What Is Finiquito in Mexico? Complete Employer Guide (2026)

When an employment relationship ends in Mexico, one obligation applies in every single scenario: the finiquito.

It does not matter whether the employee resigned, was dismissed for cause, or left by mutual agreement. Every separation triggers a finiquito. And it must be paid correctly, completely, and on time.

For foreign companies hiring in Mexico, this is one of the most misunderstood obligations in the entire labor framework.

This guide explains what the finiquito is, exactly what it includes, how to calculate it, when it must be paid, how it differs from severance, and what happens when it is wrong.

Key takeaways

• Finiquito is the final settlement payment owed to every employee at the end of employment in Mexico, regardless of the reason for separation.
  
  

• It is not the same as severance (indemnización). Severance is additional compensation owed only when the company terminates without justified cause.
  
  

• Finiquito components are fixed by law: earned but unpaid salary, prorated aguinaldo, accrued vacation days, and the 25% vacation premium.
  
  

• The prima de antigüedad (seniority bonus) is a separate statutory payment included in finiquito when certain conditions are met.
  
  

• There is no statutory payment deadline in the LFT, but labor courts expect immediate or same-day payment on the separation date.
  
  

• Late or incorrect finiquito creates legal exposure: the employee can file a labor complaint and claim additional back wages.
  
  

• Every finiquito must be documented with a signed liquidación receipt and a CFDI 4.0-stamped payroll record filed with SAT.
  
  

• ISR income tax treatment differs depending on the type of separation and payment components included.
  
  

What finiquito means in plain language

Finiquito comes from the Spanish legal concept of finiquitar, meaning to settle or close an account entirely.

In Mexican labor law, it is the settlement that closes the employment relationship.

It covers everything the employer owes the employee for work already done but not yet paid, plus the prorated value of statutory annual benefits for the partial year worked.

Think of it as the final accounting of the employment relationship: what did the employee earn, what have they already received, and what balance remains unpaid?

Every employment relationship in Mexico ends with a finiquito. The amount varies by reason for separation, but the obligation to pay it does not.

Finiquito vs. indemnización: the critical distinction

This is where most foreign employers make their first mistake.

Finiquito is the base settlement. It covers accrued earned compensation. Every separated employee receives it, regardless of who initiated the separation or why.

Indemnización (severance) is the additional payment owed only when the employer terminates the employee without justified cause. It is a penalty for the involuntary nature of the termination.

When the company terminates an employee without justified cause, both the finiquito and the indemnización are owed. They are not alternatives. They stack.

For a full breakdown of the unjustified termination cost and process, the consequences of unjust dismissal in Mexico covers every component and the legal timeline employers must follow.

What finiquito includes: the four mandatory components

Every finiquito, in every separation scenario, must include these four elements.

1. Earned but unpaid salary (salarios devengados)

Any salary the employee earned since the last payroll cycle that has not yet been paid.

Mexico runs biweekly payroll (quincenal: 15th and last day of the month). If an employee's last day falls mid-cycle, the finiquito includes salary for every day worked since the last payment.

Calculation: Daily salary × number of unpaid days worked

The daily salary used for finiquito calculations is the employee's base daily rate.

If there is ambiguity about the correct daily rate, the daily pay rate calculation in Mexico guide explains the exact method under the LFT.

2. Prorated aguinaldo (aguinaldo proporcional)

Aguinaldo is the mandatory annual Christmas bonus of at least 15 days' salary, due before December 20 each year.

When employment ends at any point during the year, the employee is owed a prorated portion for the months worked in that calendar year.

Calculation: (15 days' salary ÷ 365 days) × days worked worked in the current calendar year

Example: An employee earning MXN 2,000/day separates in September after 273 days in the current year.

Prorated aguinaldo = (15 × 2,000 ÷ 365) × 273 = MXN 22,438.36

For a complete breakdown of how aguinaldo works and the full calculation methodology, the mandatory aguinaldo in Mexico guide covers the legal formula and common employer errors.

3. Accrued unused vacation days (vacaciones no gozadas)

Employees in Mexico accrue vacation days from their first year of employment. Under the Vacaciones Dignas reform (effective 2023), the entitlement is:

At separation, the employee receives payment for any vacation days accrued in the current employment year but not taken.

For how vacation accrual and tracking work throughout employment, the handling vacation days in Mexico guide covers the full annual cycle.

Calculation for accrued vacation: (Annual entitlement ÷ 365) × days worked in current employment year × daily salary

4. Vacation premium (prima vacacional proporcional)

The vacation premium (prima vacacional) is a mandatory 25% surcharge on top of vacation pay.

When vacation days are paid out as part of finiquito, the premium is applied to that amount.

Calculation: Vacation day payment × 25%

Example: If 8 days of accrued vacation are owed at MXN 2,000/day:

Vacation pay = 8 × 2,000 = MXN 16,000 Vacation premium = 16,000 × 25% = MXN 4,000 Total vacation component = MXN 20,000

The vacation bonus in Mexico article explains how the prima vacacional is structured across different separation scenarios.

The prima de antigüedad: when it applies

The prima de antigüedad (seniority bonus) is a statutory payment of 12 days' salary per year of service, subject to a cap of twice the applicable minimum wage.

It is a separate component that may be included in the finiquito depending on the circumstances of separation.

When prima de antigüedad is owed:

• Employee is dismissed without justified cause (always required)

• Employee resigns voluntarily after 15+ years of service (required by LFT)

• Employee dies or becomes permanently disabled (required)

• Employee resigns for reasons attributable to the employer (e.g., constructive dismissal scenarios)

When prima de antigüedad is NOT owed:

• Employee resigns voluntarily with less than 15 years of service

• Employee is dismissed for justified cause

Calculation: 12 days' salary × years of service

Note: The daily salary used for prima de antigüedad calculations is capped at twice the minimum wage if the employee's actual salary exceeds that amount. In 2026, the daily general minimum wage is MXN 315.04. The applicable cap is MXN 630.08 per day for this calculation.

For a detailed breakdown of how the seniority bonus is calculated across different scenarios, the seniority bonus in Mexico guide covers every case.

Finiquito calculation by separation scenario

The finiquito components differ depending on how and why employment ends. Here is a scenario-by-scenario breakdown.

Scenario 1: Voluntary resignation

The employee resigns. No indemnización is owed. No prima de antigüedad (unless 15+ years of service).

Finiquito includes:

• Earned but unpaid salary

• Prorated aguinaldo

• Accrued unused vacation days

• Vacation premium on those days

• Prima de antigüedad (only if 15+ years of service)

For the procedural steps that follow an employee resignation in Mexico, the employee resignation process in Mexico covers documentation, notice periods, and what the employer must process.

Scenario 2: Termination without justified cause (unjustified dismissal)

The company ends the relationship without a valid LFT cause. Both finiquito and indemnización are owed.

Finiquito includes:

• Earned but unpaid salary

• Prorated aguinaldo

• Accrued unused vacation days

• Vacation premium on those days

• Prima de antigüedad (always owed in this scenario)

Indemnización (paid on top of finiquito) includes:

• 90 days of integrated salary (constitutional indemnization)

• 20 days of integrated salary per year of service applies only when a labor court orders reinstatement and the employer elects not to reinstate, or in other specific cases under Mexican labor law

• Back wages (salarios caídos) if the employee filed a labor complaint: up to 12 months of salary

The mandatory severance in Mexico guide covers the full severance calculation, including how the integrated daily salary is used in the indemnización formula.

Scenario 3: Justified termination (rescisión con causa)

The company dismisses the employee for a cause specifically listed in Article 47 of the LFT. Examples include serious misconduct, fraud, deliberate property damage, or repeated insubordination.

Finiquito includes:

• Earned but unpaid salary

• Prorated aguinaldo

• Accrued unused vacation days

• Vacation premium on those days

No indemnización is owed. No prima de antigüedad.

Important: Justified cause dismissal in Mexico requires written notification to the employee, delivered on the day of separation, stating the specific cause with facts and dates. Without this document, the dismissal defaults to unjustified in any subsequent labor dispute.

Scenario 4: Mutual agreement (convenio de separación)

Both parties agree to end the employment relationship. The agreement documents what is paid and constitutes a full and final settlement.

Finiquito includes all four standard components. Prima de antigüedad and any negotiated additional amounts are specified in the agreement.

The signed agreement, ratified before the CFCRL (Federal Conciliation and Labor Registration Center) or a labor authority, provides the employer with a legal release from further claims.

Summary table

Worked finiquito calculation example

Employee profile:

• Monthly salary: MXN 60,000

• Daily salary: MXN 2,000

• .

• Time with company: 3 years, 7 months (3.58 years)

• Separation type: Voluntary resignation

• Last payday: 15th of the month

• Separation date: 22nd of the month (7 days into new pay cycle)

• Vacation days accrued in current year but not taken: 10 days

• Years of service: 3.58 (under 15, so no prima de antigüedad)

Approx. USD 3,139 at MXN 18 per USD (2026 Banxico reference rate).

If this were an unjustified termination instead, add:

• Prima de antigüedad: 12 × 881.74 ( capped to 2 minimum wage salary) × 3.58 years = MXN 37,879.55 

• Indemnización (90 days): 90 × 2,098.60  = MXN 188,874 

• Indemnización (20 days/year × 3.58 years): 71.6 × 2,098.60 = MXN 150,259.76 

Total for unjustified termination: MXN 377,013.31 (approx. USD 25,812)

Use the severance and resignation pay calculator to model any separation scenario with your specific numbers.

When must finiquito be paid?

The Federal Labor Law does not specify an explicit payment deadline for finiquito in the same way it mandates December 20 for aguinaldo.

In practice, labor courts and labor authorities expect payment on the day of separation or within 24–48 hours. Any meaningful delay creates exposure.

If an employee files a labor complaint for non-payment:

• The employer must prove the amount and date of finiquito payment

• If unpaid, the employee can claim back wages (salarios caídos) for each day the finiquito remains outstanding, up to 12 months' salary from the date of the complaint

• Interest of 2% monthly accrues on outstanding amounts after the 12-month period

The day an employee's last day arrives, the finiquito should be ready to sign and pay. Not the following week. Not after HR processes the paperwork. That day.

Documentation: the liquidación and the CFDI

Two documents must accompany every finiquito payment.

The liquidación (settlement receipt)

This is a signed document that details every component of the finiquito:

• Employee's full name and CURP

• Dates of employment (start and end)

• Reason for separation

• Itemized breakdown of each payment component

• Total gross amount

• ISR withholding (if applicable)

• Net amount paid

• Acknowledgment that the employee has received full and final payment

• Employee signature

The liquidación signed by the employee functions as a release. It documents that the finiquito was paid correctly and accepted. Without it, the employer has limited legal protection against subsequent claims.

The CFDI 4.0 payroll receipt

Every finiquito payment must generate a CFDI 4.0 (Comprobante Fiscal Digital por Internet) digital payroll receipt stamped with SAT through the employer's authorized CFDI issuer.

This receipt must classify each component correctly:

• Earned salary: as regular salary income

• Prorated aguinaldo: as aguinaldo

• Vacation days and premium: as vacation pay

• Prima de antigüedad: as prima de antigüedad (specific SAT classification)

• Indemnización: as indemnización (specific SAT classification with favorable tax treatment)

Incorrect CFDI classification creates tax liability for both employer and employee. The SAT can assess unpaid ISR if components are misclassified.

For a full explanation of how CFDI works in Mexican payroll, the what is CFDI in Mexico article covers the digital stamping process, classification codes, and compliance requirements.

ISR tax treatment of finiquito components

Not all finiquito components are taxed the same way under ISR law. This is an area where employers frequently get the calculation wrong.

Components that are generally exempt from ISR (up to statutory limits)

• Prorated aguinaldo: Exempt up to 30 UMA units per year (at the 2026 daily UMA of MXN 117.31, this is approximately MXN 3,519.30 annually). Anything above is taxable.

• Vacation premium: Exempt up to 15 UMA units per year (approximately MXN 1,759.6 annually at 2026 UMA values).

• Prima de antigüedad and indemnización: Exempt up to 90 UMA units per year of service (approximately MXN 10,557 per year of service). The exemption is calculated per year of service, not as a single cap.

Components that are fully taxable

• Earned but unpaid salary: Taxed as regular income at the employee's applicable ISR bracket

• Any amounts above the statutory exemption thresholds above

ISR on finiquito payments is withheld by the employer and reflected on the CFDI payroll receipt. The employee receives net pay after withholding.

For the full breakdown of how ISR is calculated and withheld in Mexican payroll, the what is ISR in Mexico guide explains the progressive tax table and withholding mechanics.

Common finiquito mistakes employers make

Paying the finiquito late

The most common error. The employer processes the paperwork over several days after the last day of work. During that period, exposure to back-wage claims grows daily.

Calculating prorated aguinaldo by months rather than days

The correct calculation uses completed months. An employee who leaves mid-month earns aguinaldo for complete months only, not partial months.

Incorrect: Counting the partial departure month as a full month. Correct: Only counting fully completed months in the current calendar year.

Using the wrong daily salary for vacation calculations

The daily rate for vacation pay and premium is the employee's base daily salary.

Some employers use the integrated daily salary (SBC) instead. These are different figures, and using the wrong one affects the calculation.

Omitting the vacation premium entirely

The 25% premium on vacation days owed at separation is mandatory. It is not optional and cannot be waived in the employment contract.

Confusing finiquito with total separation cost

The finiquito is the minimum owed in every separation. In unjustified termination, the total cost includes finiquito plus indemnización. Employers who budget only the finiquito significantly underestimate exposure.

Not getting the liquidación signed

Paying the finiquito without a signed receipt leaves no documentary proof of settlement. The employee can later claim non-payment. A signed and correctly documented liquidación is the employer's primary legal protection.

Missing the CFDI for the finiquito payment

A finiquito paid without a corresponding SAT-stamped CFDI 4.0 payroll receipt is not compliant. SAT can assess penalties, and the payment may not be deductible for tax purposes.

Finiquito and termination notice obligations

Mexico's Federal Labor Law does not require a notice period for most employment terminations. Either party can end the relationship without advance notice.

However, the absence of a notice requirement does not eliminate the finiquito obligation. If the employer terminates without notice, the finiquito is still due immediately on the last day of work.

Some employment contracts include voluntary notice provisions (30 days, for example). If the employee resigns without giving contracted notice, this does not reduce the finiquito.

It may give the employer a contractual claim for damages, but that is a separate legal matter from the finiquito obligation.

For the full framework around termination timing and documentation requirements under Mexican law, the termination notice period in Mexico article covers what the LFT requires versus what contracts can add.

How EOR providers handle finiquito for foreign companies

A foreign company without a Mexican legal entity cannot process a finiquito directly.

There is no SAT registration to generate the CFDI, no registered payroll to process the final payment through, and no legal employer status to issue the liquidación.

This is one of the core reasons compliant EOR use matters for foreign companies hiring in Mexico.

When you employ someone through an Employer of Record in Mexico, the EOR is the legal employer. When the employment ends, the EOR:

• Calculates every finiquito component correctly

• Drafts the liquidación with accurate figures

• Issues the CFDI 4.0 payroll receipt with correct SAT classification for each component

• Processes ISR withholding on taxable portions

• Manages IMSS baja (IMSS de-registration) on the employee's last working day

• Handles INFONAVIT notification of the employment termination

• Coordinates signatures and delivers payment to the employee

• Retains documentation for any subsequent labor authority inquiries

The client company (you) is invoiced for the finiquito amounts. The EOR absorbs the administrative and legal complexity of executing it correctly under Mexican law.

This is particularly important in unjustified termination scenarios, where the combined finiquito and indemnización can represent a significant lump-sum liability.

The EOR coordinates timing, documentation, and payment execution to minimize legal risk to the client.

For a full picture of all the employer obligations that run alongside finiquito management, the employer obligations in Mexico guide covers the complete compliance framework.

Handling finiquito correctly from day one

Human Resources Mexico (HRM) is a Mexico-only Employer of Record with 17 years of physical presence in Mexico.

We manage the full employment lifecycle for every employee we hire on your behalf, including finiquito calculation, liquidación drafting, CFDI 4.0 payroll compliance, IMSS baja processing, and severance coordination when applicable.

When employment ends, you notify us. We handle every element of the separation correctly, completely, and on the day it needs to happen.

We hold active REPSE registration. We have 17 years of experience handling Mexican separations, terminations, and negotiated settlements. Our team is physically in Mexico.

• 17 years of physical presence in Mexico: Deep expertise in Mexican labor law and separation processes

• Active REPSE registration: Verifiable in the federal government registry

• Mexico-only focus: One country, handled correctly every time

• Human support: Real bilingual HR professionals manage your employees' separations in Mexico

• Transparent pricing: One inclusive fee covers payroll, compliance, and separation management

Get a custom HRM proposal to see exactly what compliant employment management in Mexico costs.

Have questions about how finiquito applies to a specific situation? Ask our Mexico EOR Specialist AI Chatbot for immediate, situation-specific answers.

Frequently asked questions

What is finiquito in Mexico?

Finiquito is the mandatory final settlement paid to every employee when employment ends in Mexico. It includes earned unpaid salary, prorated aguinaldo, accrued vacation days, and the 25% vacation premium.

Every separation type triggers a finiquito obligation.

Is finiquito the same as severance in Mexico?

No. Finiquito covers compensation the employee already earned. Severance (indemnización) is additional compensation owed only when the employer terminates without justified cause. In unjustified terminations, both are paid: finiquito plus severance.

When must finiquito be paid in Mexico?

The LFT does not specify a fixed deadline, but labor courts expect payment on the day of separation or within 24–48 hours.

Delayed payment allows the employee to claim back wages for every day the finiquito remains unpaid, up to 12 months.

What does finiquito include when an employee resigns?

For a voluntary resignation, finiquito includes earned unpaid salary, prorated aguinaldo, accrued vacation days, and the 25% vacation premium.

Prima de antigüedad is only included if the employee has 15 or more years of service.

Does finiquito apply when an employee is fired for cause?

Yes. Even in justified cause terminations, the employer must pay finiquito covering earned salary, prorated aguinaldo, and accrued vacation with the premium.

No indemnización or prima de antigüedad is owed in a correctly documented justified termination.

Is finiquito taxable in Mexico?

Partially. Earned unpaid salary is taxed as regular income. Prorated aguinaldo and vacation premium are partially exempt under ISR law up to UMA-based thresholds.

Prima de antigüedad and indemnización are exempt up to 90 UMA units per year of service. Amounts above those thresholds are taxed at the employee's applicable ISR bracket.

What is the prima de antigüedad and when is it part of finiquito?

Prima de antigüedad is a seniority bonus of 12 days' salary per year of service.

It is included in finiquito when the employer terminates without justified cause, when the employee resigns after 15+ years of service, or when the employee dies or becomes permanently incapacitated.

Can an employee waive their finiquito rights in Mexico?

No. Finiquito rights under the Federal Labor Law are non-waivable. Any clause or agreement that attempts to reduce finiquito below the statutory minimum is void and unenforceable.

Only amounts above the legal minimum can be negotiated.