Thinking of Outsourcing HR & Accounting? Here Are 4 Reasons You Should
11.22.21
There are a number of advantages to manufacturing in Mexico. These include cost-effective labor, access to a highly skilled and trained industrial workforce, and multiple free trade agreements, including the USMCA. Though with these advantages comes the complexities of setting up a new operation in a foreign country. There are several things that must be in place before a manufacturer can start production.
While some decide to set up their own standalone entity, others seek to minimize their risk and maximize their investment by partnering with a Mexico shelter company. This concept of outsourcing helps U.S. and other foreign manufacturers focus their full attention on production. Meanwhile, a shelter company handles all necessary administrative tasks, including HR and accounting services. If you’re not yet sure if this is the route for you, here are a few benefits to consider.
Saves Time and Money
Navigating foreign regulation is a tricky landscape and can delay productivity when trying to adapt. Additionally, not knowing the specifics of tax, labor, and payroll laws in Mexico can result in hefty fines if there are discrepancies or violations. Working with a Mexico shelter company like IVEMSA minimizes a manufacturer’s risk and liability and saves approximately$13,500 per month vs. operating outside of IVEMSA’s structure.
In addition to HR and accounting services, a shelter company also provides customs compliance, site selection, and other important administrative responsibilities. When compared to operating outside of a shelter, the time to get a new operation up and running is often twice as long.
Ensures Compliance
Another reason it’s beneficial to outsource HR and accounting services to a shelter company is because of their familiarity with compliance laws, which all foreign manufacturers must abide by. For example, there’s a profit-sharing law, which requires companies to annually distribute 10% of their taxable earnings among their employees.
However, there are contingencies that can save companies money. If a manufacturer has been operating in Mexico for less than two years, their participation in this is not required. Nor does this law apply to first-year employees or companies that do not meet the minimum income requirement. The expertise of a shelter company reduces the learning curve for foreign manufacturers and ensures they are meeting compliance requirements while saving money.
Handles Payroll Processes
There are similar regulations in Mexico as there are in the U.S. and other parts of the world. Social security withholdings are part of the payroll process in Mexico. Each foreign operator must contribute 15-25% of an employee’s salary to Social Security Institute, Mexico’s local government system. A shelter company sets up payroll to ensure this is being distributed as required to avoid penalty fines or the risk of an audit.
Offers Competitive Recruiting Advantage
Additionally, when it comes to HR and recruiting, Mexico is known for its highly skilled technical workforce which means competition is stiff when hiring new employees. Delegating HR and recruiting services to a shelter company provides manufacturers a competitive advantage.
Through a shelter’s built-in network and familiarity with the hiring landscape in different regions, it helps companies hire the right fit for their positions more efficiently. It also ensures the manufacturer is following all local labor laws and cultural expectations with regard to salary and benefits.
Getting a business off the ground takes extreme planning and strategy, even more so when operating in a foreign country for the first time. To prevent disruption from production, partnering with a Mexico shelter services provider like IVEMSA can help streamline the process.