Being our neighbor to the south, Mexico is a highly desired nation for global employment. While many of the legal employment requirements may sound similar to our practices in the US, it is important to understand the intricacies and differences of Mexican employment law.
Many employers provide their employees with a personal pension plan, typically through the Pension Plan Retirement System or Administradora de Fondos para al Retiro (AFORE). Under the AFORE system, employees can pay a certain amount of their salary into a pension plan; the employer and Mexican government adds to the contributions as well. Employers must pay 2% of an employee’s salary to a retirement fund in a bank account under the employee’s name. AFORE pension products are administered by all Mexican banks which invest the contributions in approved stocks and investment funds. According to an article published by the Wall Street Journal in December 2014, the minimum wage in Mexico is at about 70 pesos/day – less than $4.50 at the current exchange range.
Affordable health insurance is offered to all Mexican employees by the government through the Mexican Institute of Social Security (IMSS). Benefits include basic health care, retirement, disability, death, and medical. The employer is required to register his or her employees within the IMSS.
Contributions are based on the employee’s entire salary up to 25 times the minimum wage. A minimum of 17.42% must be contributed to the Social Security fund, depending on risk factors of the job. Some companies offer a private insurance plan to their employees, which is often preferred since it covers more expensive treatments. The team at Globalization Partners can help your company set up private medical insurance in Mexico if you would like to offer that to your new employees.
National Workers’ Housing Fund Law, the “INFONAVIT Law,” requires employers to contribute an amount equal to 5% of the employee’s daily earnings to the INFONAVIT to finance the construction of low-cost housing units. The goal of this program is to provide housing assistance to employees by making it easier to acquire a home.
Labor unions are recognized under the Federal Labor Law as a means of the employees uniting to protect their common employment rights with emphasis on workers with more seniority. Various larger labor unions exist in Mexico. They are generally permitted in a place of employment provided that at least 20% of the employees belong to the union. As a result of the labor unions, collective labor contracts, which are reviewed every two years, are signed between the employer’s representative and the representative of the labor union.