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Trusted -VS- Exempt Employees in Mexico. Franklin and Marisol discuss the definition of a "Trusted" employee in Mexico and clarify that there are NO exempt employees in Mexico.
Legal basis:
Presented by Franklin D Frith II - General Manager / Principal and Marisol Perez - HR / Payroll Manager for Human Resources Mexico S de RL (www.payrollmexico.com) The Most Trusted PEO in Mexico. The PEO used by the Global PEO and International PEO.
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How was it established? What are the benefits? Who does it apply to? (8 Minute video worth your time) Franklin provides a summary with important details relating to the new zone. What is it? The Economic Free Zone for the Northern border was implemented January 1, 2019 in 43 municipalities bordering the United States. It offers benefits such as reducing the IVA tax (VAT) from 16% to 8%; and decrease the corporate income tax (ISR) from 30% to 20%, and doubling the daily minimum wage rate. How was this new Economic Free Zone implemented?
This zone was created by Presidential Decree and is only valid for a 2 year period unless ratified by the Mexican Congress. (A decree is similar to an executive order in the USA, in other words it bypasses congress, congress then approves or disapproves later) Most international companies base their decisions on a 5 year period. A 2 year trade zone period may not be sufficient to entice foreign company investment. How does it work and who does the Economic Free Zone apply to? IVA (Vat) tax from 16% to 8%: The Decree DOES NOT lower the IVA (Value added tax) to 8%. The Decree offers a “fiscal incentive” to provide a “fiscal credit” for companies that sell tangible products. Those persons or companies can apply during January 2019 for this program with SAT and they can then charge 8% IVA and apply a fiscal credit for the remaining 8% The program only applies to persons or companies selling “tangible products” only. It does not apply importations, real estate, intangible products, digital content, professional services and internet sales. Persons and companies must have at least 18 months in the region with 90% of their income in the border region. ISR Corporate Income tax from 30% to 20%: To whom does the income tax reduction apply? Individuals or companies with business activity the Northern border region. The requirements are at least 18 months in the border region before the Decree was published. It applies to companies with income of 90% in the border zone. Applicants must apply for the program by the end of March 2019 – SAT will respond within 30 days. Excluded from this program are: Maquiladoras, Financial institutions, production cooperatives, intangible products, internet commerce, outsourcing companies, those with problems with SAT, and companies in bankruptcy. DOUBLING THE MINIMUM WAGE in the border region From 88.36 MXN per day to 176.72 MXN The minimum wage increase basically has no real effect in the border region in as much as the average wage before the increase is $1400 MXN to $1500 MXN per week. In other words, people have already been earning the amount equivalent to or more than the new minimum wage for the border region. If you want an English version of the decree regarding the New Economic Free Zone in the border region of Mexico…we recommend that you visit www.mexicanlaws.com a great web site for people who want to see the Mexican laws in English. Presented by Franklin D. Frith II - General Manager / Principal for Human Resources Mexico S de RL. The Most Trusted PEO in Mexico. The PEO used by the global PEO and International PEO. 12 Mandated federal benefits in Mexico. Franklin and Marisol discuss the mandated benefits; provide a brief explanation of each benefit, and who they apply to. 1) Christmas Bonus / Aguinaldo: equivalent to a minimum of 15 days, must be paid before December 20 of each year. Article 87 LFT.
2) Vacation and vacation bonus: employees who complete 1 year of services will enjoy an annual period of paid holidays, 6 working days for the first year, increase in two working days, to reach twelve for each subsequent year of services. The vacation bonus is 25% of the corresponding salary during your vacation period, there is a whole chapter in the Law that regulates this right, Chapter Four LFT, of Articles 76 to 81. 3) Weekly rest day: for every six days of work the employee will enjoy 1 day of rest at least with full salary. Chapter III LFT Art. 69 to 75. 4) Sunday bonus: If the employee works their seventh day of rest, they are entitled to a Sunday bonus of 25% on the salary of the days ordinary work. Art. 71 LFT. 5) Maternity leave: pregnant working women will enjoy a break of 84 days of rest. IMSS Art. 170 LFT fraction II. 6) Adoption leave: Working women will have a 6 week rest leave in case of adoption of an infant, counted from the day they receive it. Art 170 II Bis LFT 7) Breastfeeding period: up to the maximum term of 6 months, two extraordinary rest per day of half an hour each to feed her child, in a suitable and hygienic place or the employee can agree with the employer to reduce in one hour of the employee’s working day during the indicated period Art. 170 fraction IV LFT 8) Paternity leave: An employee who is a father can rest 5 days when the child is born. Reform of the LFT in 2012. 9) Premium of seniority: Corresponds when a work relationship is terminated or voluntary resignation, as long as the worker has worked 15 years or more at the time of resignation, also applies if the employee is unjustifiably dismissed Art. 162 LFT 10) Benefits for voluntary resignation / Finiquito: Consists of the payment of the Christmas bonus, vacation bonus and accrued vacation days and the seniority bonus if you worked more than 15 years. 11) Severance Pay: Compensation of 3 months of salary plus the prorated mandated federal benefits. Art. 48 and 50 LFT 12) Profit Sharing / PTU: 10% distribution of declared profits to be paid within 60 days after the federal tax filing deadline (May 30). Chapter VIII Federal Labor Law of Article 117 to 121. Presented by Franklin D Frith II - General Manager / Principal and Marisol Perez - HR / Payroll Manager for Human Resources Mexico S de RL (www.payrollmexico.com) The Most Trusted PEO in Mexico. The PEO used by the Global PEO and International PEO. How to pay profit sharing / PTU in Mexico. Franklin and Marisol discuss what profit sharing / PTU Mexico consists of, what companies must pay profit sharing, what entities are exempt of profit sharing, which employees are entitled to profit sharing, and how the profit sharing / PTU is calculated in Mexico. Remember, profit sharing / PTU must be paid within 60 days after the March 31st tax deadline. Presented by Franklin D Frith II - General Manager / Principal and Marisol Perez - HR / Payroll Manager for Human Resources Mexico S de RL (www.payrollmexico.com) The Most Trusted PEO in Mexico. The PEO used by the Global PEO and International PEO. How to pay the Christmas Bonus / Aguinaldo in Mexico. Franklin and Marisol discuss the calculation based on the daily pay rate and number of Christmas bonus days in the employment contract for the employee. 15 days is the federal minimum. However, it can be negotiated higher between the employee and the employer in Mexico. The Christmas bonus / Aguinaldo must be paid no later than December 20th and is subject to withholding taxes based on caps. Presented by Franklin D Frith II - General Manager / Principal and Marisol Perez - HR / Payroll Manager for Human Resources Mexico S de RL (www.payrollmexico.com) |
AuthorThe Most Trusted PEO in Mexico. The PEO used by the Global PEO. Archives
May 2019
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