Employee Benefits In Mexico: Mandatory Vs Customary

Some employee benefits in Mexico are mandatory and some are just customary. In this article we will explain the most important ones.
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Employee benefits in Mexico are really important when starting a business here because of two things. First, some of these benefits are required by law, 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.

Basically, the purpose of this article is to give you an overview of employee benefits in Mexico. Also, we’ll tell you which ones are mandatory, and which ones 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. Certainly, Mexico’s Labor Law is really clear in this regard. Article 69 indeed states that for every six days of work, an employee is entitled to a fully paid rest day. Also, article 71 states that when possible this rest day will be on Sunday.  Obviously, it is impossible for nobody to work on Sundays. So the article also states that if an employee works on a Sunday he is entitled to a premium. Specifically, this premium is 25% over his ordinary daily salary.

Legal Holidays 

Another rest-related employee benefit in Mexico is the legal holidays. In essence, companies need to give their employees certain mandatory legal holidays. Besides these, there are certain holidays that are not mandatory but it is a custom to provide them. If a company needs its employees to work on a mandatory holiday, it can do it. However, it needs to pay double their daily salary plus their ordinary salary. This means that the employee receives triple payment for that day.

Statutory Holidays in Mexico

Date

Holiday

Explanation

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

Date

Holiday

Explanation

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 as an employee benefit in Mexico

Vacations And Vacation Premium

These are the mandatory holidays. Besides, employees who have worked in the company for more than one year are entitled to paid vacations annually. This is one of the most important employee benefits in Mexico.

Basically, the number of vacation days starts at six working days (meaning you can’t count weekends or holidays). Furthermore, this increases by two working days every year working continuously for the company. However, this continues until a maximum period of 12 working days is reached in the fourth year. So, after this, it increases by two days for every five years working for the company.

Continous Employment in the CompanyVacation PeriodVacation Premium
0 to 1 yearZero
1year625%
2 years825%
3 years1025%
4 years1225%
5 to 9 years1425%
10 to 14 years1625%
14 to 19 years1825%

Take into account that this is the mandatory employee benefit in Mexico. Generally, in some industries, employers may choose to give a little extra vacation to keep the employees happy and prevent pouching.

Vacation Premium

Additionally, there is a mandatory vacation premium of 25% of salary (on top of regular salary). Thus, employees earn an additional 25% during their vacation period. Basically, the idea is for the employee to have some extra money. Therefore he can pay for his vacations and enjoy life.

Same as with vacation days, even though 25% is the mandatory benefit in Mexico. Additionally, some companies provide a larger vacation premium to keep their employees happy. It depends on how competitive you would like your company to be as an employer.

Christmas bonus as an employee benefit in Mexico

Christmas Bonus Or Aguinaldo: A Mandatory Employee Benefit in Mexico

Similarly, you must pay your employees a Christmas bonus equal to or higher than fifteen days of their salary. Accordingly, you must pay it prior to the 20th of December. Indeed, the idea behind this is for people to have a little extra cash to enjoy the holidays. Therefore they can buy presents, dinner and such. But employees need to work for the company for at least one year to receive this bonus.

Certainly, 15 days is 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

So, according to the Federal Labor Law, companies must share with their employees 10% of their annual profits. Also companies must distribute these profits within 60 days of filing the annual tax return. 

Social Security 

Certainly, every employee in Mexico is entitled to social security. 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.

Severance Pay

In Mexico, a company must have a valid reason to terminate its work relationship with an employee. Otherwise, the termination is deemed wrongful. This leaves us with three different options when a working relationship ends. 

  • 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 more than 15 years in the company, he 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 with the voluntary resignation. It is composed of the basic 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 basic settlement and antiquity premium if applicable.

Common Employee Benefits in Mexico (Non-Mandatory)

Private insurance as an employee benefit in Mexico

Private Insurance 

As stated before, social security is a mandatory benefit and this includes public health insurance as well as life insurance. However, the medical attention you get in public hospitals is not the best out there. Therefore, one of the most common employee benefits in Mexico is to give them private health insurance and private life insurance.

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 has an advantage for the company; they can deduct it as an expense (up to 53%), and therefore pay less income tax. Actually, the term food voucher exists because it used to truly be a voucher that you took to the store. Nowadays these are electronic wallets with chips that you use in a similar fashion to a debit card. 

Savings fund as an employee benefit in Mexico

Savings Funds

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. Basically, the company withholds these contributions from the employee’s salary and contributes an identical amount to the fund every month, according to the employee’s instructions. Certainly, these company contributions are fully deductible for the company. Finally, once per year, the employee has the possibility of withdrawing his saving. 

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.

Productivity Bonus

A productivity bonus is a way to pay an extra amount to your employees if certain productivity milestones are reached. Certainly, one big advantage of this employee benefit in Mexico is that they are not taken into consideration for the employee’s income tax calculation. So, this means they receive the full amount.

Would you like to know more about a particular employee benefit in Mexico? Leave it in the comments below!

 

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Roberto Cornejo
Roberto Cornejo

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