Common Problems of Companies Who Don’t Use Mexico Shelter Services04.30.21
Operating in a foreign country involves a learning curve, which can often be costly and time-consuming. Fortunately, manufacturing in Mexico is made easier when under the guidance of an experienced shelter services provider. Although each manufacturer faces its own set of problems, there are several common challenges that can be immediately avoided by working with a shelter. Among the most frequently experienced are:
- Timeline delays due to trade compliance, including certification approval for the IMMEX program
- Labor law challenges unique to Mexico
- Problems that can arise when individually staffing third-party resources
While there are a few different ways companies can set up operations in Mexico, the majority would agree hiring an experienced shelter company makes the process more efficient and far less troublesome. By further exploring these common problems and how a shelter can help with remedying them, it will help determine which method will work best for you.
Timeline Delays Regarding Compliance and Certifications
The first major problem companies face when operating in Mexico is the wait time for VAT certification and IMMEX program approval. There are several boxes that must be checked before they’re considered in compliance to operate. As a standalone entity, this process can take several months to complete.
When operating as a standalone, manufacturers must individually apply and await approval for all certifications related to the IMMEX program in order to become a licensed maquiladora in Mexico. This is in addition to obtaining building permits, managing trade compliance, and abiding by other operational requirements of the region.
When under a shelter company, manufacturers have the advantage of having all necessary certifications and permits already in place. It also alleviates the legal risk of operating as a new entity in Mexico. This helps to expedite setup, reduces scrutiny by authorities, and saves valuable time and money. For example, per the maquiladora program, manufacturers working under a shelter are automatically exempt from the 16 percent VAT tax on all temporarily imported goods.
A shelter operator also monitors health and safety protocols and is able to respond to them quickly. Shelter organizations often have INDEX (Mexico’s national maquiladora association) members as part of their team who can communicate the most up-to-date information. Those that don’t use shelter companies are left to figure out the changes on their own and can possibly face fines or delays in their operations as a result.
Labor Law Challenges Unique to Mexico
In addition to problems with compliance, many manufacturers are unaware of the specifications regarding Mexico’s labor laws. They are vastly different from how employment is handled in other countries, particularly with regards to how employees are terminated.
Manufacturers operating in Mexico must build a case for the labor board that justifies employee termination. If not done properly, it can be costly to the company in terms of back severance pay and the possibility of being sued by the former employee. Employers must provide a written notice stating the cause of termination and date of action. Although, employees have a right to refuse this notice as it goes before the labor board.
Furthermore, labor laws outline particular contractual obligations manufacturers must be aware of when assigning roles to workers. For example, when your HR team does not justify the dismissal of a full-time employee, the worker may be entitled to severance pay equaling three months’ worth of wages, as well as 20 days’ worth of wages for each year the employee worked. This amount is equal to the employee’s most recent salary and benefits.
As you may conclude, having the expertise of a shelter company that takes care of these complex issues from day one will save you a lot of labor troubles and money, since they can help to justify the dismissal. If the dismissal is justified, you are not required to pay the 90-day severance payment.
Mexico’s labor laws are in place to protect workers, which leaves foreign manufacturers vulnerable if unaware of what’s required. A shelter services provider works as a partner to assist in managing this burden and ensure proper steps are taken regarding all possible scenarios.
Finding the Right Fit with Third Parties
Another common problem companies face when manufacturing in Mexico is finding third-party personnel to take on the administrative responsibilities necessary to set up and successfully manage their operation. This includes hiring for several departments, including human resources, accounting, and legal, among others. Each must work well both separately and together in a seamless way. Unfortunately, the wrong fit in any of these areas becomes a liability for the company and can deter efforts.
On the other hand, when partnering with a shelter services provider like IVEMSA, companies receive an all-in-one solution from day one that works as an extension of the manufacturer. There are several advantages to this, one being that there’s already a team of experienced professionals with set processes in place. Furthermore, there’s insight into changes in Mexico that will help manufacturers stay competitive and operate in the most cost-effective manner.
Benefit from Built-in Solutions with a Shelter Services Provider
Make manufacturing in Mexico as problem-free as possible by working with IVEMSA. With built-in solutions and a history of success to benefit from, it creates opportunities for expansion with setup in as little as three to four months.