Mexico Employee Benefits

Mexican Benefits

Happy and satisfied employees make your businessthrive and lead to even better profits. However, the specific benefits for employees in Mexico might not all be familiar to you yet. By using our PEO and EOR service we can provide compliant labor contracts for employees in Mexico including local benefits.

When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few. In Mexico, benefits are guaranteed by national legislation as well as collective agreements with trade unions or workers’ councils.

Our guide will explain what benefits and employee compensation are guaranteed, and what can be modified, for any employer who wishes to expand their business into Mexico

What are Employee Benefits in Mexico?

Companies making their move into a new territory must ensure they comply with guarantees, benefits, compensation, and entitlements when they draw up contracts for their new employees. Mandatory entitlements typically cover social insurance, unemployment support, paid vacations, termination and notice periods, maternity leave, and severance payments.

In Mexico, employee benefits are governed by a range of laws, statutes and amendments under the Constitution and are drawn together under the umbrella of the Federal Labor Law. Additionally, incoming businesses must comply with regulations of the Tax Administration Service (SAT) at the Ministry of Finance and Credit (Secretaria de Hacienda et Credito Publico); the Mexican Social Security Institute (Instituto Mexicano del Segura Social); the relevant local tax administration for payroll (Secretaria de Finanzas del Gobierno de Distrito Federal) and then with the Sistema de Informacion Empresarial Mexicano (SIEM), which keeps a register of all businesses in Mexico.

What Compensation Laws exist in Mexico?

In Mexico a framework of employment laws and regulations guarantee employees are protected in many areas. Legislation covers conditions such as minimum wages, social insurance, redundancy, termination, severance, working hours, vacation leave, maternity, paternity issues, and more.

Statutory and mandatory minimums cannot be undercut by collective or trade union agreements, although they can improve entitlements for employees.

Drawing up contracts can be tricky enough, but in Mexico (as elsewhere), it is vital to fulfil your responsibilities to your employees over benefits, compensation, and minimum requirements. Compensation and benefits include:

• Social Insurance:  All employees are registered with the Mexican Social Security Institute (Instituto Mexicano del Segura Social, IMSS). Contributions are withheld by the employer, who also makes contributions based on a percentage of the employee’s own salary, subject to various rates and caps.

Retirement pensions, disability insurance, maternity benefits and work-related illness or accidents are among categories covered by social insurance. Employers withhold contributions to the IMSS to a maximum of MXN 138,479 (US$6,840) annually.
Employers may also contribute an ‘occupational risk premium’ depending on the role of the employee.
The employees contribute approximately 5% of their salaries to social security and retirement funds. Employers contribute approximately the equivalent of 25% of employees’ salaries to funds for social security, housing, and retirement.

• National Minimum Wage:  In January 2021 the National Minimum Wage was raised to MXN (Mexican pesos) 141.70 (US$7) per workday. This can be exceeded regionally and in the Northern Border Zone, for example, it is MXN 213.39 (US$10.55).
• Working Hours and Breaks:  Working hours are set at eight per day in a flexible 14-hour window from 6am until 8pm. The Federal Labor Law does not allow either employers or their staff to opt out of these regulations. A day shift between 6am to 8pm cannot exceed 48 hours in a week; a night shift from 8pm to 6am cannot exceed 42 hours per week; a mixed shift must not exceed 45 hours in a week. The Federal Labor Law (FLL) stipulates that an employee must have a break of at least 30 minutes during eight hours of continuous work.
• Holiday / Vacation Leave:  Minimum paid vacations depend on the years of service that qualify for days of paid leave:

Years of employment	Paid vacation days
5	6
6	8
7	10
8	12
5-9	14
10-14	16
15-19	18
10-24	20
25-29	22

There are also seven paid national holidays. Vacation premiums are paid to employees at the rate of an extra 25% of their daily wage for each vacation day. Employees also receive 15 days salary for their Christmas bonus (‘aguinaldo’), or pro rata for the number of days worked in that year.

• Maternity / Paternity Leave: Maternity leave comprises six weeks each before and after birth and can be stretched by an extra six weeks on half pay. It is possible for the mother to transfer four weeks of the pre-natal leave to the post-natal period. Maternity benefit is paid at full salary for the full term of the leave of six weeks before the birth and six weeks after. Fathers are entitled to five days paid paternity leave after the birth or after the adoption of a child. Maternity leave and paternity leave are governed by the Federal Labor Law and the Social Security Law.
• Redundancy, Termination and Severance: Employees are entitled to 90 days’ pay plus 12 days’ pay for each year’s seniority capped at twice the minimum wage, plus any benefits due for vacations and bonuses. There is a further entitlement to an extra 20 days’ pay and if the employer settles all three of the payments the dismissed employee cannot sue for unfair dismissal. Taxes apply. If dismissed for ‘just cause’ the employee is entitled only to salary due.
• Overtime: All employees are entitled to overtime pay, whatever their category of work or employment status. They are compensated at 100% premium on their hourly rate for the first nine hours of overtime and a 200% premium for hours above that.
• Sick Leave: Once illness or injury is certified by the medical authorities of the Mexican Social Insurance Institute (Instituto Mexicano de Seguridad, IMSS), the employee is entitled to a maximum of 52 weeks’ paid sickness leave, at 60% of their regular wage from the fourth day of incapacity.

Bonuses: The Prima bonus is 25% of the weekly salary which can be taken during time off e.g., holidays, or at the end of a year. The Christmas bonus (‘aguinaldo’) is equal to a minimum of 15 days’ salary and is given before December 20 for the festivities.  Profit sharing – Mexican companies (excluding the first year of operation) must share 10% of profits among employees (not high earners or top staff). 50% would be between staff pro rata for days worked and 50% would be distributed based on days worked and wages earned.

Employer Statutory Costs in Mexico

All employees are registered with the Mexican Social Security Institute (Instituto Mexicano del Segura Social, IMSS). Contributions are withheld by the employer, who also makes contributions based on a percentage of the employee’s own salary, subject to various rates and caps. Retirement pensions, disability insurance, maternity benefits and work-related illness or accidents are among categories covered by social insurance.

Employers withhold contributions to the IMSS to a maximum of MXN 138,479 (US$6,840) annually. Employers may also contribute an ‘occupational risk premium’ depending on the role of the employee.

The employees contribute approximately 5% of their salaries to social security and retirement funds. Employers contribute approximately the equivalent of 25% of employees’ salaries to funds for social security, housing, and retirement.

Type of Insurance	Paid by Employer	Paid by Employee	Total
Social Security (IMSS)	9.93% – 24.4%	2.7%	12.66% – 27.16%
Retirement Fund (SAR)	2.0%	0.0%	2.0%
Housing Fund (ONFOAVIT)	5.0%	0.0%	5.0%
Total	16.9% – 31.43%	2.7%	19.66% – 34.2%

Rates depend on capped salary rates for employees and employer’s classification.