Labor Reform and the increase of workers vacations
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, which reforms became effective on January 1st, 2023.
Among the main reasons that led to the discussion and approval of this reform were the following:
- Recent OECD studies indicated that Mexico is one of the countries with the highest number of working hours in the world (2,124 hours per year).
- According to El Financiero, WHO (World Health Organization) statistics indicated that Mexico has a 75% prevalence of stress in its labor force, placing it above countries such as China with 73% and the United States with 59%.
- In terms of comparative labor policy, the working groups of the bicameral labor commissions had access to studies that revealed Mexico as one of the countries with the fewest vacation days in the world.
Based on the abovementioned reform, a Mexican employee who completes one year in his job will be entitled to 12 days of vacation.
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:
Benefits of the Labor Reform in manufacturing companies:
The increase of workers vacations, is expected to have a positive impact in the manufacturing industry and other industries, due to the following reasons:
- It has been demonstrated that an increase in workers’ benefits contributes to improving their quality of life, which has a positive impact on the development of their activities and, therefore, on the productivity of companies.
- It will favor labor stability, since work stress, overwork and lack of rest lead to greater labor desertion.
- Companies will be able to enjoy a better organizational climate, because the increase in vacation days improves satisfaction with the employer, as well as helps to have more committed employees with the company and thus promotes a healthy working relationship in reciprocity.
Recommendations for employers due to the increase of workers vacations
All employer must make sure to make any appropriate changes in order to make sure they are complying with the reform.
It is recommended for employers to:
- Ensure compliance and update applicable vacation days, review collective bargaining agreements and individual employment contracts.
- Perform a seniority analysis of their staff and determine the number of vacation days each employee is eligible for based on seniority at the time the reform decree was published.
- Consider that any terminations carried out after January 1, 2023, should include new accrued vacation premium payments.
- Revise digital vacation request systems to ensure the vacation-day allotment increase is reflected on each employee’s respective account.
In addition, it is important to take into account that the increase in vacation days will also impact the payment of the vacation premium. As you know, the vacation premium should not be less than 25% of the salary that corresponds to the vacation days.
Also, under the Social Security Law, it will integrate the base salary for the purpose of payment of dues to the IMSS, SAR and INFONAVIT.
Lastly, given that it is a payment derived from the employment relationship, it will also have an impact on local payroll taxes.
Compliance with Labor Law
As before mentioned employers need to make sure they are complying with the Labor Law including all of its reforms. If you need assistance, Mexcentrix counts with experts on this area. Through our payroll processing service and human resources service we can help you company comply fully with Mexican regulations.
Contact us to learn more about our services.
