Payroll and Benefits Guide Mexico

Employer

Employer Payroll Contributions

Employee

Employee Payroll Contributions

Employee

Employee Income Tax

* Most Mexican states levy a relatively low tax on salaries and other income earned by employees, which is payable by the employer. For example, Mexico City imposes a 3% payroll tax.

General

The national minimum wage in Mexico is 207.44 MXN per day; however, this can differ by job role and category.
The Northern Border Zone has a different minimum wage of 312.41 MXN per day; the Border zone is a defined set of municipalities in Mexican states bordering the USA.

Payroll Cycle

The payroll cycle is semi-monthly, and employees are generally paid on the 15th and the last day of each month.

13th Salary

A 13th-month salary payment is mandatory in Mexico; this is a bonus payment paid by December 20th (Aguinaldo). The Aguinaldo is calculated as 15 working days of salary, plus an allowance, based on a 365-day year.

General

The standard working hours in Mexico are 48 hours per week, 8 hours per day. However, there are three work shifts stated in Mexico federal labor law:

• Day shifts comprise 48 hours per week (between 6 am to 8 pm)
• Night shifts comprise 42 hours per week (between 8 pm to 6 am)
• Mixed shifts comprise 45 hours per week
• The maximum weekly and daily working hours can differ as stipulated in employment contract/collective bargaining agreements

Overtime

All work above the standard mandated shift is paid as overtime and regulated by the employment contract/collective agreements. 3 overtime hours a day can be worked providing it is not done for more than 3 consecutive days. Managers might be exempt from overtime pay and limitations.

The payment of overtime is based on two considerations which determine whether overtime hours need to be paid at double or triple paid hours. These considerations are the total number of overtime hours worked during the working week and the number of hours worked during a single day after a regular shift.
The first nine overtime hours during the week are to be paid at 200% of the regular salary rate; every hour after that is to be paid at 300% of the regular salary rate.

The first three hours after a normal shift are considered double hours; every hour after that is deemed to be triple regardless of the number of overtime hours worked during the week.

Working Week

Monday–Saturday

Paid Time Off

Paid leave in Mexico is outlined in the employment contract as a minimum of 12 days paid holiday per year, plus an additional two days per year of service, following completion of 1-year service. Following the completion of 5 years of service, two additional days are added every five years as detailed in the table below. Unused leave can carry over for 6 months.

A vacation premium must be given at an extra 25% pay for each day of leave.

Public Holidays

7 public holidays.

Sick Days

Paid by Social Security (IMSS). Eligible employees are entitled to up to 52 weeks of paid sick leave at 60% of the regular salary when verified by IMSS affiliated medical authorities. If it is a work-related injury, the employee is entitled to 100% of the regular salary.

Maternity Leave

All female employees are entitled to 12 weeks of paid maternity leave, which the employee must take six weeks before the birth and six weeks after that. The maternity pay is calculated at full pay, capped at 25 times daily UMA, and covered by the IMSS. The application for maternity leave must be supported by a medical certification issued by an IMSS approved clinic or a private medical institution.
Female employees are also entitled to six weeks of paid adoption leave after the child (a minor) is handed to them.

Paternity Leave

The father is entitled to mandatory paid paternity leave of 5 days.

Parental Leave

There is no additional parental leave in Mexico.

Other Leave

There is no statutory additional leave in Mexico.

Termination Process

At-will employment does not exist in Mexico, and termination at-will clauses are only applicable to the employee. Therefore, employers may not terminate employment relationships without just cause. The Mexican Federal Labor Law stipulates a closed list of reasons and sets the procedure to terminate an employee at any time without incurring liability. The list of reasons can be found below:

• False statements about work qualifications
• Breach to the disobedience or honesty principles
• Vandalism
• Sexual harassment
• Alcoholism in the workplace
• Revealing company secrets
• Refusing to comply with safety procedures
• Four unexcused absences in 30 days

Notice Period

There are no statutory minimum notice periods in Mexico; however, federal labor law states that should the circumstance dictate, the company must provide the employee with notice in writing within 30 days of knowing about the misconduct. The written notice must explain the grounds for dismissal, or the labor board must issue a termination notice. Two weeks notice is commonly be given as courtesy where there is ‘termination without cause’ or resignation.

Severance Pay

In Mexico, terminating an employee without reasonable cause requires severance. The severance payment should comprise three times the regular monthly salary figure plus an additional 20 days’ pay for every year of service thereafter for those employees with more than 15 years’ service.

Voluntary resignation & termination with cause: Workers with 15+ years service  receive a seniority premium of 12 days pay for each year of service.

Probation Period

The probation period in Mexico for permanent employees is optional and is commonly 90 days.

General

• Internet allowance
• Cell phone allowance
• Meal vouchers are provided by the Employer through a card (usually around 2600 MXN per month)
• Wellness/fitness allowance
• Computer allowance

VISA

Any foreigners coming to work in Mexico will need to apply for a work permit and resident visa.
The National Institute of Immigration oversees all immigration in Mexico and issues work visas.
Mexico has a temporary and permanent visa; the employee should apply for both jointly with the prospective employer. A temporary resident visa is for foreign nationals who want to live in Mexico for more than 180 days. In addition to the Mexico work permit, people with a temporary resident visa can live and work in the country for up to four years with a Mexico work visa.
After completing four years of service (with the same company), a foreigner may apply for a permanent resident visa.

Teleworking

The Mexican Government passed federal labor laws on teleworking, which applies to any worker who performs paid work activities at least 40% of the time outside the employer’s workplace, either at home or another location chosen by the employee. The contract should state if the employee is performing work outside the employer’s workplace in order to be eligible for teleworking benefit.

Employers must provide, install, and maintain the necessary working equipment and training needed by the employee to perform the work and,
Pay for any appropriate telework-related cost, and record teleworking arrangements in a written agreement.

General

The standard rate of VAT in Mexico is 16.00%.

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