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Change Salary or Pay in Mexico
Question:
We have an employee that initially had been granted his salary plus commissions since Sep 2013. Now that he has more experience in sales, the client now wants to decrease his salary and offer him higher commissions. We know that the labor law prohibits the salary decrease of an employee, but is there a legal basis to justify this change?
We have an employee that initially had been granted his salary plus commissions since Sep 2013. Now that he has more experience in sales, the client now wants to decrease his salary and offer him higher commissions. We know that the labor law prohibits the salary decrease of an employee, but is there a legal basis to justify this change?
Answer:
Article 51 sub-clause IV of the Federal Labor Statute (FLS) prohibits a salary reduction by the employer. However, this provision refers to a salary reduction as a unilateral act by the employer, meaning without the employee’s consent. Since the employment contract is a bilateral agreement, as a matter of principle it can be modified with the express consent by both parties (employee and employer), always in compliance with the mandatory provisions by the Federal Labor Statute.
Hence, if the employee expressly consents to the modification of his/her salary, and the new salary complies with all provisions of the law (it is remunerating, above the professional minimum salary, not subject to illegal deductions, no force was applied by the employer), it is permitted to modify the salary, even if this means a salary reduction. However, the employee may not waive his/her right to the payment of salary accrued for past services (art. 5 FLS).
It is very important that the employee declares his/her consent in writing and in the presence of two witnesses.
Question:
If an employer has a financial hardship and they do not want to terminate the employee outright. Can they change the employee from salary to 100% commission based? Is this possible? The employee currently has a permanent contract.
Answer:
Pursuant to articles 285 and 286 of the Federal Labor Statute (FLS), it is possible that the salary of commercial agents, insurance agents, sales persons, or similar consists entirely of a premium on the value of the sold merchandise. However, if the employee has already an employment contract with a fixed salary, the employee’s written consent is necessary to change the fixed salary into a commission based salary. Otherwise, the employee may sue for termination of the employment contract based on a unilateral reduction of his/her salary by the employer pursuant to article 51 IV FLS. In this event, the employer would have to pay severance as if the employee had been wrongfully terminated (art. 52 FLS).
Thus, it is important to have the employee sign a written amendment to the existing employment contract changing the fixed salary to a commission based salary. I also recommend that the employee should be paid at least a statutory minimum salary applicable to the position.
In all circumstances, the employer will need to make the salary / pay change with IMSS (The Social Security in Mexico.) Employer taxes are based on the employee pay / salary.
Article 51 sub-clause IV of the Federal Labor Statute (FLS) prohibits a salary reduction by the employer. However, this provision refers to a salary reduction as a unilateral act by the employer, meaning without the employee’s consent. Since the employment contract is a bilateral agreement, as a matter of principle it can be modified with the express consent by both parties (employee and employer), always in compliance with the mandatory provisions by the Federal Labor Statute.
Hence, if the employee expressly consents to the modification of his/her salary, and the new salary complies with all provisions of the law (it is remunerating, above the professional minimum salary, not subject to illegal deductions, no force was applied by the employer), it is permitted to modify the salary, even if this means a salary reduction. However, the employee may not waive his/her right to the payment of salary accrued for past services (art. 5 FLS).
It is very important that the employee declares his/her consent in writing and in the presence of two witnesses.
Question:
If an employer has a financial hardship and they do not want to terminate the employee outright. Can they change the employee from salary to 100% commission based? Is this possible? The employee currently has a permanent contract.
Answer:
Pursuant to articles 285 and 286 of the Federal Labor Statute (FLS), it is possible that the salary of commercial agents, insurance agents, sales persons, or similar consists entirely of a premium on the value of the sold merchandise. However, if the employee has already an employment contract with a fixed salary, the employee’s written consent is necessary to change the fixed salary into a commission based salary. Otherwise, the employee may sue for termination of the employment contract based on a unilateral reduction of his/her salary by the employer pursuant to article 51 IV FLS. In this event, the employer would have to pay severance as if the employee had been wrongfully terminated (art. 52 FLS).
Thus, it is important to have the employee sign a written amendment to the existing employment contract changing the fixed salary to a commission based salary. I also recommend that the employee should be paid at least a statutory minimum salary applicable to the position.
In all circumstances, the employer will need to make the salary / pay change with IMSS (The Social Security in Mexico.) Employer taxes are based on the employee pay / salary.
