How do I know if I can hire someone as a service provider or if I should hire him/her as a worker?
In Mexico, the difference between a worker and a service provider is that the former performs his activities in a subordinate manner and the latter in an autonomous manner.
The concept of subordination is a bit ambiguous, however it is understood that someone works in a subordinate manner when there is power of command over him, that is, there is a boss who instructs the worker on how to perform his activities.
Additionally, there are some criteria to determine whether or not there is an employment relationship, such as: performing the activities exclusively for the benefit of a person or company, a fixed consideration regardless of the activities performed, a work schedule and/or a work place.
If the relationship with the person performing the activities meets one or more of the characteristics described above, you have a true employment relationship. In this case, even if your contract says otherwise, the worker has the same rights as if he/she were hired under a labor contract and your risks are even greater in case of a lawsuit.
Some criteria we use to determine if you are truly a service provider:
Autonomy to decide how to perform the work.
That you provide your activities for more than 4 companies and none of them represents more than 25% of the income.
That he/she has assistants.
That it earns according to the activities performed.
That it carries out the activities with its own tools and materials.
That it does not have to provide services permanently at the client's office.
That he/she does not have a timetable.
As a general rule, service providers may charge in the following ways:
- Simplified Trust Regime (Resico): They give you an invoice and you pay the following:
ISR: Between 1% and 2.5%. The company retains 1.25% and pays it to SAT.
VAT: 16% (When they are professional services, that is to say that they require a title, two thirds of VAT is withheld, that is to say 10.6667% and it is paid directly to SAT, only one third is deposited).
- Salaried employees: Only the CSF is required, they do not have to submit an invoice, the company withholds ISR and pays it directly to SAT.
ISR is paid: From 1.92% to 35% depending on the amount.
It does not generate VAT.
- Individual with business activity (No Resico):
You must be given an invoice and it is generated:
VAT: 16% is withheld 10.6667% when they are professional services.
ISR: From 1.92% to 35% - 10% is withheld when they are professional services.
Workers do not generate VAT and ISR is withheld (between 1.92% and 35%). Additionally, social security and Payroll Tax (3% in CDMX) must be paid, which can increase the cost of the worker up to 50% Aprox. of what he/she actually receives.
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