Employment Law

Mexican Employment Contract

Employers in Mexico are legally required to provide all employees with a formal written employment contract. Any contract should include all relevant details such as salary/wages, termination clauses, job title, etc. Contracts should also always be written in Spanish and use the Mexican peso currency (MXN) .

Fixed Term

Indefinite

Mexico Working Hours

Average Mexico office hours are Monday through Friday from 8 a.m. to 6 p.m., but may vary by industry and company. Some companies still offer extra-long lunch breaks (or "naps"), but the normal length is about an hour.

Working hours are limited to 11 hours per day and 50 hours per week, with at least one 24-hour rest period per week. If the limit is exceeded, overtime pay must be paid at 1.5 times the regular wage.

Holiday Policy

Mexico Vacation

After one year of employment, Mexican workers are entitled to six days of vacation. This right increases by two days for every additional year of service up to four years and by two days for every five years of service thereafter.

Many employers choose to offer more generous holiday allowances, with senior employees often receiving 15 or more days of holiday per year.

Mexico Sick Leave

Typically, employees can take sick leave by agreement with their employer, and compensation will depend on the individual agreement. Employees suffering from non-work-related diseases can receive 60% of the government-subsidized salary with a doctor's certificate; employees suffering from work-related diseases can receive 100% of the government-subsidized salary.

Maternity and Paternity Leave in Mexico

Mothers are entitled to six weeks of paid maternity leave around the date of birth (12 weeks in total), and fathers are entitled to five days of paid maternity leave. The government pays these costs, subject to a limit of 2,500% of the minimum wage.

It is common for employers to offer additional payments as part of a benefits package.

Employee Severance Pay and Termination in Mexico

Termination payments in Mexico are complex and consist of multiple inputs:

• – unpaid wages
• – Holiday bonus
• – Excellent holiday
• – 13th month bonus
• – any other benefits or payments included in the employment contract

Employees may also be entitled to severance pay if they are fired without just cause. In this case, the employee will receive three months' wages, an additional 20 days' wages for each year of service, and a seniority bonus of 12 days' wages for each year of service (capped at 200% of the minimum wage).

In fact, many layoffs result in severance packages, as proving "just cause" to authorities is notoriously difficult.

For companies expanding overseas for the first time, dealing with employee layoffs and dealing with severance packages can be complicated. Remoly's Mexican PEOs can reduce risk for foreign companies and provide guidance during the process.

Mexico Taxes

Mexico implements a progressive tax system. The higher the employee's income level, the higher the proportion of tax paid, with the highest tax rate being 35%. Non-residents pay up to 30%.

Mexico's corporate tax rate is 30%.

Retirement contributions are unique and difficult to understand. The Mexican Pension Fund Authority (AFORE) handles employee retirement and housing accounts, and workers can choose which projects they want to start funding, and then employers must contribute a percentage of their wages to these funds. The percentage may vary depending on the employee type and if the employee does not elect an account after one year of employment, the AFORE account will be automatically assigned by the government.

Health Insurance in Mexico

IMSS provides health insurance to Mexicans, so employers are not necessarily required to offer health benefits. However, the health care system is known for long wait times and shortages, so it's fairly common for employers to offer private insurance.

Salary and Benefits

Mexico’s Compensation Law

As of 2020, the minimum wage in most of Mexico is 123.22 pesos per day. The cost is higher in the northern border states at 185.56 pesos per day.

An aguinaldo (or Christmas bonus) is an annual bonus that employees in Mexico are also entitled to receive for the price of 0.5 months to 1 month's salary, sometimes more, depending on the employer.Employers must also pay a "holiday premium" to employees taking annual leave. The holiday insurance premium is paid in one lump sum at 0.25 times the annual salary and is paid on the employee's working anniversary.

Benefits Administration in Mexico

Setting up a Mexican benefits plan as a foreign employer can be a difficult process and requires following administrative procedures, complex laws, and language barriers.

A simple solution is to outsource your Mexican benefits administration to Remoly. We can set up your benefits system quickly and efficiently, and provide expert guidance every step of the way so you can focus on successfully expanding your business.

Remoly's Mexico PEO can provide expert guidance to help streamline the process of entering Mexico.