Mexico is particularly known for being protective towards employees when it comes to labor laws. All relationships with employees are regulated by the Mexican Federal Labor Law (FLL), which was enforced in 1970 and revised with a new amendment in 2012, and also regulated by the Mexican Social Safety Law, protection and sanitation law and, essentially the Constitution of Mexico dated back to 1917. Compliance is a supreme priority when it comes to business in Mexico; therefore, a complete understanding of the Mexican employment policies, payrolls, and tax laws is necessary for employment in Mexico. Below are 4 primary things your company should consider before hiring employees in Mexico. Just read on!
1. What is Mexican Federal Labor Law?
Mexican Federal Labor Law (FLL), which was approved in 1970 and was reformed in 2012, governs all the employment relationships that are entered into the Mexican jurisdiction. It has set forth the following rules that an employer must have to follow.
- Salary should never be less than the current minimum general wage.
- At least 25% of the vacation premium is to be paid.
- If the employee had provided his services during the full year calendar, 15 days of Christmas bonus is to be given.
- Overtime has to be paid if an employee works more than 48 hours per week.
- Employees have the right to receive a Sunday premium consisting of 25% of the day’s salary if they are working on Sundays.
- Along with that, social security benefits and profit-sharing is mandatory.
2. What Are the Obligations for Employers in Mexico?
Following are the obligations employers must have to follow in a relationship with an employee in Mexico:
- Establish a formally written agreement with the employee.
- Follow all the legislation.
- Pay salaries monthly or bi-monthly.
- Pay social security and housing.
- Register all the employees with Mexican Social Security (IMSS) within Following are the obligations employers must have to follow in a relationship with an employee in Mexico: a limit of five days.
- Implement proper health and safety protocols.
3. How to Pay Employees in Mexico?
In Mexico, payrolls and taxes are one of the hardest things to understand for employers. Whether you are using a third-party employer or DIY method, there are specific rules you need to follow. Many companies opt for payroll to speed up the process.
1. Payroll Rules
According to Mexican tax revenue regulation, official Mexican banks have to receive the net pay for all employees, and it is to be paid in Mexican pesos. Net pay should include salary, hardship allowance, and cash benefits. Medical insurance and 401K contribution are not included in Mexican payrolls. Hence, it is obligatory for all the employees to set up accounts in official Mexican banks.
2. Pay Slips
The process of issuing pay slips should also be according to Mexican laws. They must be approved and electronically stamped (after SAT confirms the amount of money sent from employer to employee’s bank) before the employee receives an official copy of the pay slip. All the payments should be in Mexican pesos; afterward, they can be converted to other currencies.
4. How to Terminate Employees in Mexico?
Employ termination is the most complicated area of employment in Mexico. Employees are assumed to be permanent after a month, which means that termination must because of a justifiable cause.
Mexico has very defined guidelines for the termination of working relationships. If any employee is terminated and gives a justified cause, they are entitled to have:
- Three months of salary.
- 12 days of salary per year for those who have served longer than 15 years.
- Holiday pay, profit sharing, and 13th-month bonus.
- 20-day salary per year of service.
I hope you find this article helpful as most of the foreign companies find employment regulations strict in Mexico as compare to other countries in terms of adherence to labor protections and financial requirements. Whatever your company plans to establish in Mexico, you just need to know the underlying rules.