Social security in Mexico is a right that every worker has. Firstly, it ensures that workers have access to health care and it guarantees their income in case of sickness or maternity. Secondly, through social security, workers create a retirement fund with the aid of their employers. Therefore, once they become too old to continue working, they will have an income that will allow them to support themselves for the rest of their lives.
In this article, we will go in-depth about how social security in Mexico works and the contributions made by both workers and employers.
To easily navigate this article you can use the following table of content.
First, let’s begin with the institution behind it.
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 (Institute Mexicano del Seguro Social). Therefore, IMSS’ mission is to provide medical attention and social security to all Mexican workers. Certainly, every Mexican employee in the public or private sector has the right to social security benefits.
So, let’s get legal. The Mexican Social Security Institute has its legal basis in article 5 of the Mexican Federal Social Security Law. Certainly, this article states that IMSS is a decentralized public organism with its own legal personality. Therefore it establishes its own regulations to achieve its goals. However, these regulations need to be in line with the Federal Social Security Law.
IMSS Mexico Worker-Employer Fees
Overall, in order for the Mexican Social Security Institute to operate correctly, it requires economic support from the government, and the payments made by all registered employer and their workers. As a result, pensions and social security in Mexico keep on running.
Basically, every worker in Mexico contributes a portion of his salary to his retirement, medical insurance, and other concepts. Concurrently, the employer has the obligation to contribute to these same concepts as a benefit for the worker. Thus, the total amount that is paid to the IMSS is called Worker – Employer Fees or Cuotas Obrero – Patronales.
Certainly, it is the employer’s responsibility to 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 has the obligation of registering itself before the Mexican Social Security Institute as an employer. This is called Alta Patronal, which roughly translates to Employer Registration.
Secondly, every company has to register each worker before the IMSS. Consequently, these workers get an account in the Mexican Social Security Institute where all the payments will be accrued for the rest of their lives. If they change jobs, they use the same account under a different employer registration.
Lastly, once the company and workers are registered before the IMSS, your company will incur the obligation of calculating and paying 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 Mexican working has a constitutional right to decent housing. Therefore, social housing is a part of social security in Mexico. However, an entirely different institute oversees it. It is indeed called 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 INFONAVIT in 1972 specifically with the objective of guaranteeing that every Mexican worker has a decent home.
INFONAVIT works 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 gets itself and its employees registered at the IMSS, they automatically become registered at INFONAVIT.
Now, on to the Mexican social security concepts and the proportion of the salary that they charge as deductions from both the worker and the employer.
Mexican Social Security Benefits
Basically, by being listed in the Mexican Social Security Institute, workers are entitled to 5 different benefits. Following, companies calculate each one as a percentage of the worker’s salary. However, as we stated earlier, both employer and worker 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, don’t be fooled by the terms. Obviously, all of the payments need to be done in money. What this means is that the worker may finally obtain the benefit as a sum of money, e.g. his pension or he can obtain the benefit-in-kind, e.g. medical attention, medicines, childcare, etc.
Let’s see how this works.
Work Risk Insurance
Firstly, every industry and type of employment environment has a different level of risk linked to it. Furthermore, the IMSS has identified and divided 5 different levels or categories of risk. Level I basically refers to jobs with insignificant risks, such as working in an office. Level V, on the other hand, could be some types of mining activities where the work gets fairly dangerous.
Secondly, at each level, there is an associated risk premium. This premium is the percentage we use to calculate the work risk insurance payment. The company makes this contribution, the worker does not contribute to this category.
The following table specifies the risk category and the corresponding premium.
Mexican Social Security Institute Risk CategoriesOverall
|Risk Category||Premium %|
Disease And Maternity Insurance
Firstly, the Mexican Social Security Institution grants its affiliated workers benefits in kind and money in case they get sick and, in the case of women when they go through maternity.
Secondly, in the case of diseases, the insurance covers medical attention, surgery, medicines, and hospitals. Besides, if the worker is incapable of working because of the disease, there is also a subsidy in money for him to continue to obtain a salary
In the case of maternity, for instance, insurance covers all medical attention, in-kind help for lactation, and an in-money subsidy of 100% of the worker’s salary for 42 days before labor and 42 days after labor.
Furthermore, the IMSS offers medical insurance for pensioners and their families as well.
This subcategory of benefits basically refers to all those not given to the employee as money, i.e. medical assistance, surgery, hospitalization, and medicines.
- Fixed Fee: 20.40% of the current UMA value.
- Surplus Fee: If the employee makes more than 3 times the value of UMA, a fee is paid on the surplus of 1.10%.
- Surplus Fee: If the employee makes more than 3 times the value of UMA, a fee of 0.4% is paid by the worker on the surplus.
Medical Expenses for Pensioners And Their Beneficiaries.
Following, once a worker retires, he continues to have medical insurance for himself and for his beneficiaries (spouse and underage kids). Indeed, he pays for this insurance throughout his productive years, with a subsidy from his employer.
- Company contribution: 1.05% of the BLS.
- Worker contribution: 0.375% of the BLS.
Benefits In Money
This benefit specifically is for the 84 days of salary in the case of maternity or the in-money subsidy when the worker is incapacitated by disease.
- Employer contribution: 0.7% of the BLS.
- Worker contribution: 0.25% of the BLS.
Disablement And Life Insurance
Basically, this insurance functions for when a worker has an accident because of the work he performs and becomes disabled, or dies. It is paid in kind and money.
- Company contribution: 1.75% of the BLS.
- Employee contribution: 0.625% of the BLS.
Retirement: Advanced Age Severance, and Old Age
These benefits are specifically for two different types of pension funds.
- Advanced Age Severance: A worker is entitled to it if he is over 60 years of age and has been listed in the IMSS for at least 25 years.
- Old Age: A worker is entitled to it if he is 65 years of age and has been listed at the IMSS for at least 25 years.
The contributions are as follows.
- Old Age: 2% of the BLS.
- Advanced Age Severance: 3.15% of the BLS.
- Old Age: None.
- Advanced Age Severance: 1.125% of the BLS.
Nursery And Social Benefits
Finally, this benefit is for day nursery for the children of workers while the parent is at work.
- Employer contribution: 1% of the BLS.
- Worker contribution: None.
- Company contribution: 5% of the BLS.
- Employee contribution: None E
|Concept||Type of Benefit||Company||Employee||Calculation Base|
|Work Risk||In-Kind and Money||Premium according to Risk Category||0.00%||Base Listed Salary|
|Disease And Maternity Insurance||In-Kind||20.40 %||0.00 %||Monthly UMA|
|1.10 %||0.40 %||Difference between BLS and 3 times UMA|
|Medical Expenses for Pensioners And Their Beneficiaries.||1.05 %||0.375 %||Base Listed Salary|
|In Money||0.70 %||0.25 %||Base Listed Salary|
|Disablement and Life Insurance||In-Kind & Money||1.75 %||0.625 %||Base Listed Salary|
|Retirement; Advanced Age Severance and Old Age||Old Age||2.00 %||0.00 %||Base Listed Salary|
|Advanced Age Severance||3.150 %||1.125 %||Base Listed Salary|
|Nursery and Social Benefits||In-Kind||1.00 %||0.00 %||Base Listed Salary|
|INFONAVIT||In Money||5.00%||0.00%||Base Listed salary|
Other Concepts involved in the Calculation of Social Security In Mexico
Lastly, to calculate both the worker’s and the employer’s deductions, we need to know three things.
- The Base listed salary of our workers
- The Measurement and Updating Unit (UMA)
- The percentages established by the law for worker-employer contributions.
Base Listed Salary
First, let’s get legal. Specifically, article 27 of Mexico’s Social Security Law stipulates that the Base Listed Salary is the amount on which the benefits given to the employee are calculated.
Basically, to obtain the base listed salary, what you need to do is to integrate all the mandatory employee benefits i.e. vacations, vacations premium, and Aguinaldo (Christmas bonus) into the worker’s salary.
If you would like to know more about these concepts, we recommend that you read our Employee Benefits In Mexico article. However, here’s a quick summary.
- Christmas Bonus. Employees who have worked for the company for more than one year are entitled to a Christmas bonus equal to or higher than fifteen days of their salary.
- Vacations. Employees who have worked for the company for more than one year are entitled to paid vacations annually. This period starts at six days and two days are added for each year of continuous employment in the company until the fifth year. After that, it is increased by two days every 4 years.
- Vacation Premium. Vacation days are paid with an extra premium of 25% on top of the regular salary.
Base Listed Salary Calculation
Firstly, we need to calculate the worker’s daily salary. So, let’s see an example. Let’s think about Raul, a nice employee that has worked for the company doing administrative tasks for two and a half years. So, let’s say he makes MXN $10,000 a month.
Following, we divide his monthly salary by 30, the standardized days in a month.
Certainly, Raul has continuously worked for your company for two years. Therefore, he gets 8 days of vacation annually, with a mandatory vacation premium of 25%. Besides Raul’s Aguinaldo (Christmas Bonus) is the mandatory 15 days.
Finally, we have all the information we need. Subsequently, we need to obtain our integration factor.
What we are trying to obtain is the number of days that the worker earns a salary in a year. So we add the extra days (Vacation Days and Christmas Bonus days) to 365, which is the number of days in a year. Then, we convert the vacation premium to days by multiplying the premium by the vacation days.
- Christmas Bonus 15 days.
- Vacations 8 days.
- Vacation Premium of 2 days (8 days * 25%).
This gives us an integration factor 1.0685. Now we just multiply Raul’s daily salary times the integration factor to obtain his Base Listed Salary.
And voila, Raul’s Base Listed Salary is $356.16 and all the benefits will be calculated on that amount.
The Measurement and Updating Unit (UMA)
The Unidad de Medida y Actualización (UMA) is an economic reference unit. It is linked to inflation, and it’s used in Mexico to pay things like fines and social housing loans. The National Institute of Geography and Statistics (INEGI in Spanish) calculates the UMA. You can see it published here.
Why is it important to calculate social security in Mexico? Because IMSS allows for a maximum Base Listed Salary limit of 25 UMAs. Besides, some deductions are made on this unit.
UMAs change every year. But don’t worry, just bookmark this article and we keep it updated for you.
|Concept||Mexican Pesos||US Dollars|
|Daily UMA||MXN $96.22||US $4.85|
|Monthly UMA||MXN $2,925.09||US $147.47|
How to Calculate Social Security In Mexico
Now that we have all the information we need at hand, let’s make a calculation example of Mexican social security for an employee.
Since we already calculated his base listed salary, let’s continue with Raul’s example.
Since we know that his daily base listed salary is $348.86 we just need to multiply it by 30 to obtain his monthly BLS.
This monthly base listed salary is the amount with which we will make all the calculations.
So, let’s get to it.
Social Security in Mexico Calculation Example
Firstly, we have to the risk premium according to the type of work that Raul performs. Since he does administrative tasks and basically performs all his activities from a computer in an office environment, the risk premium would be Class I, with a premium of 0.54355%.
Secondly, we need to calculate his surplus fee to calculate the In-Kind part of Disease and Maternity Insurance. Remember that the surplus is the difference between the worker’s monthly BLS and three times monthly UMA.
Now we have everything we need to calculate social security in Mexico for our employee, Raul.
- Monthly BLS = $10,684.80
- Risk Premium = 0.54355%
- Disease & Maternity Insurance Surplus = $1,909.53
The rest is pretty straightforward so let’s do the calculation in a table.
Mexican Social Security for a $10,000 Salary
|Type of Benefit||Company||Employee||Calculation Base||Company Contribution||Employee Contribution|
|D. & M. Insurance In-Kind||20.40%||0.00 %||Monthly UMA||$596.72||$0.00|
|Medical Expenses for Pensioners And Their Beneficiaries.||1.05%||0.38%||BLS||$112.19||$40.07|
|D. & M. Insurance In Money||0.70%||0.25%||BLS||$74.79||$26.71|
|Disablement & Life Insurance||1.75%||0.63%||BLS||$186.98||$66.78|
|Retirement Old Age||2.00%||0.00%||BLS||$213.70||$0.00|
|Retirement Advanced Age Severance||3.15%||1.13%||BLS||$336.57||$120.20|
|Nursery & Social Benefits||1.00%||0.00%||BLS||$106.85||$0.00|
- Company’s Contribution = $2,241.12
- Employee’s Contribution = $261.40
Social security in Mexico is a right that every employee has. In Mexico, both companies and employees need to make contributions to the employee’s social security. These contributions are calculated as a percentage of the base listed salary and, in some cases, of the current monthly UMA.
Do you still have questions about how to calculate social security in Mexico?
Drop them in the comments below!