G-P's global growth platform makes it possible to start obtaining services in Mexico in minutes via our global entity infrastructure – allowing your company to expand your global footprint without the hassle...
G-P's global growth platform makes it possible to start obtaining services in Mexico in minutes via our global entity infrastructure – allowing your company to expand your global footprint without the hassle of entity setup and management. G-P provides services in Mexico for its customers through the assistance of one or more professionals capable of meeting the demands expressed by the customer.
G-P’s global growth platform makes it possible to start obtaining services in Mexico in minutes via our global entity infrastructure – allowing your company to expand your global footprint without the hassle of entity setup and management. G-P provides services in Mexico for its customers through the assistance of one or more professionals capable of meeting the demands expressed by the customer.
Our global employment products, including G-P Meridian Prime™ and G-P Meridian Core™, are backed by the largest team of HR and legal experts in the industry. We handle the growing complexities of global expansion and compliance for you — so you can focus on the global opportunities ahead.
You’ll have peace of mind knowing you have a team of dedicated experts to support your growth. G-P allows you to harness the talent of the brightest people in 180+ countries around the world, quickly and easily.
Hiring in Mexico
Labor unions are recognized under the Federal Labor Law as a means of the employees uniting to protect their common employment rights. Large labor unions exist in Mexico, with the goal of protecting the interest of employees, and their emphasis on workers with more seniority.
Collective Bargaining Agreements must be reviewed and approved by at least 30% of covered employees by said agreement, and should be reviewed every 2 years, while salaries should be reviewed annually.
Unions must prove that they are approved by at least 30% of employees that will be “covered” by the Collective Bargaining Agreement, to obtain a certificate from the authority. Without such certificate, unions cannot serve employers nor enter a Collective Bargaining Agreement.
Employment contracts in Mexico
It is legally required to put a strong employment contract in place in Mexico, in the local language, which spells out the terms of the employee’s compensation, benefits, and termination requirements. An offer letter and employment contract in Mexico should always state the salary and any compensation amounts in Mexican pesos rather than another currency.
Employees can also be hired subject to a probationary period up to 30 days, or up to 180 days for employees with a fiduciary/trust position or highly skilled roles. The standard in Mexico for a probationary period is generally no more than 90 days.
Contracts for an indefinite term are the rule. It is possible to enter into a contract for a definite term, but a justified reason for the definite term is required and should be detailed in the contract.
Telework is a recent modality in which employees are allowed to work outside the work center, either at home or at any other address agreed upon by the employment contract, for more than 40% of their working hours. Employees engaged under a telework regime must be provided a telework allowance or have telework costs reimbursed by the employer. The latter should cover at least the internet service costs and a proportional part of the electricity service. In addition, working tools and ergonomic assets should be provided to the employee according to the nature of the job requirements. New ergonomic and health and safety requirements are in place for both the employees and the employer in Mexico.
Working hours in Mexico
In general, most office job hours run from 9 a.m. to 6 p.m., although working hours are now becoming longer and often go until 7 p.m. or later. There is a minimum statutory work break of 30 minutes, although it is now common to offer a 1-hour break.
In Mexico there are 3 types of work shifts and each one has their own maximum number of working hours:
Daytime shift: Maximum 8 working hours per day, and maximum 48 hours per week, from 6 a.m. to 10 p.m.
Nighttime shift: Maximum 7 hours per day, and 42 per week, from 10 p.m. to 6 a.m. the following day.
Mixed shift: Maximum 7.5 hours per day, and 45 hours per week. If more than 3.5 hours fall within the nighttime period, the shift will be considered a nighttime shift, instead of a mixed shift. Employees should not work more than 3 overtime hours per day, and no more than 3 times per week.
If weekly working hours are exceeded, compensation for overtime is compulsory, and cannot be waived nor compensated with time off. The first 9 overtime hours per week are paid at 100% of the normal salary. Employers must pay 200% for overtime exceeding the first 9 overtime hours per week and 25% of a normal daily salary if the employee works on Sunday. Every employee must be given at least one 24-hour rest period each week, although it is common to provide a 2-day weekly rest period. If an employee is not granted the minimum statutory weekly rest period, they should be paid with 200% of a daily salary.
Employees receiving overtime payments should be subject to a time control that must be completed prior to processing the overtime payment.
Holidays in Mexico
The people of Mexico celebrate the following statutory national paid public holidays:
New Year’s Day – January 1
Constitution Day – First Monday of February
Benito Juarez’s birthday – Third Monday of March
Labour Day/May Day – May 1
Independence Day – September 16
Revolution Day – Third Monday of November
Day of change of National Government – December 1 every 6 years
Christmas Day – December 25
On local and national election days (some local elections day do not match with the national election day)
Mexico celebrates several types of holidays:
Festivals (traditional holidays to honor religious events)
Civic holidays (celebrated nationwide but employees are not entitled to a day off with pay)
Statutory holidays celebrated according to Federal Labor Law as listed above
Employees who work on mandatory holidays are entitled to 3 times their normal rate of pay (1 daily salary as normal day’s work + 200% of a daily salary per holiday = 3 times daily salary). It is strongly advised that they are not required to work overtime on holidays. Employees must consent to work on holidays.
Vacation days in Mexico
Annual vacation days are progressive and based on employees’ seniority/tenure in the company. As of January 1st, 2023, the minimum statutory annual vacation days is of 12 days for the first year/anniversary of services. For every year thereafter, employees will accrue 2 additional days. As of the sixth year of service, employees will accrue 2 additional vacation days for every 5 years of service. Please refer to the illustrative chart of the statutory progressive vacation balance days, below:
Years of service 1 > New Vacation days 12
Years of service 2 > New Vacation days 14
Years of service 3 > New Vacation days 16
Years of service 4 > New Vacation days 18
Years of service 5* > New Vacation days 20
Years of service 6 – 10* > New Vacation days 22
Years of service 11 – 15* > New Vacation days 24
Years of service 16- 20* > New Vacation days 26
Years of service 21 – 25* > New Vacation days 28
Years of service 26 – 30* > New Vacation days 30
Years of service 31 – 35* > New Vacation days 32
It is common to offer 15 to 18 days of annual vacation leave for each year, during the first and second year of service until such benefit matches the statutory annual days based on the years of service of the professional.
Vacation days must be availed and cannot be compensated unless the employment relationship ends. The vacation balance is carried over 18 months after the anniversary date. Employers should ask employees to take their unused vacation days.
Employees are also entitled to paid time off for public holidays. Unlimited paid time off/vacation is not an option.
Mexico sick leave
In general, an employer may grant permission for sick leave to employees provided there is a reason that justifies the absence, which can be with or without pay and will be approved at the discretion of the immediate manager or general manager.
In the case of absence due to sickness, in general, the employee must submit the Leave Certificate issued by the Mexican Social Security Institute, or Instituto Mexicano del Seguro Social (IMSS), or a medical prescription issued by a private doctor, the latter will be accepted as justification at the discretion of the supervisor or general manager. For absences due to occupational-related sickness and accidents, only the Leave Certificate issued by IMSS will be accepted as official justification.
Medical certificates should be provided by the employee who is eligible to claim a government subsidy in the amount of 60% of their salary when suffering from an illness not related to work. This increases to 100% when the illness is work-related. For those employees with higher salaries than capped by law, some companies pay the difference of the income not received by the employee by social security payment.
An employee with a Leave Certificate issued by the Mexican Social Security Institute must not be allowed to work, not even under a telework accommodation.
Maternity/paternity leave in Mexico
Pregnant employees have a right to maternity leave consisting of 6 weeks’ paid leave before the estimated due date, and 6 weeks’ paid leave after birth.
Non-birthing parents are entitled to 5 paid days of leave paid by the employer.
Maternity leave is paid for by social security, unless the employee does not have enough weeks accrued under the social security registration, in which case the employer will be obliged to pay said leave. The payment is capped at 25 times the minimum wage. For those employees with higher salaries than capped by law, some companies pay the difference of the income not received by the employee by social security payment.
In case of adoption, the birthing parents are entitled to 6 weeks’ paid leave, while the non-birthing parents are entitled to 5 days´ paid leave.
Parents with a child under 16 years old, with a cancer diagnosis and when certain circumstances are met and certified by the Mexican Social Security Institute, are entitled to paid leave by said authority up to 28 days, which can also be renewed and extended at the authority’s discretion.
Health insurance in Mexico
The Mexican Social Security Institute mandates coverage of public healthcare for all employees of private companies. However, many employers provide supplemental private medical insurance to their employees.
Some companies offer their employees a private insurance scheme as part of their employment remuneration. Private insurance is often preferred as it covers more expensive treatments.
An alternative is to provide a monthly allowance to the professional so they can purchase their own private plan. Some companies also provide an allowance in lieu of insurance benefits. If only the employee is being insured a typical allowance would be MXN 2,000 per month. If a family is being insured between MXN 4,000 and 6,000 per month is a typical allowance.
Mexico supplementary benefits
The statutory benefits in Mexico are quite robust, so typically employers do not offer many additional benefits. Flexible work hours are a common benefit along with accommodating a telework arrangement. Employers occasionally offer additional benefits such as additional contributions to retirement savings, reallocation allowances for expats, and life insurance.
Employees are entitled to a yearly bonus known as an Aguinaldo. The minimum Aguinaldo each year is equal to 15 days of base salary. In most cases, the Aguinaldo amounts to 4 weeks’ pay, and in some larger companies up to 6 weeks’ pay. The Aguinaldo has to be paid, according to the law, before December 20 of each year. Sales positions in Mexico are often paid with large sales commissions or quota bonuses. Management positions also have high variable payments, dependent upon meeting business targets.
Employees are also entitled to profit sharing in Mexico and should receive a profit-sharing payment no later than May 30 each year. The profit that is shared with employees is divided into 2 parts: the first part is split in equal parts among all employees, taking into consideration the number of worked days for each employee during the previous year, and the second part is distributed in proportion to the amount of the salaries earned during the year. The profit-sharing payment is capped at 3 months of salary or the average of the profit sharing received in the last 3 fiscal years, whichever option is more beneficial to the employee.
Termination/severance in Mexico
Employers in Mexico are allowed to establish a probationary period for a term of up to 30 days, generally, or up to 180 days for employees in managerial, technical, or professional positions. Generally, the employment relationship cannot be terminated before the probationary period ends. However, it should be noted that due to lack of sufficient case law in Mexico, a termination upon the probationary period expiration is considered very risky as the employers must meet certain requirements before proceeding with the termination. Because of this, terminations during or at the expiration of the probationary period are often terminated by entering a mutual agreement but paying only accrued wages. Additionally, in order to terminate within the 30 days of probation and not pay severance, employers must have justified cause on the grounds stated in the law. However, it is very difficult to gather enough evidence for a labor court to justify an involuntary termination.
Employment contracts may be for a fixed term only if a fixed term is required by the nature of the work, or for a temporary replacement of an absent employee. Otherwise, the employment contract is considered to be for an indefinite term. Where a fixed-term contract is terminated before the expiration date, the employee will be entitled to severance and the salary throughout the rest of the term of the contract.
Employment contracts can be terminated for the following reasons in Mexico:
By mutual agreement (including resignation)
Death of the employee
Employee’s physical or mental incapacity or disability which makes working impossible
Termination payments include:
13th-month (Aguinaldo bonus)
Any other bonus or commission
If terminated without cause, severance and seniority bonus payments
Other payments under the employment contract, such as, gratuity, provident fund, etc.
When an employer wants to terminate the employment relationship with an employee without cause, the employee is entitled to 3 months of pay, 20 days’ salary for each year of service, and a seniority premium. The 3 months of severance pay would be paid on full salary, which includes premiums, bonuses, commissions, and benefits. The seniority bonus is 12 days’ pay, capped at twice the rate of the statutory minimum wage, per year of service. It is very difficult to establish and prove “cause” in Mexico and the cost of doing so often outweighs the cost of the 90 days’ severance. For a termination without cause, the employer and employee must sign a mutual agreement with the payment compensation breakdown included in the agreement.
If an employee resigns, employers are required to provide their prorated benefits, i.e. vacation, vacation bonus, and Aguinaldo.
In collective redundancy situations, if the employer recognizes a trade union and wishes to make employees who are union members redundant or make any amendments to an applicable collective agreement, it must negotiate with the union.
Paying taxes in Mexico
Employees pay progressive income tax in Mexico. The top rate is approximately 35% and starts at a salary level of MXN 4,452,343.44 annually and above as of 2023.
The Administrator of Retirement Funds, or the Administradora de Fondos para el Retiro (AFORE), are financial institutions that administer the statutory retirement savings accounts on behalf of the employee. All employees associated with the IMSS, ISSSTE (applies to government employees), as well as independent employees are eligible to open an AFORE account. An AFORE account consists of the following 3 subaccounts:
Retirement and unemployment as a result of old age, or subcuenta de Retiro, Cesantía en edad avanzada y vejez (RCV):
Retirement: 2% employer contribution
Unemployment due to old age: 3.15% employer contribution (which will gradually increase from 2023-2030) and 1.125% employee contribution.
The federal government contribution was removed effective January 2023. The federal government now grants a Social Quota for those employees who receive up to 4 times the UMA.
Housing (this is administered by Infonavit, Mexico’s federal institute for worker’s housing and AFORE only registers and controls the funds): 5% employer statutory contribution.
Voluntary contributions: Voluntary contributions can be made by the employee to increase their retirement savings. Please note the above contribution rates vary for government workers.
The employee has to specify which AFORE they have selected to set aside their retirement funds. If after 1 year of service, the employee hasn’t selected an AFORE, the Commission of Retirement Savings (CONSAR) will assign the employee’s account to the AFORE charging the lowest commissions and the funds contributed during that year will be transferred to the selected AFORE account. The employee will have the option to change their AFORE if they decide at any time.
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THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). G-P does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect G-P’s product delivery in any given jurisdiction. G-P makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.
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