The Social Security Law regulates that in Mexico all workers are subject to insurance before the IMSS, that is to say, in Mexico all workers must register before the IMSS - Mexican Social Security Institute, regardless of whether they are temporary or permanent workers:
"Article 12. The following are subject to insurance under the mandatory regime: I. Persons who, in accordance with Articles 20 and 21 of the Federal Labor Law, render, on a permanent or temporary basis, to others of a physical or legal nature or economic units without legal personality, a paid, personal and subordinate service, whatever the act that gives rise to it and whatever the legal personality or economic nature of the employer, even when the latter, by virtue of a special law, is exempt from the payment of contributions".
Article 8 of the Federal Labor Law defines a worker as a natural person who performs subordinate personal work for another natural or legal person. Therefore, in Mexico it is considered that there is an employment relationship when there is any human activity, intellectual or material, in which there is subordination.
Subordination is an essential element to prove the existence of an employment relationship. This is evidenced when a hierarchical superior (employer or its representative) has the power to issue orders regarding the matter, efficiency, place and time in which the work activity must be performed, and the employee is obliged to perform the work activity in accordance with the orders received, provided that they are related to the contracted work. In other words, there is subordination whenever an employer establishes all the characteristics of how a service must be rendered and the worker accepts and complies with them.
Likewise, although subordination is the main element to determine the existence of an employment relationship, there are other elements that may determine the existence of the same, for example:
- Place of work
- Specific working day
- Specific consideration (salary)
- Receipt of all or most of the income by a single person or entity.
In Mexico, social security includes access to health services, insurance for occupational risks and accidents, pensions, childcare and credit, among other benefits.
In the case of having workers who are not registered with the IMSS, they could demand payment of the contributions that were omitted (since part of the social security is paid by the employer and another part by the workers through withholding).
Additionally, in the event of an audit, the Mexican Social Security Institute may detect such omissions, which could result in credits, surcharges, updates and penalties, among which we consider the following as the most relevant:
Fine:
Fine equivalent to between 40 and 100% of the omitted quotas:
"Article 304. When the employers and other obligated parties carry out acts or omissions, which imply non-compliance with the payment of the fiscal concepts established in Article 287, they will be sanctioned with a fine of forty to one hundred percent of the omitted concept."
"Article 287. The fees, the constituent capitals, their updating and surcharges, the fines imposed under the terms of this Law, the expenses incurred by the Institute for improper registrations and those it has the right to demand from non-entitled persons, have the character of tax credit."
Offenses:
Generally the last resort of the state, however, criminal action may be exercised at any time.
Fraud to the social security regimes:
"Article 307. The crime of defrauding the social security regimes is committed by employers or their representatives and other obligated parties who, with the use of deceit or taking advantage of errors, omit totally or partially the payment of employer contributions or obtain an undue benefit to the detriment of the Institute or the workers..."
"Article 308. The crime of defrauding the social security systems shall be punishable with the following penalties: I. With imprisonment from three months to two years when the amount defrauded does not exceed thirteen thousand minimum daily wages in force in the Federal District; II. With imprisonment of two to five years when the amount defrauded exceeds thirteen thousand minimum daily wages in force in the Federal District, but not nineteen thousand minimum daily wages in force in the Federal District, or III. With imprisonment from five to nine years, when the amount defrauded exceeds nineteen thousand minimum daily wages in force in the Federal District."
Generic offense:
"Article 311. A sanction of three months to three years of imprisonment shall be imposed on employers or their representatives and other obligated parties who: I. Do not formulate the registration notices or provide the Institute with false data evading the payment or reducing the amount of the employer contributions, to the detriment of the Institute or the workers, by a percentage of twenty-five percent or more of the tax obligation, or"