December 3, 2018

As of December 1, 2018 Mexico has a new President. President Andres Manuel López Obrador will be President of Mexico for the next 6 years. There are still many questions about the programs he will develop and promote, but he stated in his inaugural address that starting January 1, 2019 the minimum wage will double, the IVA (Value Added Tax) in the border zone will be lowered to 8% from 16%, and income tax will be lowered to 20%.

A major reform to the Federal Labor Law is currently being discussed in Congress and we have 4 new Health and Safety Standards that will be published soon. The NOM-035-STPS-2018, Occupational psychosocial risk factors – Identification, analysis and prevention was published October 23, 2018 (available in English) and the new ergonomic standard for manual loading and unloading, “NOM-036-1-STPS-2018, was published November 23, 2018.

Many of you have been asking me for information on Government programs that you might be able to take advantage. I have spent some time researching the following programs that can mean big savings if you can take advantage.

One way that companies can increase compensation without increasing the income tax or Social Security is through a Savings Fund (Fondo de Ahorro). The Savings Fund is a very important savings mechanism. Basically, it consists of a savings program of a determined amount of money retained from the worker’s pay and matched equally by the employer. The worker can only withdraw this amount once a year.
The matching payments made by the Employer are deductible expenses for the company and exempt from income tax or Social Security. The following requirements apply:
The amounts cannot be greater than 13% of the worker’s wages (when they are larger they are subject to income tax.
The Employer must match the amount retained from the worker’s wages.
Here is an example:

UPDATE YOUR RISK ASSESSMENTS WITH THE NEW REQUIREMENTS

The new Ergonomic Standard “NOM-036-1-STPS-2018, Occupational ergonomic risk factors -Identification, analysis, prevention and control. Part 1: Manual load handling” was published

in the DOF on November 23, 2018 and will take effect January 4, 2020

This new standard will be available in translation this week and available to the Deluxe Package subscribers and the Health and Safety Package subscribers.

This standard is designed for analyzing the risk from manual loading and provides a process and guide for risk assessment. The standard takes effect January 4, 2020 so that companies will have time to develop training for manual loading and to update risk studies for each job position with the ergonomic risk from manual loading and unloading.

By January, 2020 Companies should develop and provide the following:
• Training
• Updated risk assessments
• Monitoring of workers’ health
• Units of Verification

The standard contains a formula for choosing a random selection of employees to review and the procedure for risk assessment from manual loading and unloading. Companies can do their own training based on the standard or hire 3rd parties. If you hire 3rd party trainers, you must make sure they have certification from the STPS as instructors or the training will not be considered as valid.

We are developing training for this standard; you can request a quotation to provide this training. We can prepare your RISK ASSESSMENTS or train and assist you to update them.

TAKE ADVANTAGE OF THESE GOVERNMENT PROGRAMS

Many of you have been asking me for information on Government programs that you might be able to take advantage. I have spent some time researching the following programs that can mean big savings if you can take advantage.

SAVINGS FUND – FONDO DE AHORRO

One way that companies can increase compensation without increasing the income tax or Social Security is through a Savings Fund (Fondo de Ahorro). The Savings Fund is a very important savings mechanism. Basically, it consists of a savings program of a determined amount of money retained from the worker’s pay and matched equally by the employer. The worker can only withdraw this amount once a year.
The matching payments made by the Employer are deductible expenses for the company and exempt from income tax or Social Security. The following requirements apply:
The amounts cannot be greater than 13% of the worker’s wages (when they are larger they are subject to income tax.
The Employer must match the amount retained from the worker’s wages.
Here is an example:

Objectives of the Savings Fund
These are some of the objectives of the Savings Fund:
Estas son algunas de las características y objetivos de los fondos de ahorro:
• Promote the habit of saving by the workers and improve their living standard
• The Fund is exempt from Social Security and is not integrated into the Salary for Social Security purposes.
• As long as the amounts contributed do no pass the limit of 10 times the minimum wage with the 13% payment, it will be exempt from income tax, if it exceeds the amount it is 100% taxable.
According to the Income Tax Law (Ley de Impuesto sobre la Renta) – Article 29, section VII and Article 31 section XII of the law state that the Savings Fund is a social welfare expense for the company and becomes a deductible expense, provided it complies with the law.

• It must be available to all the workers of the company – the same for Administrative personnel as well as general laborers.
• A written plan is required.

Remember the fund can be withdrawn only:
• At the end of the labor relation
• One time per year

PROGRAM FOR A FISCAL INCENTIVE – REDUCTION OF THE STATE PAYROLL TAX

The following program is a Baja California state program and allows companies that are expanding to apply for a discount or exemption for from up to 5 years of the State payroll tax. The program is applicable to companies that are expanding and adding new jobs.

There is an application form that awards points for:

• the number of employees (direct and indirect),
• the salary levels,
• the amount of the investment,
• investment in technology,
• employee benefits (food service, public or private transport, childcare
• clean technology
• renewable energy sources
Based on the number of points obtained, a company will be given a certificate from SEDECO that will discount the payroll tax for the amount and time period in the certificate.

CITATION: “Law for the Promotion of competitiveness and economic development for the State of Baja California” (Ley de Fomento a la Competitividad y Desarrollo Económico para el Estado de Baja California) and its Regulation of the Law for the Promotion of competitiveness and economic development for the State of Baja California (Reglamento de la Ley de Fomento a la Competitividad y Desarrollo Económico para el Estado de Baja California)

APPLICABLE TO:

• Start up Companies
• Companies with an expansion project
• Companies with water treatment and reuse system

BENEFITS:
• 1 – 5 years of 25 to 100 percent discount of the State Payroll tax
• 20 to 50% for water connections and sewer fees
• 30% discount on monthly water bill

REQUIREMENTS FOR AN EXPANSION PROJECT:
• Application letter
• Payroll tax exemption request
• Business plan
• Acta Constitutiva of the company (Incorporation document)
• Letter with identification of the legal representative
• Las payroll tax payment

STATE GOVERNMENT DEPT. THAT IS RESPONSIBLE
**• SEDECO – Secretary of Economic Development

FEDERAL HEALTH AND SAFETY CERTIFICATION PROGRAM – (AUTO GESTIÓN)

CITATION: Federal Labor Law, Regulation for Occupational Health and Safety, Social Security Law

APPLICABLE TO: All companies

BENEFITS: Companies with certification will be granted a discount on the Risk Rate (Prima de Riesgo) for Social Security. Social Security sets a risk rate factor for a company based on accidents and their industrial classification. The rate for most new companies is around 7%, that means 7% cost on top of your payroll. With low accidents a company can lower this rate by 1% per year to the lowest rate of .005. Many companies see a reduction by up to 4% off the monthly cost of Social Security.

A company that has certified their Health and Safety program through the Federal Auto-Gestión program have their risk rate calculated on a lower base rate and it can mean a substantial reduction in Social Security payments for all workers. Certification is achieved by verifying compliance to all applicable health and safety standards by means of a series of audits from Federal inspectors. Companies that enroll in the program will be inspected but will be exempt from fines. Once they are certified, they will not be inspected for 3 years and will not be subject to fines.

REQUIREMENTS: Requires the company to have a compliant health and safety program.

FEDERAL GOVERNMENT DEPT. THAT IS RESPONSIBLE: STPS – Secretary of Labor and Social Welfare.