead they will invoice specialized services.

Some fear the legislation could thrust more people into informal work. People who work through staffing firms would lose their jobs. All this amid the recovery from Covid that needs to take place. The fact is  a large percentage of companies in Mexico that use staffing firms are small companies.

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It’s a few bad apples that have spoiled the staffing barrel. There are unfair competitors who are causing difficulty in the market, and the government has decided to go after the industry as a whole rather than just the bad actors, says Padulla. “I think they (the government) achieved their objective in terms of the political issues,” he says. “They show the reform as very beneficial for the workers; of course, it is not true.”

Further, the law doesn’t go far enough to remove the bad actors who cause the problems in the first place and are likely to remain.

On the bright side, Padulla believes the law could, in fact, highlight the importance of staffing. It could lead to a new framework for temporary employment and, in the long term, ratification of ILO Convention 181 that sets guidelines for governments when implement rules regarding temporary staffing.

And in the meantime, staffing firms are scrambling to get things moving as the legislation has provided no time for employers to restructure their operations. Consequences of not complying with the law:  fines and the ability of the government to deduct taxes.

For more on the legislation, see this report by law firm Littler Mendelson in JD Supra.