We are not a law firm. Do not consider our information as legal advice. This information has been summarized based on our legal inquiries. Information can become obsolete from one day to another due to changes in laws, regulations, or government procedures. Consult labor and tax attorneys for legal advice. (Note from HR Mexico staff)
Mandatory Benefits in Mexico
The Mexican constitution and the Federal Labor Law of Mexico outline the mandatory benefits that an employee is to receive. Just like many other places, there are mandatory benefits the employees receive, and there can be additional private benefits that the worker receives.
Compared to the United States of America for example, there are two mandatory benefits that one would not be knowledgeable of: The Christmas bonus and the vacation bonus. We won't consider the mandatory profit sharing as a benefit in as much as the profit sharing can be paid out or not paid out based on profit. Whereas, the mandatory benefits are paid out regardless of the circumstances.
Christmas Bonus (Aguinaldo) - Companies are required to pay a year-end Christmas bonus (Aguinaldo) to all employees equivalent to 15 days pay before December 20th of each year. It is customary by some employers to pay a 20-30 day bonus based on large salary amounts or many years with the same employer. Those who have worked less than one year receive a pro-rated bonus.
Vacation Bonus - Mexico has a mandatory "vacation bonus." The minimum bonus is 25% of the base salary for every day of paid vacation. This can also be negotiated. We have seen vacation bonuses of 50% and 100%. It all depends on negotiation.
Legal Holidays - Mexican Federal Labor Law establishes 7 legal paid holidays per year. Besides these holidays many businesses and labor contracts observe additional days for religious and national celebrations.
Vacation - Vacation time is guaranteed and rewarded based on seniority. Six days of paid vacation must be offered after one year of service, plus two additional days each year for the next three years. By the 5th year of service, this adds up to two weeks of paid vacation. After five years of employment, two more days must be added for each five-year block of service. Keep in mind that the mandated vacation days are minimums. An employer can always pay and negotiate more vacation days. But never less than the minimums.
A quick guide for calculating vacation is as follows:
Year 1 = 6 days
Year 2 = 8 days
Year 3 = 10 days
Year 4 = 12 days
Year 5 = 14 days
Year 10 = 16 days
Year 15 = 18 days
Social Security - All workers are automatically covered by the public health care system the Mexican Institute of Social Security (Instituto Mexicano de Seguro Social, IMSS), whether registered or not. It is the responsibility of the employer to register employees as well as contribute a minimum on average of 17.42 percent of each worker’s salary into the social security fund, depending on the risk-factor of the job and salary level. Benefits include basic health care and medications, attention to occupational accidents and care for illnesses.
Keep in mind that we stated MINIMUM ON AVERAGE. The actual percentage of payroll will be based on the salary amount and costs associated with the payroll. Employment taxes / Employer obligations / etc.
Employee Housing - Employers also are required to pay a 5 percent fixed payroll tax to finance the Institute for the National Fund for Employee Housing (Instituto Nacional del Fondo de la Vivienda para los Trabajadores, INFONAVIT). The goal of this federal program is to provide benefits allowing employees to more easily acquire a home. If an employer doesn't deduct the INFONAVIT loan from the employee paycheck, the employer is still obligated to pay for the loan while the employee works for the company.
Retirement Insurance - Under the Retirement Savings System (Sistemas de Ahorro para el Retiro, SAR), employers must pay 2 percent of a worker’s salary.
Of course there is maternity leave, and other things that must be considered for the employees in Mexico.