Mexico Employment Contracts
International companies hiring employees for their expansion into Mexico must comply with extensive tax, employment, and social insurance regulations. Failure to comply risks fines and sanctions. The employer-employee relationship is governed by the Mexican Federal Labor Law and other laws and statutes. In drawing up their agreement, the parties cannot ‘contract out’ of mandatory requirements of the law.
By law, all employees must have a written contract. If the employee begins work before the contract is formally concluded they are working under the contract and cannot be deprived of statutory rights under the Labor Code. Employee contracts are usually indefinite and open-ended. Fixed-term contracts cannot exceed five years and can only be implemented in circumstances allowed by law.
When hiring new staff and drawing up their contracts, specific requirements from the Labor Code apply and must be considered. These include:
Contracts are part of the hiring process and should detail such as:
- Type of contract – fixed term or indefinite
- Full contact and personal details of the employee
- Indication whether the contract includes a trial or probationary period and any training programs
- Type and location of work, hours, vacation allowance
- Amount and frequency of salary payments, bonuses, holiday pay and any fringe benefits
- Working hours and if they include shift work
- Mandatory confirmation of the employee’s rights under privacy rules
- Whether it is a ‘training contract’ to give the employee time to acquire required skills for the job
- Contracts are usually drawn up in Mexico’s official language, Spanish, before any translation into the employee’s native language or one they understand
- All contractual agreements between employer and employee must fall within provisions of the Federal Labor Law
Employment Contracts in Mexico
Written contracts have been mandatory since 2012 when the Federal Labor Law was amended to also specify the types of contracts.
Fixed-term employment contracts: These are for a defined time or project and apply only when the nature of the work demands. They can also be applied when an employee is being temporarily replaced by another worker.
Open-ended ‘indefinite’ employment contracts: Where they last more than 180 days, they can include a probationary trial period to assess the suitability of the employee for the role. If a contract does not specify a specific term, it is considered legally to be open-ended.
Trial period or probationary employment contracts: These can be a maximum of 180 days for management, technical or specialized professional positions and up to 100 days for technical roles. Employees at lower levels can be offered a 30-day probationary period. Probation periods for trainees cannot exceed 180 days for management, technical or specialized roles or 90 days for trainees at a lower level. The employer must apply to Mexico’s Training and Productivity Commission to dismiss the probationer if they are considered unsuitable. Consecutive training contracts are not allowed.
Temporary employment: There cannot be consecutive periods of temporary employment, which in any case cannot exceed 12 months.
Youth employment: The minimum legal employment age is 14 years. 14- to 18-year-olds cannot be employed where jobs include alcohol, electrics, power tools or heavy lifting. Employees aged between 14 and 16 years are monitored by the Labor Inspectorate, must have a medical certificate for clean health, they must not work more than six hours a day in two three-hour shifts. Minors cannot work on Sundays or public holidays.
Collective and trade union agreements in Mexico: Close to 90% of Mexican production or industrial workers in enterprises of at least 25 people are members of trade unions. Most labor unions belong to the Confederation of Mexican Workers (Confederación de Trabajadores Mexicanos, CTM), which has around 11,000 member unions. Employers’ unions or associations are organized either by regions where employers are involved in more than one activity, or federally where a number of employers in different regions are involved in the same activity.