Social Security in Mexico: The Whole Picture

Social Security in Mexico: A Legal Overview

Social security and bad labor conditions were among the reasons for Mexico’s revolution in 1910. The winners of the revolution created a new constitution in 1917.

Article 123 of the Mexican Political Constitution, located in the Sixth Title, “On Labor & Social Security,” condenses the legal basis for these topics. Regulating an entire country’s labor and social security is impossible with one article. So, the Mexican Social Security Law and Labor Law stem directly from this article of our constitution. 

Article 5 of the Mexican Social Security Law discusses the institution regulating social security in Mexico. 

IMSS Mexico: The Mexican Social Security Institute

The institution in charge of social security in Mexico is the Mexican Social Security Institute, commonly known as IMSS, because of its name in Spanish (Instituto Mexicano del Seguro Social). Therefore, IMSS’ mission is to provide medical attention and social security to all Mexican workers. 

The law states that IMSS is a decentralized public organism with its legal personality. Therefore it establishes its regulations to achieve its goals. However, these regulations must align with the Federal Social Security Law and the Mexican Constitution. 

 

Worker-Employer Fees 

For the Mexican Social Security Institute to operate correctly, it requires economic support from the government and payments made by all registered employer and their workers. As a result, pensions and social security in Mexico keep on running.

Every worker contributes a portion of his salary to his retirement, medical insurance, and other concepts. At the same time, the employer must contribute to these concepts to benefit the worker. Thus, the total amount paid to the IMSS is called Worker – Employer Fees or Cuotas Obrero – Patronales.

The employer must perform these calculations, withhold those payments, and pay them to the IMSS. 

But how does this work?

Mexican Social Security Registration

Firstly, every company that hires a worker must register itself before the Mexican Social Security Institute as an employer. We call this Alta Patronal, which roughly translates to Employer Registration. 

Secondly, every company has to register each worker before the IMSS. Consequently, they create an account for workers in the Mexican Social Security Institute, where they accrue payments the rest of their lives. If they change jobs, they use the same account under a different employer registration.

Lastly, once your company registered your workers at the IMSS, it must calculate and pay the Worker-Employer Fees. You do this through a Reference Payment System called “SIPARE”  because of its name in Spanish. This is a digital tool that makes Mexican social security payments easy. 

INFONAVIT: Social Housing in Mexico

Every worker in Mexico has a constitutional right to decent housing. Therefore, social housing is a part of social security in Mexico. However, a different institute manages and oversees it. This is the National Housing Fund Institute, commonly known as INFONAVIT because of its name in Spanish (Instituto del Fondo Nacional de la Vivienda para Los Trabajadores). The government created the Institute in 1972 by issuing the National Housing Fund Institute Law. 

INFONAVIT’s mission is to guarantee every Mexican worker decent housing. It achieves to do that by creating a fund with the contributions that employers make to their workers. Then, it uses this money to provide mortgage loans to workers to ensure they can buy a decent house. Furthermore, it receives a subsidy from the government to ensure that these loans remain competitive.  

Whenever a company registers at the IMSS, it automatically becomes registered at INFONAVIT.

Now, on to the Mexican social security concepts and the proportion of the salary they charge as deductions from both the worker and the employer.

Mexican Social Security Benefits

Article 11 of the Mexican Social Security Law talks about a mandatory regime, which includes insurance for the following.

1. Occupational risks;
2. Sickness and maternity;
3. Disability and life;
4. Retirement, severance at an advanced age and old age; and
5. Childcare and social benefits.

Companies calculate each of these as a percentage of the worker’s salary. However, as stated earlier, employers and workers pay a part of the total.

The IMSS subdivides these benefits into subcategories. Additionally, you will see that some of these subcategories are called “In Money” and “In-Kind.” But do not let the terms fool you. Your company makes all the payments in money. 

In-Kind and In-Money, in this context, means the worker may, in the end, obtain the benefit as a sum of money, e.g., pension or maternity leave, or obtain the benefit-in-kind, e.g., medical attention, medicines, childcare, etc.

Let’s see how this works.

Work Risk Insurance

Every industry and type of employment environment has a different level of risk linked to it. Furthermore, the IMSS has identified and divided five different levels or categories of risk. Level I refers to jobs with insignificant risks, such as office work. On the other hand, Level V could be some mining activities where the work gets pretty dangerous.

Each risk level has an associated risk premium. This premium is the percentage we use to calculate the work risk insurance payment. Only the company contributes to this category.

The following table specifies the risk category and the corresponding premium.

Mexican Social Security Institute Risk Categories Overall