2023, a difficult year for SMEs

Small and medium-sized companies will undoubtedly have a difficult year for 2023, because in addition to the economic complications that are experienced globally, they will also have to comply with various local guidelines that will apply from January of next year.

On a national scale, companies will continue to assume the implications of high inflation and that in Mexico, it may remain for a good part of the following year. Likewise, linked to this phenomenon, the economic recession will continue, which may permeate domestic demand and make the business environment more complicated, mainly in some branches and geographies of the national economy.

But additionally, the new reforms to Mexican laws must be complied with, which will also impact many companies, mainly medium and small, and which refer to issues such as the increase in the general minimum wage, the increase in social security contributions and the increase in in the number of vacation days.

And it is not a question that these increases are not necessary, convenient and deserved for the collaborators of the companies.

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The benefit is clear and fully supported by employers, even forcefully authorized by legislators, at the time. The problem in question is not the benefit that is granted, but who falls to finance the cost associated with those greater benefits.

The clearest example of this mention is the one referring to the increase in social security contributions, which in a very high percentage will correspond to the employer’s part.

Given that IMSS quotas have historically been paid with tripartite participation, that is, where the cost is distributed among workers, the federal government, and employers, this increase in the benefit for workers, which will apply from 2023, will be financed almost exclusively by the employers, which will have repercussions on all companies, with a much greater impact on small and medium-sized ones.

The various analyzes that the Mexican Institute of Finance Executives (IMEF) carries out through its National Social Security Technical Committee, also highlight the impact that companies could have on the increase in the number of vacation days that may accrue workers from next year, since they will have costs that will affect not only their budget, but in some cases, the hiring of more workers to occupy the production spaces of the staff that will be on vacation.

It should be noted that twelve days of vacation -which is the minimum number of vacations that workers will accrue from 2023-, implies for practical purposes, a full fortnight and that work must be covered by the rest of the workers of the companies. Replacing these workspaces will generate higher costs for companies and that cost, on many occasions, will have to be passed on to the services or products offered, running the risk that these price increases will ultimately fall on consumers.

In a large company, it will be easier to occupy these spaces, however, small companies, where work areas with few workers persist, must decide if they should temporarily hire someone else or replace existing staff, taking into account In both cases, a cost to bear. Mitigating these risks will be easier for large companies, but not for smaller companies.

Similarly, it could happen with companies that have minimum wage employees or wages very close to the minimum, since the accumulated increases in the general minimum wage will compact the wages of lower-income workers in the companies.
All these factors are not of minor importance, on the contrary, they will become very important in a conjunctural year for their economies.

In fact, many of these companies may be linked in 2023, to the search for financing and bank loans, which will have a high cost due to the high interest rates that the financial system will be offering.

The Mexican Institute of Finance Executives (IMEF) and its National Social Security Committee applaud all the benefits that help workers, convinced to continue promoting the social vision that the IMEF develops and promotes. However, it launches an alert because the cost of financing this increase in benefits will fall mainly on companies, where small and medium-sized companies will not be able to easily mitigate these increases in their budgets.

The foregoing increases the lack of incentives for informal workers to move to the formal economy scheme, causing them to not achieve social security benefits, which is precisely what is sought when worker benefits grow.

Support for companies through the three levels of government will be essential so that increases in worker benefits do not harm the viability, especially of the so-called SMEs, and there is no risk that, by increasing these benefits, by the way , well deserved by the workers, do not neglect the permanence of those companies that will not be able to cover these strong additional costs.

This alert must be monitored and fiscal and financial mechanisms granted to small entrepreneurs, to take care of millions of these jobs and that they are offered with better salaries and benefits for workers.

* Jorge Barba Pingarrón is president of the National Social Security Technical Committee of the IMEF.