Mexico Compensation / Benefits
Compensation and benefits are two critical parts of Mexico's employment laws. You must make sure every employee gets paid a fair wage and receives every benefit they are entitled to.
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Compensation and benefits are two critical parts of Mexico’s employment laws. You must make sure every employee gets paid a fair wage and receives every benefit they are entitled to.
Mexico’s minimum wage is 172.87 (as of 2022) Mexican pesos per day according to Mexico compensation laws. This is true for all states except those at the Northern Border. Northern Border states (Baja California, Sonora, Chihuahua, Coahuila, Nuevo Leon, and Tamaulipas) have a minimum wage of $260.3 pesos per day. You can pay employees weekly, biweekly, or monthly depending on what you’ve outlined in your employment contract. The net pay, which includes salary, cash benefits in kind, and hardship allowances, must be received in official Mexican banks and paid in pesos.
Your employees are also entitled to an aguinaldo — a yearly bonus. The aguinaldo typically equals 15 days of salary and amounts to about two weeks of pay. Larger companies may give up to four or six weeks. Sales employees often get large sales commissions or quota bonuses.
Every employee is guaranteed certain benefits in addition to the compensation laws listed above. For example, workers earn an annual vacation entitlement of six days after their first full year of employment as part of Mexico benefit management. They receive an additional two vacation days for each year that they continue to work for you.
Employees in most states also are guaranteed a vacation bonus, which is at minimum 25% and goes to whatever the company determines. This percentage is granted based on the annual leave entitlement days and paid on the anniversary of the employee with the company.
Many states also offer profit sharing, in which employees are entitled to receive at the latest on May 30 each year, and they receive up to 10% of net profit of the company. The profit that will be shared is divided into two parts: the first part will be split in equal parts amongst all employees, taking into consideration the number of worked days for each employee during the previous year; and the second part will be distributed in proportion to the amount of the salaries earned during the year.
All employees get public health care coverage through the Mexican Social Security Institute. However, many employers offer their workers supplementary health insurance options.
If you opt for private medical insurance, you’ll either need to find insurance for your employees yourself or work with a global PEO. Globalization Partners uses our Global Employer of Record, accessible through our industry-leading technology, to arrange private insurance coverage after hiring your employees. You can also provide a monthly allowance for employees to choose their own private plan.
Mexico benefit management includes optional features that enhance your employee’s work life. Many companies offer flexible work hours or job sharing and telecommuting. Some employers also opt for additional contributions to retirement savings, life insurance, and more.
Mexico benefit management includes understanding their festivals, civic holidays, and statutory holidays. The country’s eight national public holidays include:
Every employee is entitled to overtime pay, which is 100% of their regular pay, or 200% for Sundays or bank holidays.
There are also specific compensation rules regarding employee sick leave. If an employee has an illness not related to work that keeps them out for more than three days, they will receive 60% of their salary. The 60% of their salary is paid by the Social Security Institute, and the remaining 40% of the salary is paid to the employer. If the sickness or accident is related to the job or commute, the employee gets 100% of their salary. For both the 60% salary compensation and 100% salary compensation, the employee will need to go to the Institute to file for sick days and get approval.
As you establish an employee benefits plan in Mexico, you need to consider key factors such as compliance, employee expectations, and local market standards. Navigating the requirements successfully will allow you to create a plan that makes your business competitive for hiring and employee retention.
As you establish your business internationally, you need to develop a benefits plan that meets legal regulations and market standards. The Mexican government has outlined some mandatory employee benefits to include in your program, but most employers also offer supplemental benefits to attract talent for their open positions. Some of the most common supplemental benefits include:
According to national labor laws, you’ll need to provide these mandatory benefits at a minimum:
Keep in mind that most employers provide several additional benefits along with these mandatory ones.
Preparing to implement a competitive employee benefits program that serves the needs of your employees and your company requires a strong strategy. Here are some best practices to make the planning and implementation process smoother.
As you begin developing a benefits plan, you’ll want to assess the resources your business has available. Take time to consider your company objectives for providing benefits and evaluate your top priorities. Is your focus to stay competitive in a specific industry or region? Are you prioritizing recruiting efforts, or is employee retention a top consideration? Your plan can meet multiple goals, but knowing which ones are priorities will help you budget accordingly.
Knowing what your employees are looking for in a company is critical to developing a competitive program that genuinely benefits them. Send out questionnaires to employees, conduct interviews, and research what competitors in your region offer their employees. You’ll also want to do your due diligence regarding legal compliance.
After you’ve gathered in-depth data on employee needs and local expectations, you can build a plan that reflects what you’ve discovered. Consider the key requirements that your sources revealed and balance them with your budget as you create your benefits program. Keep in mind that you can reexamine your benefits plan and build on it as your company grows.
The cost of your benefits program will differ based on individual requirements. As you build your benefits plan, make sure you’ve evaluated the resources you have available. Prioritize your offerings based on what your company can feasibly provide.
As an employer, you are obligated to provide fully paid annual leave and holiday leave. For supplemental benefits, you can base your rates on market standards in your business region.
Employers typically contribute 6 to 8 percent of employee income on supplemental retirement savings. Many other rates for benefits such as transportation, housing, or variable use benefits will depend on your industry and employee-specific needs.
Taxable income for employees includes:
Food benefits of less than 40% of the monthly value of the UMA for 2022 ($2982.82 MXN) are not taxable.
Mexico has a state-funded healthcare system, but many employers choose to supplement that coverage with private insurance for their employees. You can research what other companies in your area offer to determine whether you should provide private healthcare options for your employees.
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