Last updated on July 28th, 2023 at 01:47 pm
Employee benefits in Mexico are important when starting a business here because of two things. First, some of these benefits are required by the labor laws in Mexico, i.e., they are mandatory. And secondly, a company should always aim toward keeping its employees happy. Consequently, happy employees are motivated employees, and motivated employees perform better work. When done right, some benefits can have tax advantages for the company.
IMPORTANT: This article has been updated according to the Mexican Decree amending Articles 76 and 78 of the Federal Labor Law regarding vacations issued in December 2022.
This article aims to give you an overview of employee benefits in Mexico. Also, we’ll tell you which ones are mandatory and which are customary. Additionally, we’ll tell you which ones are deductible and to what extent so your company can benefit too. So let’s get to it.
Mandatory Employee Benefits in Mexico
Weekly Rest Day and Sunday Premium
This is the first employee benefit in Mexico that you need to consider. Indeed, Mexican Labor Law is evident in this regard. Article 69 of the Labor Law states employees are entitled to a fully paid rest day every six days worked. Also, Article 71 of the Labor Law states that this rest day will be on Sunday whenever possible. Or at least that is what the law procures. The law needs to foresee people working on Sundays. Therefore the article also discusses a premium of 25% over the ordinary daily salary for employees working on Sundays.
Another rest-related employee benefit in Mexico is the legal holidays. In essence, companies need to give their employees certain mandatory legal holidays. Mexican companies can indeed require their employees to work on a mandatory holiday. However, it needs to pay a triple payment for that day. Article 74 of the Mexican Labor Law states the mandatory holidays in Mexico. Besides these, certain holidays are not mandatory, but it is a custom to provide them.
Statutory Holidays in Mexico
|January 1st||New Year's Day|
First Monday of February
|Constitution Day||Celebration of the Mexican constitution|
Third Monday of March
|Benito Juarez' Birthday|
A former president of Mexico
|May 1st||Labor Day|
|September 16||Independence Day||Celebration of Mexico's independence day|
Third Monday of November
|Revolution Day||Commemoration of Mexico's Civil War|
December 1st every six years.
When there's a change of president
|December 25||Christmas Day|
Common Non-Mandatory Holidays in Mexico
|Thursday before Easter Sunday||Holy Thursday||Commemoration Jesus' last supper|
|Friday before Easter Sunday||Good Friday||Commemoration of the crucifixion and death of Jesus|
|May 5||Puebla's Battle||Commemoration of the Mexican Army's victory over the French|
|October 12||Day of the Races||Commemoration of the discovery of America|
|November 2||Day of the Dead||A day to honor relatives who passed away|
|December 12||Guadalupe's Virgin Day||Celebration of the appearance of the Virgin Mary in Mexico|
Vacations And Vacation Premium
Besides mandatory holidays, employees who have worked in the company for over a year are entitled to 12 days of paid vacations annually. This is one of the most important employee benefits in Mexico. Actually, until 2022, this number was six days. A new decree published on 27 December 2022 in Mexico’s Official Federation Gazette amended Mexico’s Federal Labor Law to double the number of annual paid vacations effective 2023.
The number of vacation days starts at 12 working days (meaning you can’t count weekends or holidays). Furthermore, this increases by two working days every year, working continuously for the company until a maximum period of 20 working days is reached. After that, vacations increase by two days every five years.
|Continous Employment in the Company||Vacation Period||Vacation Premium|
|0 to 1 year||Zero|
Take into account that this is the mandatory employee benefit in Mexico. Generally, in some industries, employers may give a little extra vacation to keep the employees happy and prevent pouching.
Article 80 of the Mexican Labor Law states a mandatory vacation premium of 25% (on top of regular salary). Thus, employees earn an additional 25% during their vacation period. The idea is for the employees to have some extra money. Therefore they can pay for their vacations and enjoy life.
Same as with vacation days, even though 25% is the mandatory benefit in Mexico. Additionally, some companies provide a more significant vacation premium to keep their employees happy. This depends on how competitive you would like your company to be as an employer.
Christmas Bonus (Aguinaldo): A Mandatory Employee Benefit in Mexico
Similarly, according to Article 87 of the Labor Law, you must pay your employees a Christmas bonus in Mexico. This bonus cannot be lower than fifteen days of their salary. Accordingly, you must pay it before the 20th of December.
Companies must pay Christmas bonuses even to employees who have worked for the company for less than a year. Only the proportional part is paid.
Indeed, the idea behind Mexican Christmas Bonus is for people to have a little extra cash to enjoy the holidays. Therefore they can buy presents, dinner and such.
Indeed, 15 days are what the mandatory employee benefit in Mexico is. But it is up to the company to negotiate with their employees how much they will get. Indeed, some high-level executives or key personnel may get a little more than that.
Profit-Sharing As An Employee Benefit in Mexico
According to Article 123 of the Mexican Constitution, companies must share 10% of their annual profits with their employees. Also, companies must distribute these profits within 60 days of filing the annual tax return.
If you wish to understand profit-sharing in Mexico at a more granular level, you should read our profit-sharing in Mexico article. If you wish to understand taxes in Mexico comprehensively, you can read our guide for foreigners.
The same article granting workers the right to profit-sharing and minimum wage, Article 123 of the 1917 Constitution, gives every person in Mexico the right to Social Security. The Sixth Title, On Labor & Social Security, has only one article. In this one article, the authors of the Mexican Constitution made their best effort to stipulate how labor and social security of the entire Nation should work. Mexico’s Labor Law & Social Security Law stems from Article 123.
Basically, through social security, workers have access to health care. Furthermore, it guarantees their income in case of sickness or maternity. Besides, it helps them create a retirement fund with the aid of their employers.
If you wish to understand more in-depth how social security works in Mexico, please read our Mexican Social Security article. Also, if you wish to calculate your employees’ social security contributions or understand how much your Mexican company has to contribute, we have created a Mexican Social Security Calculator.
According to Article 46 of the Mexican Labor Law, employers (and employees) can terminate a working relationship (i.e., fire an employee) without incurring liability if this termination is justified. But what does “justified termination” mean? Article 47 of the Labor Law enlists the causes of justified termination.
Suppose you can prove your employee did one of the things enlisted in Article 47. In that case, you can fire an employee without paying extra money. Section XIII, for example, states that termination is justified if employees go to work drunk or under the influence of substances. So, if an employee shows up drunk, feel free to fire him, and there will not be any charges. This, of course, can be easy to prove. But in other cases, proving the employee did something wrong gets more challenging, so you need to build a case. For this case, the employee (and his lawyer) will look to Article 51, which states the causes for termination of the employment relationship without liability for the employee.
If the termination is deemed wrongful, i.e., unjustified, the employer must pay the worker a severance payment according to Article 50 of the Labor Law. This leaves us with three possible scenarios when a working relationship is terminated in Mexico.
Scenarios For The Termination Of A Working Relationship In Mexico
- Voluntary Resignation. If an employee quits his job, he is entitled to the payment of his prorated vacations and Christmas bonus. This is the amount accumulated that year up until the moment he resigned. We call this the “basic settlement.” If he/she worked for over 15 years in the company, he/she is entitled to an “antiquity premium.” This is 12 days of salary for every year worked.
- Justified Termination. If there is a valid reason for the termination, the severance package is the same as a voluntary resignation. It is composed of the essential settlement and antiquity premium, if applicable.
- Wrongful Termination. If the termination of an employee is unjustified, the employee is entitled to the following. (1) Three months of his salary. (2) 20 days of salary for every year worked. (3) The essential settlement and antiquity premium, if applicable.
Common Employee Benefits in Mexico (Non-Mandatory)
As stated before, social security is a mandatory benefit, including public health and life insurance. However, the medical attention you get in public hospitals is not the best. Therefore, one of Mexico’s most common employee benefits is giving them private health and life insurance. This is a custom only in specific industries.
Food Vouchers as an employee benefit in Mexico
As part of a package of employee benefits in Mexico, it is common for companies to give food vouchers to their employees. With these, employees can go to any supermarket and buy groceries, medicine, etc. This employee benefit in Mexico is advantageous for the company; they can deduct it as an expense (up to 53%) and pay less income tax. The term “food voucher” exists because it used to be a physical paper voucher you took to the store. Nowadays, these are electronic wallets with chips that you use similarly to a debit card.
A savings fund is an employee benefit in Mexico in which a company sets a fund in a financial institution on behalf of an employee for him to contribute a part of his salary as savings. According to the employee’s instructions, the company withholds these contributions from the employee’s salary and contributes an identical amount to the fund every month. Indeed, these company contributions are fully deductible for the company. Finally, once per year, the employee can withdraw his savings.
Also, the limit for the company’s contributions to be deductible is 13% of the employee’s salary, without this exceeding 1.3 times the current minimum wage.
A productivity bonus is a way to pay an extra amount to your employees if certain productivity milestones are reached. Indeed, one significant advantage of this employee benefit in Mexico is that they are not considered for the employee’s income tax calculation. So this means they receive the total amount.
Would you like to know more about a particular employee benefit in Mexico? Please leave it in the comments below!