Companies, ventures, institutions, or individuals require services from specialized fields of study to carry out their productive, commercial, or business activities. Professionals meet this requirement by having the training and specific experience necessary to solve problems related to productive processes.

This need for services can be contracted by businesses or productive units either directly or indirectly. In direct contracts, companies establish a direct labor relationship, where in exchange for a salary, professionals commit to working five days a week and eight hours a day. This form of employment has its benefits: it prevents professionals from spreading their knowledge of the business to other companies. By offering job and income stability, companies manage to keep the business knowledge that professionals accumulate on a daily basis confidential. This form of contracting establishes an employment relationship with the presence of four key elements:

1.- Compliance with working hours, 2.- Direct supervision of their services and compliance with company policies, 3.- Regular participation in the company’s usual processes or business operations, 4.- Receiving regular payments habitually or cyclically.

In contrast, professional service contracts are governed by civil law and aim to regulate a commercial relationship between the company and the professionals. This form of contracting is often used by companies to receive highly specialized services that cannot be hired permanently due to the cost of these highly specialized professionals. Alternatively, professionals with such expertise may not be willing to enter into a direct employment relationship for a set salary. Therefore, professionals provide their services individually.

Both forms of hiring are necessary for the proper functioning of the labor market. The problem arises when companies decide to minimize their labor costs by concealing the employment relationship under the guise of professional service contracts, while still demanding that those hired under such contracts comply with specific work schedules, direct orders from superiors, and receive regular monthly payments.

For example, if a company hires a worker with a technical accounting diploma under a direct and bilateral contract, they would be obligated to pay the following entitlements:

• Monthly salary,
• Annual vacations,
• Holidays off,
• Overtime pay if applicable,
• Social Security affiliation,
• Worker’s seniority benefits,
• Contributions to reserve funds if the worker has been employed for more than one year,
• Employer’s retirement benefits if the worker has served the same employer for more than 20 years,
• Payment of a penalty if the employer unjustifiably dismisses the worker,
• Paternity or maternity leave,
• Medical leave.

On the other hand, if a company hires under a professional services contract, it would not have to pay any of the aforementioned entitlements, except for the agreed-upon service fee. The company cannot contract a worker with only a high school diploma under a professional services contract. Thus, the company requires professionals, not to provide specialized services, but to conceal the employment relationship and have them perform routine tasks for the company. This way, the company avoids paying employee benefits and only pays the agreed fee, which is usually close to or even less than the basic salary.

Many professionals are thus hired to perform the company’s daily routines, underutilizing their professional potential and relegating them to tasks fit for a lower educational level.

Another example of using professional services contracts to reduce costs is the case of teachers or trainers. For example, a university, whose primary objective is education, may be tempted to hire professors to teach its semesters through professional service contracts. By reducing costs, the university can easily dismiss professors. Under the four aforementioned points, universities or training centers should not hire their professors under professional service contracts since their regular activities, class schedules, and compliance with policies would constitute a direct bilateral relationship.