If you’re hiring remote team members in Mexico, you’ll need to be aware of the benefits you’re required to provide by law.
Mexico’s robust federal labor laws set out a wide range of statutory benefits for employees, and you’ll have to adhere to these laws when hiring employees in Mexico, regardless of where your company is located.
Failure to comply with Mexico’s employment laws could spell serious trouble for your business, so let’s dive into the mandatory employee benefits you’ll need to provide. Then, we’ll explore optional benefits you can offer to position yourself as a more attractive employer for top talent in Mexico.
Mandatory Employee Benefits in Mexico
Paid Time Off (PTO)
Employees are entitled to at least six days of paid vacation after their first year of employment, and employers must grant paid time off within six months of completion of the first year.
The amount of PTO granted to an employee increases by two days for every subsequent year of service, up to five years. After this, the number of vacation days they’re entitled to will increase by two days for every five years of service.
PTO in Mexico doesn’t just apply to full-time employees — discontinuous and seasonal employees are also entitled to annual time off proportional to the number of their working days in a year.
Statutory Holidays
Employees are also entitled to statutory or national holidays, including New Year’s Day, Independence Day, Revolution Day, and Christmas Day. These mandatory holidays are set out in Article 74 of the Mexican Federal Labor Law. While companies can require their employees to work on a mandatory holiday, in such cases, employees will receive triple their regular salary.
Prima Anual
The Prima Anual is a bonus paid out to employees when the business achieves its annual financial goals. It consists of 25% of the total profit to be distributed among the employees, and the organization is only obligated to pay the Prima when it has made a profit the previous year.
All employees who have worked at the company for more than three months have the right to receive the Prima Anual, which must be paid within 30 days of closing the annual ledger.
Profit Sharing
Profit sharing — known as PTU — is a mandatory employee benefit in Mexico not to be confused with the Prima Anual. While the Prima depends on the company hitting certain goals, PTU is compulsory for most businesses in Mexico, with a handful of exceptions, including companies that are less than two years old.
PTU requires employers to pay 10% of their profit to employees. The amount shared is divided in two:
- The first half is distributed among the employees according to their days worked throughout the year. It’s capped at three months’ worth of an employee’s salary and prorated for employees who have been at the company for less than a year.
- The second part is applied in proportion to the employee’s income level.
PTU does not apply to executives and other high-ranking employees such as CEOs, CFOs, General Managers, and Administration and Finance Directors.
Annual Bonus
Employers in Mexico are required to give their employees an ‘aguinaldo’ — a yearly bonus. This bonus typically equals 15 days’ pay, though some employers give their employees 20 or 30 days’ pay.
Companies must distribute the Christmas bonus before December 20th so that employees can use the funds for the holidays. Employees who have been with their company for less than a year are entitled to a prorated portion of their bonus.
Social Security
Mexican businesses and any business with employees in Mexico must contribute to the Mexican Social Security Institute (IMSS) on behalf of their employees. The IMSS provides a number of benefits to employees, including public healthcare coverage, disability insurance, and retirement benefits.
Social security in Mexico also covers parental leave. Mothers receive six weeks of maternity leave before the due date and six weeks after the birth as paid leave, while fathers receive five days of paternity leave after the birth of a child.
Severance Pay
When you terminate an employee’s contract in Mexico, you’re required to give them severance pay. The type of severance pay the employee receives will depend on the individual circumstances, as follows:
- Employees who quit are entitled to a small severance package that includes proportional payments of the annual bonus and unused PTO.
- Employees who are fired with cause receive 12 days’ worth of their salary for each year worked at the company.
- Employees fired without cause get hefty severance packages, including a minimum of three months’ salary plus additional compensation, such as twenty days’ worth of salary for each year at the organization.
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Optional Employee Benefits in Mexico
Because the mandatory employee benefits in Mexico are so robust, many companies choose not to provide any additional benefits.
However, if you want to attract top talent from Mexico, you might want to consider going beyond the statutory benefits. Here are some suggestions for elective employee benefits to add to your package.
Private Health Insurance
You can choose to provide your employees with private medical insurance. This can be a valuable benefit, as it provides access to better clinics and shorter wait times, and the Mexican public healthcare system is not always reliable.
Life Insurance
Life insurance is an optional benefit that can provide peace of mind for employees and their families in the event of an employee’s death.
Private Pension Plan
Private pension plans can help employees save for their retirement and reach their financial goals.
Savings Funds
You can set aside a portion of an employee’s salary each month to deposit into a company-owned savings account. The amount withheld may never exceed 13% of the employee’s monthly salary, the company matches the employee’s contribution, and the employee receives the full dividends payout once a year.
Training and Professional Development
Upskilling your employees by paying for ongoing training and professional development can help them advance their careers and strengthen your organization. According to Sodexo, companies with a strong learning culture have 30-50% higher employee retention.
Other Perks and Benefits
Employers in Mexico often provide other perks and bonuses, such as WiFi, transportation stipends, productivity bonuses, and food vouchers.
Offer Competitive Benefits to Employees in Mexico
Mexico’s robust employment laws require Mexican and international employers to provide statutory benefits that can take you by surprise, and failure to comply can result in penalties and fines.
Partnering with an EOR like RemoFirst can help you avoid potential legal pitfalls when hiring employees in Mexico while creating a supportive and engaging work environment that increases employee satisfaction and retention. To learn more, check out our Mexico country guide.
