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In Mexico, employers are legally obligated to establish employee benefits programs that align with the country's employment laws. This commitment ensures that all workers, whether temporary residents or permanent residents, receive their entitled benefits
Our guide provides a comprehensive overview of how to design a compliant benefits program while also offering additional benefits to demonstrate your commitment to your employees in Mexico.
Mandatory Employee Benefits in Mexico
Mandatory employee benefits refer to the legally mandated perks that companies must present to their full-time staff in Mexico. Failure to provide these benefits can result in compliance penalties and fines for businesses operating in the country.
Mexico boasts comprehensive mandatory benefit regulations, prompting numerous companies to limit their offerings to these essential benefits, with only a few specific exemptions. Some of the mandatory employee benefits in Mexico are:
Social Security
Employers in Mexico contribute 25-35% on top of their employees' salaries to Instituto Mexicano del Seguro Social (IMSS), while employee contribution rates amount to around 2.78%. Mexico has several social security systems. The following are the most important public institutions providing social security
- Medical insurance
- Pension
- Work risk insurance
- Disability pay
- Sick leave
- Parental leave (both maternity leave and paternity leave)
- Childcare
- Social housing
Overtime Pay
Overtime pay in Mexico changes depending on whether the employee works the day shift, the night shift, or a shift that extends into both day and night. In Mexico, the night shift extends from 8 p.m. to 6 a.m.
Day shift employees who work more than eight hours on any day or 48 hours in a week receive 200% pay for the extra hours worked. The 200% overtime rate goes into effect after seven hours in one day or 42 hours in one week for night shift workers. Workers who work split shifts receive overtime pay beginning at 7.5 hours or 45 hours per week.
After the first nine hours of overtime pay, employees receive 300% pay for all subsequent overtime hours worked. Employees who work on Sunday receive a 25% bonus regardless of how many hours they work, and overtime rules go into effect after eight hours. Employers in Mexico must give employees at least one day off per week.
Severance Pay
In Mexico, there are no mandated notice periods for employee termination. When dismissing an employee, the employer must provide well-grounded reasoning, and the terminated employee has the right to appeal to the government for reinstatement or additional severance.
Collective bargaining agreements (CBAs) can also impact termination conditions, which employers must adhere to. Instead of notice periods, Mexico requires severance pay upon termination, with the amount varying depending on the reason for the termination.
Profit Sharing
The Mexican Constitution mandates that every company allocate 10% of its annual profits to employees. This profit-sharing distribution must be made within 60 days of filing the annual tax return. It serves as a legal requirement to share the benefits of a company's success with its workforce.
Public Holidays
Another important employee benefit in Mexico revolves around legal holidays. Article 74 of the Mexican Labor Law outlines the mandatory holidays that must be observed in Mexico.
Companies are obligated to grant their employees specific mandatory legal holidays. Mexican companies can require their employees to work on these mandatory holidays, but in such cases, they must provide triple payment for that day.
In addition to these mandatory holidays, non-mandatory holidays are also provided by many companies.
Mandatory Holidays
Non-Mandatory Holidays
Weekly Rest Day and Sunday Premium
Wages in Mexico are typically calculated on a seven-day week basis. However, Article 69 of Mexico's Labor Law states employees are entitled to a fully paid rest day for every six days worked. Furthermore, according to Article 71 of the Labor Law, this mandated rest day should ideally fall on a Sunday whenever feasible.
In cases where an employee is required to work on a Sunday, they are entitled to receive a 25% bonus on top of their daily wage as a Sunday premium.
Paid Time Off or Vacation Day
Mexico's Federal Labor Law (FLL) ensures that all employees in Mexico are entitled to a minimum of 12 days of paid annual vacation, with the duration potentially increasing based on their length of service with their employer.
In addition to the vacation days, employees are also eligible for an annual vacation premium or bonus, equivalent to 25% of their base salary.
Maternity and Paternity Leave
Female employees are entitled to 12 weeks of paid maternity leave, split into six weeks before and after birth. The pay is capped at 25 times the daily UMA, covered by the IMSS, and requires a medical certification.
Additionally, female employees receive six weeks of paid adoption leave. On the other hand, male employees are granted five days of paid parental leave after a child's birth, supported by the state.
13th Month Pay or Christmas Bonus
In Mexico, employees are guaranteed a mandatory 13th-month salary, often referred to as a Christmas bonus or aguinaldo.
This bonus typically amounts to 15-30 days of the employee's regular salary and must be paid to employees before December 20th. For those who have been with their employer for less than one year, the bonus is prorated accordingly.
What Supplemental Benefits Can You Offer in Mexico?
While Mexico's mandatory benefits are comprehensive, some employers aim to attract top talent by offering additional perks. Here are a few examples:
Private Health Insurance/HMO
Healthcare in Mexico is provided through the IMSS for all residents and is known for its quality. While additional private health benefits aren't common in most industries, some employers in specific sectors offer premium private health insurance as a competitive advantage to attract talent.
Savings Funds, Loans and Credit
Employees in Mexico can participate in savings funds where a portion of their salary is withheld and deposited into dedicated accounts, often for retirement or other purposes. Employers may also match these contributions up to a specified percentage of earnings.
Some employers provide low-interest loans to their employees, including personal, payroll, mortgage, and automobile loans. However, strict payroll regulations must be adhered to when offering these services.
Productivity Bonus
To attract and retain top talent, Mexican employers can offer productivity bonuses tied to achieving specific goals or milestones. These bonuses hold particular appeal as they are tax-free and not included in income tax calculations, providing employees with additional income.
Food Vouchers
Food vouchers, originally physical coupons, have evolved into reloadable chip cards akin to debit cards. While not mandatory, many Mexican companies offer these benefits to employees. Notably, they can be deducted as a business expense for tax purposes, making them an attractive option for employers and workers.
Company Cars and Transportation Allowance
High-ranking employees in Mexico, such as salespeople, executives, and general managers, may receive company cars that can be used for both work and personal use. These cars are registered under the company's name, ensuring ownership remains with the employer if the employee departs.
Moreover, some companies provide gasoline vouchers or fixed cash amounts to facilitate commuting, and some even offer employee transportation services. Free parking is also highly valued, given the high costs associated with city parking.
Internet Allocation
In Mexico, some employers provide internet service allowance for their employees, especially in the context of remote work arrangements. The employer directly covers the cost, and the service is billed in the employer's name, similar to cell phone benefits.
Workplace Equipment
Mexican companies sometimes go the extra mile to ensure their employees are well-equipped. For example, they may provide employees with mobile phones and service plans. Some also offer Laptops to facilitate work efficiency, especially in an era where remote work has gained prominence. These laptops and mobile phones are typically owned by the company, allowing employees to access essential tools and resources.
How can Gloroots help you offer benefits to employees in Mexico?
Running a global workforce means ensuring compliance in designing benefits plan, managing employees, onboarding them, processing payroll, and other essential aspects.
Gloroots’s EOR Platform streamlines onboarding, managing, and paying employees while ensuring compliance with local employment laws and regulations of Mexico. The team of experts helps you design a Mexican labor law-compliant and effective benefits plan. Partner with Gloroots to provide the best possible benefits to your employees without any hassle.
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