Labor, social security and operational, the triple impact of the vacation reform

The holiday reform It has been in force since January 1, which means that companies must make a series of changes that go beyond the labor field. The legal modifications also require adjustments in operational and social security aspects.

Specialists from the EY firm emphasize that compliance with the new vacation regime not only depends on adjustments in labor matters, there are other areas where changes are required within companies to adapt to the reform.

“It is important to mention that this reform arose as an initiative motivated by reports such as that of the World Health Organization (WHO), which estimates that Mexico has a 75% prevalence of stress in its workforce, a situation that places it in the first place above the leading economies in the world such as China or the United States; and that it ranked as the country with the fewest vacation days in the world, below nations like Cuba, Panama or Nicaragua, which offer 30 days from the first year of work,” said Jacqueline Álvarez, partner of the labor area of ​​the firm.

In this sense, for companies to apply the vacation reform in their organizations, they must take into account adjustments in three dimensions:

» Labor impact

The first change, specialists point out, is in labor matters. In addition to increasing vacation days, the amount that workers will receive for vacation bonus will be older Although this benefit remains at 25% of the salary received on rest days to which the person is entitled, as of this year said calculation will be on a higher basis.

In the workplace, another important point that companies should consider this year is that the extension of the rest period will influence the settlement amounts of the labor force. When an employment relationship ends, the proportional part of vacation that must be paid to a person will be higher.

In addition, “it is necessary to take into account that the Federal Labor Law (LFT) establishes that the worker will enjoy 12 continuous vacation days. Said period, at the discretion of the worker, may be distributed in the manner and time required. In addition, to grant vacations in periods of less than 12 days, the consent of the workers will be necessary and that this be formalized in the Individual Work Contracts, Collective Work Contracts and Internal Regulations and, if they exist, in the vacation policies ”, added Alejandro Caro, partner at EY Law-Labor.

The penalty for failing to comply with the new vacation regime ranges between 5,187 and 25,935 pesosthis fine can be applied per affected worker and does not exempt companies for correcting irregularities.

» Impact on social security

The quotas that employers pay to the Mexican Institute of Social Security (IMSS) is another aspect that will have changes when the vacation reform begins. The contribution base salary (SBC) is updated when a fixed benefit is modified, as is the case of the vacation bonus.

“We must not lose sight of the fact that in accordance with the provisions of the Social Security Law (LSS), vacation premium payments are part of the payment base of worker-employer quotasTherefore, finally, employers must evaluate whether the vacation premium payments made during 2023 generate amounts pending integration,” said Francisco Ibarra, Senior Manager of People Advisory Services (PAS)-Social Security.

On the other hand, in terms of repercussions on Financial statementsCésar Villegas, partner of Accounting and Financial Advisory at EY, pointed out that the effect is on short-term direct benefits such as vacation days and vacation premium, which an entity expects to pay no later than twelve months after closing of the annual exercise in which the employees have provided the services that grant them the corresponding rights.

“The accounting impact of this change affects the provisions for expenses for short-term benefits that are recognized and their corresponding liabilities by increasing the days to be received in favor of employees,” he added.

» Operational impact

In operational matters, the impact of the reform will be differentiated depending on the line of business and size of the company. Therefore, it is important that businesses identify aspects such as the number of people in each area, how many could be absent per department at the same time, if contracts are required to cover absences, among other factors that can influence operations.

After the multiple impact of the changes to the Federal Labor Law (LFT), EY specialists recommend companies address six key aspects:

1. Carry out a diagnosis to identify the impact of the new provision in the different areas.
2. Analyze various scenarios with an operational and financial vision, so that the impacts and capitalizable benefits can be measured.
3. Have change management and planned communication, so that leaders and collaborators transform their way of thinking and understand the effects that the reform will have on their day to day.
4. Implement changes in the operating model and identify how they can be optimized, promoting technology or new ways of working.
5. Measure the impact of the changes that are proposed to be able to make adjustments according to the results obtained and have feedback.
6. Have a project management that covers the different areas in a multidisciplinary way and manages the governance of the transformation.

What is the role of Human Resources?

The Human Resources departments are key to the implementation of the reform and for the changes to translate into greater productivity. According to VentureSoft, the Human Capital areas should take into account the following aspects regarding the new regulation:

• Adjustments in the number of workers. In the case of workers who are in a plant, managers must consider how to continue to operate the production line without staff taking vacations. The same happens in other positions: how to continue fulfilling the daily tasks when the collaborators are on their requested days off? Human resource planning will be vital.
• Legal obligations for substitutions. On some occasions, to replace people who take vacations, it will be necessary to hire temporary staff or make adjustments to the workloads of those already on the payroll. From there, costs can be derived, such as in recruitment, training and liquidation in the case of temporary personnel.
• Increased budget spending. Another priority task is the availability of sufficient resources. This issue must be considered in the budgets for 2023, since the amount of the vacation bonus will be higher.

“While it is true that this reform will favor the quality of life of employees and focuses on the proper rest of people, companies will have to learn to adapt to these changes and create strategies to correct the possible reduction in productivity. Once the Transformation proccessit will be possible to appreciate the advantages and virtues of the reform”, indicated Juan Solana, EY Consulting partner.