TSA Pre-Signing Review
Price the Mexican TSA before you sign.
We scope employer substitution and the outsourcing rules into the TSA while you still hold leverage. Fixed-fee proposal in 48 hours. The first conversation is always free.
A TSA carve-out in Mexico turns on employer substitution under the Federal Labor Law, a payroll built around IMSS social security and INFONAVIT housing contributions, and the limits the outsourcing reform places on shared services. The work sits inside the broader carve-out advisory plan, and in Mexico inherited seniority and profit sharing set the cost base more than the technology does. A buyer that ignores employer substitution inherits liabilities it never priced.
Mexican law treats a transfer of the business through the concept of employer substitution. When the new employer takes over the operation and its workers, it assumes the existing employment relationships, the accrued seniority, and the obligations attached to them. The change of employer does not reset the relationship or the entitlements that have built up over years of service.
The Federal Labor Law also imposes joint liability between the prior and new employer for obligations that arose before the substitution, for a defined period after notice to the workers. A buyer that does not understand this can find Newco answerable for liabilities that originated under the seller.
Because seniority carries, the buyer prices the full accrued position rather than the headline payroll. Statutory severance in Mexico is calculated on seniority and salary, so a workforce with long tenure represents a material balance that transfers with the people.
The practical step is a careful diligence review of headcount, seniority, salary, and any prior restructuring, so Newco models the substitution accurately before it commits to a Day One date.
Mexican payroll runs through registration with the tax authority and the social security institute. Newco withholds income tax, registers workers with IMSS, and contributes to social security on an integrated salary base that includes more than base pay. The integrated base is a frequent source of error for buyers used to a simpler salary definition.
Housing contributions to INFONAVIT and retirement savings through the AFORE system add further mandatory employer costs. The buyer models the fully loaded employment cost, which sits well above gross salary once social security, housing, and retirement contributions are included.
Statutory profit sharing, known as PTU, is a distinctly Mexican obligation. Employers distribute a share of taxable profit to workers each year within statutory limits, and the buyer accounts for how PTU will be handled across the transaction and the TSA period.
Because registration and the integrated salary setup take coordination, many buyers run a short seller payroll TSA to bridge the gap, held to cost-plus or fixed-fee with audit rights and a firm exit date, then cut over at a clean month boundary.
Mexico reformed its outsourcing rules to prohibit the subcontracting of a company core activities and to regulate the provision of specialised services. Providers of permitted specialised services must register with the labour authority under the REPSE regime. This reform reshaped how shared services and intra group support can be delivered.
For a carve-out, the reform matters because a TSA often involves the seller continuing to provide services that touch personnel and operations. The buyer confirms that any seller provided service that could be characterised as personnel supply is structured to comply, and that registration is in place where the law requires it.
Profit sharing and the reform are connected, because the changes also affected how PTU is calculated and capped. The buyer takes local advice on how these rules apply to the specific service arrangement rather than assuming a structure used in another country will transfer.
Structuring the TSA to respect the outsourcing rules protects both parties from a compliance finding that could disrupt the very services the buyer depends on during separation.
Mexico governs personal data held by private parties through its federal data protection law, which sets out the ARCO rights of access, rectification, cancellation, and opposition, and requires a privacy notice and a lawful basis for processing. During the TSA the seller processes Newco personal data in shared systems, so a compliant arrangement is essential.
The law sets expectations around security measures and the handling of transfers of personal data to third parties, including across borders. Where support is delivered from outside Mexico, the buyer confirms the transfer conditions are met and the privacy notice supports the arrangement.
A carve-out treats the seller processor role as a controlled workstream with security duties and a deletion duty at exit. The buyer documents how Newco personal data is separated and protected so there is a clear record if a question arises later.
Designing the separation to a forward looking standard avoids reworking the data estate as Mexican data protection enforcement continues to mature.
The Mexican TSA scope typically covers payroll, IT and identity, finance, and facilities, each with a clear description, a service-level expectation, and a price held to cost-plus or fixed-fee. The buyer insists on line item pricing because seller cost allocations can bury group overhead that does not belong to Newco.
Cutover is sequenced and gated. Payroll cuts at a month boundary once IMSS, INFONAVIT, and tax registrations are confirmed, IT after a tested migration, finance at a period close. Each step has a reconciliation gate and a rollback path so a single failure does not spread across the separation.
Cost discipline depends on doing the work before signing. The buyer benchmarks seller charges, removes unjustified mark-up, and sets exit fees that decline across the term. Where the Mexican business sits inside a regional group, the buyer watches for a TSA that bundles services delivered to other Latin American operations.
A disciplined Mexican separation leaves Newco running its own payroll, social security, and housing contributions, on its own systems and data estate, with the seller dependency closed on agreed terms. That outcome starts with a pre-signing review that scoped the TSA before leverage shifted to the seller.
When the new employer takes over the business and its workers, it assumes the existing employment relationships, accrued seniority, and attached obligations under the Federal Labor Law. The prior and new employer are jointly liable for pre substitution obligations for a defined period after notice to workers.
Newco contributes to IMSS social security on an integrated salary base broader than base pay, pays INFONAVIT housing contributions, and funds AFORE retirement savings. Statutory profit sharing, PTU, adds a further annual obligation. The fully loaded cost sits well above gross salary.
The reform prohibits subcontracting of core activities and regulates specialised services, which must be registered under REPSE. The buyer confirms any seller provided service that touches personnel supply is structured to comply and is registered where the law requires it.
The federal data protection law for private parties governs personal data, with the ARCO rights and a privacy notice requirement. The buyer treats the seller processor role during the TSA as a controlled workstream with security duties and a deletion duty at exit.
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We scope employer substitution and the outsourcing rules into the TSA while you still hold leverage. Fixed-fee proposal in 48 hours. The first conversation is always free.
Seven buyer-side moves to exit a Transition Services Agreement on time and below budget. The mark-up, the extension-fee curve, exit sequencing, and the 11-month calendar.
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