If your company is considering nearshoring to Mexico and benefit from the several advantages Mexico has to offer for manufacturing companies.
One of such advantages if the availability of skilled workers and competitive labor costs, therefore it is important to learn the basics of the Mexican Federal Labor Law, including its key regulations and workers’ rights.
What is the Mexican Labor Law
The “Mexican Federal Labor Law (Ley Federal del Trabajo)” states the regulations that apply to the employer and employee in Mexico, and governs its relationship.
For the employee it represents a document that grants labor rights and gives clarity in regards to :
- Specific obligations in the employment relationship between the employer and employee
- Working hours
- Place and time where the workday start.
- Payment days
- Rules to prevent working risks.
- Permits and licenses.
- Disciplinary measures and their application.
- The benefits you receive for your work: salary, breaks, vacations, social security, law and additional benefits.
Employment contracts are required in Mexico, among the most common are the following:
- Indefinite period contracts: Of the most used in Mexico. It is one that establishes a working relationship in which there is no term of duration. To be considered an employment relationship for an indefinite period of time, it must exceed 180 days.
- Definite period contracts: set for specific periods of time. In this, the duration of the contract is expressly written in the document.
- Seasonal contracts: This type of contract serves those labor relations that are developed for an indefinite period, but to perform discontinuous tasks.
Employees hired for an undetermined term who are dismissed without a justified cause are entitled to claim a severance payment, which includes the following:
- 90 days of daily wage of indemnification
- Accrued salaries and pro-rata benefits (such as pending vacation days, vacation premium, christmas bonus and any other applicable accrued benefit).
- 20 days of daily wage for each worked year.
- Seniority Bonus which is equal to 12 days of wage for each year of service tat the employee has worked. It applies only if the employee has at least 15 years of continuous service with the employer.
Working hours and Overtime
According to Article 61, the maximum length of a working day is eight hours during the day shift (48 hours per week), seven hours in the night shift (42 hours per week) and seven and a half hours when mixed (45 hours per week).
Overtime pay rate applies one the employee exceeds the above-mentioned working hours per shift. The first 9 hours of overtime are paid at twice the normal base salary rate. For any overtime going beyond 9 hours per week, employees must be paid 3 times their normal base salary rate.
According to Article 85 of the Federal Labor Law, it is not allowed to pay an employee less than the legal minimum wage. Nowadays Mexico’s minimum daily wage is $194.07 pesos, except for the Northern Border Zone which the minimum daily wage is higher corresponding to $291.52 pesos.
Even though the above mentioned are the established minimum wages, a common practice in all areas is paying above the minimum wage in order to attract skilled workers and reduce turnover rates.
The first step for being able to hire employees is registering your company before the social security institute as an employer known as IMSS (Instituto Mexicano del Seguro Social), all employers are required to register and pay the contributions to the IMSS.
Social security payments cover among others: occupational accidents, retirement and survivor pensions, disability, sickness, maternity leave, childcare and other social service and medical benefits.
Vacation and holidays
On December 14th 2022, the Senate approved the Labor Reform bill of articles 76 and 78 of the Federal Labor Law, to increase workers vacations from 6 to 12 days the annual paid vacation period for Mexican workers, once the employee completes one year is his job. This reform became effective on January 1st, 2023.
After the second year of service, two days of vacation will be increased to 20 days, and after the sixth year of service, the vacation period will be increased by two days for every five years of service, as shown in the following table:
Furthermore, the national paid holidays in Mexico are the following:
- January 1 New Year’s Day
- February 5 constitution day
- March 21 Benito Juarez day
- May 1 Labor Day
- September 16 Independence Day
- November 20 revolution day
- December 1 presidential inauguration day every six years
- December 25 Christmas day
Are you looking to start operations in Mexico?
If your company is considering nearshoring operations to Mexico it is important to count with all the relevant information regarding the Mexican Labor Law and the regulations that will apply for your employees in Mexico.
One of the main advantages of working with a shelter company is that your company will get all the expertise, advice and guidance from professionals who understand fully the labor law in Mexico and its implications.