In recent years, several countries in Latin America have reformed their labor laws, particularly in relation to subcontracting. These changes have introduced new obligations for both contracting companies and service providers. If your company uses third-party services, it is crucial to ensure compliance with their labor, tax, and social security obligations.
Subcontracting is no longer just an operational practice, but a legal responsibility that can lead to serious consequences if not managed properly. Legislative reforms have established that contracting companies can incur joint liability if their contractors fail to pay wages, benefits, or taxes for their employees. This means that if a contractor fails to make payments, the contracting company could be held responsible for those payments.
- Joint liability: If your company subcontracts services and the contractor fails to meet their labor or tax obligations, you could be legally responsible for those payments. This includes wages, benefits, taxes, and social security.
- Contract review: It is essential to review and update contracts with suppliers to ensure they align with legal reforms and that contractors have the necessary certifications and registrations required by law.
- Ongoing monitoring: Continuous oversight of contractors’ labor and tax obligations is key to avoiding risks and penalties. Companies must establish verification processes to ensure contractors comply with all relevant regulations.
- Risk of penalties: Failing to comply with these regulations can result in financial fines and severe penalties for the contracting company.
- Review and update contracts: Make sure contracts with contractors include clear clauses specifying the labor and tax responsibilities of both parties, as well as mechanisms for verifying compliance.
- Verify contractor compliance: Implement a monitoring system to ensure contractors are up-to-date with payments for wages, taxes, and social security. Use auditing tools or consult official records.
- Request compliance documentation: Ask your contractors for the necessary documents to prove they are up to date with their labor and tax obligations, such as payment receipts, proof of social security registration, tax declarations, and more.
Is your company prepared to comply with the new labor regulations?
