Employment Compliance in Mexico
This an overview of the regulations relevant to your employment activities in Mexico in addition to available services.
Our Firm provides a one-stop approach to all employment-related needs for Mexican companies with a particular focus on foreign clients.
- Payroll Management
- Employee Benefit Plans
- Employee Recruitment
- Mexican Work Permits and Visas
The purpose of this document is to present to you the nature of the employment relationship in Mexico and the obligations of Mexican Companies when retaining employees.
Documentation of the Employment Relationship:
In general, labor laws in Mexico regarding Mexican companies should be considered “pro-employee”. It is very important that all major activities, actions and aspects of the employment relationship are documented. Our firm will assist the Mexican company in drafting the necessary documentation and undertake the required procedures to evidence the contractual relationship with its employees, therefore we will provide as requested:
- Individual Employment Agreements
- Pay Stubs
- Benefit Statements
- Attendance Records
- Employee Code of Conduct and Regulations
- Collective Bargaining Agreement
- Administrative Minutes
- Termination Notices
Documents Required from Employees
The company must obtain the following documents from each employee in order to
consummate the employment relationship.
- Official identification (INE or passport)*
- Proof of address
- Proof of education
- Professional license (cedula professional).*The “INE” or “IFE” is the Mexican voter registration card, which is used as the standard form of official identification in Mexico. A driver’s license should also suffice. In many cases, the official identification can serve additionally as a proof of address where it contains the candidate’s full name and address of record.
Length of Employment:
As a general rule, Mexican law considers the Individual Employment relationship as for an indefinite period, but the Labor Law gives the Mexican Company the option to enter into employment arrangements for specific periods. In most cases, the contract that we recommend to enter into is a training contract, in which the Mexican company and the employee enter into an employment arrangement on a provisional basis for a period of 90 days. The Mexican company can utilize this period to evaluate and consider whether to continue the labor relationship or to terminate it.
Upon termination of the evaluation period, the employment contract is signed for an indefinite period. This permanent contract will need to be drafted and entered into between the Mexican company and the employee only after the initial probationary period has ended. Otherwise, the contact during the evaluation period will convert into an indefinite employment agreement between the Mexican company and the employer on the same terms.
The employer has the obligation to retain government benefits from the employee’s salary and submit these contributions to the authorities directly. These are government-sponsored public benefits. It is important to be aware that total employee-related deductions may be shared between the Mexican company and the employee each party contributing to roughly 15% of the base salary and totaling approximately 30%. The contributions will be paid by the Mexican company from its corporate account to the authorities. The following is a non-exhaustive list of the contributions the Mexican Company will pay on behalf of the employee:
- Life Insurance
- Gov’t Health Plan (IMSS)
- Public Housing Contribution
- Public Child-Care Deduction
- State Wage Taxes Employee Benefits: Mexico has an extensive list of employment benefits required by law. These benefits need to be calculated and issued for each employee based primarily on length of employment and base salary. The Mexican company should pay to the employee the minimum of benefits that are established by the labor law. These are the following:
- Christmas Bonus of 15 days of salary per year paid prior to the 20th day of December annually.
- Vacation according to the following:
o 6 days for the first year
o 8 for the second year
o 10 for the third year
o 12 for the fourth.
o If the employee works for more time, the days of vacation should be 2 days
… for every 5 years worked.
- Vacation Bonus of the 25% of the wages due for vacation days the employee has accrued.
- Minimum wage of $73.04 pesos per day
- One non-work day per week. In Mexico, the work-week is 6 days as opposed to 5 in the United States.
- Severance pay in case of dismissal without cause (see below)
Termination of the Employment Relationship:
The Mexican company may only terminate the employment relationship in a limited number of circumstances and with legal cause. Otherwise, the Mexican Company must pay to the employee a severance payment. The Labor Law establishes the causes in which the Mexican company can dismiss an employee:
- If the employee does not have the ability to do the job or if the employee gives to the company false documents, such as the university title.
- Commission of an act of aggression toward the employer or coworkers.
- Commission of material damage intentionally to the company.
- Commission sexual harassment.
- The revelation of confidential or proprietary information of the company.
- 3 unjustified absences within 30 days.
- Refusal to adopt security measures to avoid accidents or sickness.
- Report to the workplace drunk, inebriated, or under the influence of drugs.
- Incarceration. The employer may dismiss an employee without a legal cause, however, the following consequences result. Employees who renounce their position are not entitled to receipt of severance pay.
- Pay 90 days of salaries as a Legal Compensation
- Seniority Bonus. The seniority bonus based on the number of years the employee has worked.
- All fringe benefits that the company owes up to the day of dismissalDismissal should always be evinced in writing. If the Mexican company neglects to issue a notice of a legal cause for separation of the employee, the law considers the dismissal as illegal and the compensation and compensation referred to in the previous paragraph must be paid.
Mexico requires monthly payments on behalf of employee social security, retirement plans, and public housing. The Mexican social security system is referred to as IMSS. The Mexican public housing program or Housing Promotion Fund is referred to as INFONVAVIT (Instituto Nacional para el Fomento a la Vivienda para Trabajadores). The Mexican Retirement Savings System is referred to by the acronym SAR. These payments equate to about 29% of a given worker’s salary.
Our accounting staff makes complying with employment and labor laws fast and easy. Simply scan and send us your human resources documentation and we handle the rest!
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