The Impact of REPSE on Nearshore Call Center Outsourcing in Mexico: A Comprehensive Analysis

Nearshore call center outsourcing is thriving in Mexico. The country is known for its highly skilled talent, cost-effective labor, and sustainable digital ecosystems. As such, hiring customer service representatives (CSRs), information technology (IT) professionals, and virtual assistants (VAs) in Mexico is a smart move.

However, outsourcing reforms have posed challenges to service providers and companies outsourcing to the country. They must comply with the requirements of the Registro de Prestadoras de Servicios Especializados u Obras Especializadas (REPSE).

What is REPSE, and how does it impact Mexican call center outsourcing? Read below to find answers to these questions.

Understanding the Mexican Outsourcing Law Reforms

Stakeholders in Mexico’s outsourcing industry must understand the country’s legal reforms. Both client companies and service providers should consider learning the applicable laws and regulations governing the industry, including REPSE registration and compliance.

The Mexican government amended the Federal Labor Law (FLL) in April 2021, along with the Social Security Law and the National Workers’ Housing Fund Law. The FLL reforms sought to create REPSE, a registry listing for businesses providing specialized services. REPSE primarily aims to protect workers’ rights and prevent labor exploitation.

Mexico’s amendments to the tax code, income tax law, and value-added tax (VAT) took effect in August 2021. These reforms seek to prevent tax evasion by companies, particularly in the outsourcing industry. 

The Mexican outsourcing reforms aim to address the following evil practices in outsourcing:

• Labor exploitation. Some companies engaged in outsourcing employ Mexican workers as contractors but make them handle full-time employee (FTE) obligations. They would deny them the benefits they deserve, such as profit shares and bonuses. Thus, the reforms seek to reclaim workers’ rights by providing benefits outlined in labor agreements.

• Tax evasion. Some companies take advantage of outsourcing arrangements to avoid their tax obligations. They hire Mexican contractors treated as FTEs so they can avoid withholding tax. Likewise, contractors sometimes opt not to pay their taxes. With REPSE, the government can better prevent tax evasion and promote tax compliance.

The Mexican outsourcing law reforms mainly focus on labor law. However, the amendments cover several related laws. Consider the following:

• The Federal Labor Law seeks to regulate outsourcing practices and ensure compliance with labor rights. The law explicitly covers the prohibition of personnel outsourcing for core activities and the establishment of REPSE.

• The Social Security Law guarantees that all employees receive proper social security benefits and protections stipulated in the law.

• The National Workers’ Housing Fund Law covers provisions to protect workers’ rights. The law ensures access to benefits offered by the institute, such as housing benefits and loans.

• The Federal Fiscal Code aims to guarantee tax compliance by regulating outsourcing arrangements to prevent tax evasion. The law ensures that companies fulfill their tax obligations.

• The Income Tax Law seeks to prevent tax evasion by imposing stricter regulations. The law guarantees proper income tax reporting and compliance.

• The VAT Law sets clear guidelines for outsourcing providers and beneficiaries on VAT-related tax responsibilities.

Understanding what business process outsourcing (BPO) is and how the above reforms affect Mexican outsourcing is crucial. 

The legal and regulatory reforms cover the obligations of BPO service providers and companies outsourcing to the country. Simply put, they are required to register with the government and pay all applicable taxes and benefits.

In the following sections, learn about REPSE and its impact on nearshore call center outsourcing in Mexico.

What Is REPSE?

REPSE is short for Registro de Prestadoras de Servicios Especializados u Obras Especializadas. It translates to the Registry of Providers of Specialized Services or Specialized Works in English. 

REPSE is a registry listing for companies providing specialized services or self-employed individuals. Its purpose is to ensure compliance with labor laws and regulations, particularly in the Mexican outsourcing industry. Businesses looking to outsource and employ contractors from the country can only hire personnel registered on the list.

The need for labor legislation to promote vendor transparency and accountability is nothing new. The World Employment Confederation (WEC) reported about 900 service providers engaged in labor outsourcing in Mexico. However, only 100 vendors were registered with the Instituto Mexicano del Seguro Social (IMSS), Mexico’s social security system.

This service provider problem eventually paved the way for the establishment of REPSE. The Mexican government required companies and specialized service providers to register until May 2021 for legal and regulatory compliance. Non-compliant vendors would be subject to legal and financial consequences.

REPSE compliance applies to BPO providers offering front- and back-office outsourcing services, which are considered specialized services. Companies engaged in nearshore call center outsourcing in Mexico should hire service providers listed with REPSE to avoid legal ramifications.

Here is how REPSE can impact businesses outsourcing to Mexico:

• Companies can only hire specialized services. You can only outsource non-core operations to BPO service providers in Mexico. Non-core tasks are processes outside of the primary corporate purpose of your business. For example, your e-commerce business can delegate data entry and inventory management to Mexican providers.

• Vendors must be listed with REPSE. You should hire a BPO service provider registered with REPSE. Only firms without debts with the IMSS, Instituto del Fondo Nacional de la Vivienda para Los Trabajadores (Infonavit), or Servicio de Administración Tributaria (SAT) can register as specialized service providers. So, working with an unlisted Mexican provider can put your business at risk.

• The company and its service provider are jointly liable. Not only is your BPO service provider legally accountable, but you are also responsible for ensuring REPSE compliance and obligations. You may also be subject to hefty fines and penalties if your contracted provider fails to comply.

• Companies must provide reports to Infonavit. You must submit reports to Mexico’s employee housing agency every four months. The report includes employer obligations, outsourcing contract data, employee information, and base salaries.

Key Business Obligations Under the New Amendments

The Mexican outsourcing law reforms outline the obligations of both the “beneficiary” and the “subcontracting company.” Your business is the beneficiary, as the company receives the outsourced services. On the other hand, the subcontracting company is the BPO service provider.

When considering nearshore call center outsourcing in Mexico, ensure you understand your responsibilities and those of the contractor you hired under the new amendments. 

Here are some of the vital obligations to keep in mind:

• Registration. The subcontracting company must officially register with the Mexican Ministry of Labor. This registration ensures your hired BPO provider complies with the government’s requirements and operates within the legal framework.

• Tax identification number. The subcontracting company must have a valid tax ID number. This ID is crucial for tax purposes, allowing the government to monitor the company’s financial activities and tax obligations.

• Quarterly report. You and the subcontracting company must submit a quarterly report to Infonavit. This report outlines detailed information about the outsourcing contract, including the number of workers involved, the services provided, and compliance with labor regulations. 

• Profit sharing. You must ensure that BPO workers receive their fair share of the profits. Mexican labor law mandates that the service provider allocate 10% of its taxable income to workers. However, the maximum individual share equals the employee’s three-month salary.

• Year-end bonus. As with profit sharing, you must also ensure that BPO employees receive their year-end bonus or aguinaldo. This year-end bonus is an annual mandatory payment, along with health and retirement plans.

• Tax receipts. The subcontracting company must provide proper tax receipts, such as withholding tax payments, employer contributions, and employee salaries. The goal is to ensure transparent financial transactions and prevent tax evasion practices.

The Impact of REPSE on Businesses and BPO Call Centers in Mexico

The Mexican outsourcing law reforms have significantly impacted BPO service providers and businesses outsourcing to the country. Specifically, REPSE registration and compliance have required stakeholders’ time, money, and effort.

At the same time, these reforms have positively influenced companies employing customer service and technical support outsourcing. They can help those engaged in nearshore call center outsourcing and improve the Mexican outsourcing industry.

Here is how REPSE affects companies and BPO call centers in Mexico:

• BPO operations. The REPSE registration has led to a fundamental change in how Mexican BPO call centers operate. As per the outsourcing reform, call center operations must be non-core to be eligible for outsourcing. This means you can only outsource tasks outside your business’s core activities.

• Regulatory compliance. REPSE compliance has impacted service providers. BPO call centers must comply with the REPSE requirements for specialized services. These requirements entail registering with the Ministry of Labor, reporting to Infonavit, and providing employee benefits.

• Worker conditions. One of the primary objectives of FLL and REPSE is to reclaim workers’ rights. BPO employees can enjoy full benefits stipulated in the labor law agreements, such as fair wages, social benefits, profit shares, year-end bonuses, and other rights.

• Service quality. While the outsourcing reforms have had some repercussions in the BPO industry, their ultimate goal is to improve the quality of specialized services. The government can create a more effective outsourcing sector by ensuring call centers focus on non-core tasks and meet REPSE requirements.

Learn more about the REPSE implications for businesses (for both employers and employees).

What REPSE Means to Employers and Employees

Now that you have learned the impact of REPSE on BPO call centers, the question remains: what does REPSE mean to employers and employees? Here is what you need to know:

Employers:

Employers, whether BPO service providers or companies engaged in nearshore call center outsourcing, should take note of the following:

• Vendors must create a new business model offering specialized services (administrative work, recruitment, call center operations, etc.). They must register with REPSE and comply with the requirements.

• Local companies employing a third-party workforce must terminate their service agreements and directly hire employees. Foreign companies outsourcing to the country must hire REPSE-registered BPO firms.

Employees:

Employees working as contractors for nearshore call center outsourcing should consider the following:

• BPO employees under a non-registered employer could lose their jobs and should consider transferring.
• BPO employees can continue their employment by handling specialized services only.
• BPO employees already managing non-core functions can continue with business as usual.

What Businesses Can Do Under REPSE

Nearshore call center outsourcing in Mexico proves beneficial in several ways. However, REPSE compliance has had repercussions on outsourcing activities.

Businesses outsourcing customer service, IT support, or data entry services must take action to keep up with the outsourcing reforms. Here is what you can do:

• Business as usual for non-core activities. Companies seeking outsourcing arrangements for tasks considered “non-core” to their business functions can continue their outsourcing practices without significant changes. 

• Consider offshoring for core activities: Companies looking to outsource activities related to their core operations can consider offshoring. Offshoring entails shifting business operations to Mexico instead of contracting specific work to third-party service providers.

Best Practices for Nearshore Call Center Outsourcing in Mexico

The industry will continue to thrive despite REPSE’s impact on Mexican outsourcing. According to Statista, the BPO market in Mexico could grow from $3.87 billion in 2023 to $4.90 billion by 2027, with a compound annual growth rate (CAGR) of 4.83%.

Because of the Mexican outsourcing reforms and REPSE requirements, companies must implement effective strategies. Below are the best practices for nearshore call center outsourcing in Mexico.

• Select the right BPO service provider. Choose a reputable and experienced outsourcing partner in Mexico. Look for a call center specializing in your industry with a record of providing high-quality services. Conduct thorough research and evaluate prospects based on workforce, technology, resources, and pricing.

• Guarantee legal and regulatory compliance. Ensure that the outsourcing partner complies with all relevant laws and regulations, including labor laws, tax regulations, and data protection requirements. The goal is to avoid legal or regulatory compliance issues down the line.

• Keep adequate contracts. Set aside a detailed record of each contract to comply with Infonavit’s report request. As mentioned, you must submit this every four months for REPSE compliance. More importantly, ensure each record is complete, accurate, and up-to-date for submission.
• Ensure communication and language proficiency. Effective communication is essential in call center operations. Ensure that the call center agents are fluent in the required languages and have excellent communication skills to provide a seamless customer experience.

• Establish quality assurance and training. Implement solid quality assurance (QA) processes to monitor and evaluate the performance of call center agents. Provide continuous training and feedback to improve customer service and overall efficiency.

• Leverage digital tools and communications technologies. You can use contact center as a service (CCaaS) software for your call center operations. Also, consider incorporating the latest innovations, such as robotic process automation (RPA), artificial intelligence (AI), and cloud computing.

• Implement data security and privacy. Protect customer data and ensure the call center has robust data security measures. Consider signing non-disclosure agreements (NDAs) and outlining data handling protocols to safeguard sensitive information.

• Capitalize on scalability and flexibility. Flexibility is vital to accommodate seasonal fluctuations or sudden changes in call volume. Thus, hire an outsourcing partner that offers a flexible contract and can scale its operations according to your business needs. 

• Ensure cultural compatibility. Cultural similarity can ensure effective collaboration and enhance customer satisfaction. Look for a call center with agents familiar with your business culture and target market. 

• Require performance metrics and reporting. Establish clear performance metrics and reporting systems to track the call center’s performance. Review key performance indicators (KPIs), such as service efficiency, quality control, and customer satisfaction (CSAT).

• Establish regular communication and feedback. Maintain open and regular communication with your outsourcing partner. Provide performance feedback, address issues promptly, and collaborate to continually improve processes.

• Set up disaster recovery and business continuity plans. Ensure the call center has robust disaster recovery and business continuity plans. These contingency plans are vital to reducing the impact of disruptions during unforeseen events or emergencies.

• Visit the call center in Mexico. Visit the call center facility whenever possible to meet the team, observe operations, and understand their working environment. This personal interaction can establish good relationships, build trust, and strengthen the business partnership.

The Bottom Line

Outsourcing reforms have significantly impacted nearshore call center outsourcing in Mexico. Businesses outsourcing to the country should work with service providers registered in REPSE and guarantee all applicable taxes and benefit payments.

Comply with all the REPSE requirements outlined above. Understand how REPSE can impact your business and contracted BPO call center. More importantly, consider the best practices recommended above when outsourcing to Mexico.

REPSE compliance might be daunting for businesses outsourcing to the country and their service providers. But ultimately, it protects both employees and employers, uplifting the nearshore outsourcing industry in Mexico.

Ready to outsource your call center to Mexico? Unity Communications can help you comply with the REPSE requirements and optimize your operations. Let’s connect today to get started with outsourcing!