Employee Benefits in Mexico: A Guide for US Employers

If you’re employing workers in Mexico, it’s important to understand what benefits you’re legally required to provide. These are known as statutory employee benefits.

Providing these benefits means staying compliant. This is key to avoiding legal issues and hefty fines while keeping employees happy.

You should also be aware of supplemental benefits you can offer to increase your competitiveness as an employer.

This article provides an in-depth look at both statutory and supplemental employee benefits in Mexico.

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Who Should Receive Employee Benefits in Mexico? Types of Statutory Employee Benefits in Mexico Additional Employee Benefits in Mexico You May Offer to Attract Talent Discover Wise Business: The Easy Way to Pay International Employees

Who Should Receive Employee Benefits in Mexico?

All full time workers in Mexico are entitled to receive statutory employee benefits.

Statutory employee benefits in Mexico are strong compared to other nations. They cover a wide range of entitlements and are comparatively generous. For this reason, many companies offer little in the way of supplemental benefits.

But if you want to attract the best candidates or if you operate in certain industries where it’s expected, offering both statutory and supplemental benefits can be beneficial.

Types of Statutory Employee Benefits in Mexico

Here are some of the main statutory employee benefits in Mexico.

Keep in mind that it’s always best to consult an in-country compliance expert for advice on your specific industry.

Vacation and premiums

In Mexico, any employee who has worked for at least one year is entitled to 12 days of paid vacation per year.¹

For every extra year worked, the employee will receive 2 extra days of paid vacation. This continues until they reach 20 days of paid vacation. After this, the employee’s vacation allowance will increase by 2 days for every 5 years of service.

Your employees are also entitled to a premium of 25% of their wages on top of their base salary, during their vacation.

Here’s an overview of paid leave in Mexico:

Number of years in continuous employment	Annual vacation allowance (days)
< 1	0
1	12
2	14
3	16
4	18
5	20

National holidays

There are a range of national holidays that employers must give employees.

Here are the mandatory holidays all workers are entitled to in Mexico:

• New Year's Day—January 1
• Constitution Day—The first Monday of February
• Benito Juarez' Birthday—The third Monday of March
• Labor Day—May 1
• Independence Day—September 16
• Revolution Day—The third Monday of November
• In the event that the president changes—On December 1 of every six years
• Christmas Day—December 25

All workers are entitled to full pay during national holidays. In the event an employee has to work during a national holiday, employers need to pay them triple their wages for the day worked.

Article 74 also states that depending on local electoral laws, employees may also be entitled to a paid day off for Election Day.¹

Weekly day of rest

All workers in Mexico are entitled to a weekly day of rest. Specifically, for every six days worked, they should receive a minimum of one day off. This day off is fully paid. This is known as Article 69 of the labor law.

Where possible, employers should also try to give Sunday as the weekly day of rest. If they fail to do this, employees will be entitled to a 25% premium on top of their full pay. This is Article 71 of the labor law.¹

Christmas bonus

All Mexican employees are entitled to an annual Christmas bonus (Aguinaldo). This is found in Article 87 of the Mexican labor law.

The Christmas bonus is equivalent to a minimum of 15 days of wages and must be paid by December 20.

Regardless of their job or how long they’ve worked for, all workers are entitled to their Christmas bonus. Even workers who have quit are still entitled to their bonus. In these cases, they’ll receive an amount proportional to the time they worked for.¹

Profit sharing

Employees in Mexico are entitled to receive 10% of their company’s annual profits.²

As the employer, you’ll need to pay your employees their share of the profit within 60 days of filing your tax returns.

Profit to be distributed is divided into two equal parts.

The first part is distributed equally among your employees. This takes the number of days worked by each employee over the year into account, regardless of their wages.

The second part is distributed in proportion to the wages earned during the year.

Administrators, general managers and directors are excluded from profit sharing. Likewise, companies younger than one year old aren’t required to share profits with their employees.¹

Severance pay

An employment contract can be terminated by either the employee or employer, as long as there is a just cause for doing so.

Article 47 of the labor law outlines what defines a just cause. These include cases such as:

• Misconduct such as acts of violence, harassment or damages to property
• Coming to work under the influence of alcohol or drugs
• Revealing secretive information, to the detriment of the company
• Having more than three absences without permission within 30 days

If you end an employee’s contract as a result of one of these reasons, you’ll be without liability.

But if the employee can argue that the cause isn’t just, you may have to pay them a certain amount in wages, under Article 51. In that case, you could be liable to pay:

• 3 months worth of their salary
• 20 days of salary for every year they worked
• Accumulated prorated vacation pay
• Prorated Christmas bonus
• Seniority bonus (12 days of salary for workers who have been with your company for more than 15 years)¹

The exact amount you’re liable to pay can vary based on situational factors.

Social Security

Employers and employees need to contribute to the Instituto Mexicano del Seguro Social (IMSS). The IMSS provides a range of social and healthcare benefits to employees, such as:

• Sick leave
• Employment insurance
• Healthcare
• Life insurance
• Social housing
• Disability pay
• Parental leave

The contribution rate can vary depending on the context.

The IMSS covers many instances, meaning that the employer often doesn’t have to pay extra in such cases. For example, when an employee is sick, the IMSS will cover sick leave, not the employer.

Additional Employee Benefits in Mexico You May Offer to Attract Talent

Mexican employees have a wide range of solid statutory benefits. This means that supplemental benefits are not always common.

But if you’re looking to attract the top talent, offering a supplemental benefit package may help you to stand out from other employers.

Here are some of the supplemental benefits you can offer your employees in Mexico.

Food coupons

Food coupons are a common supplemental benefit offered to employees in Mexico. These coupons can be used for a range of supermarket purchases.

Food coupons come in the form of either a prepaid card or digital wallet.

Offering food coupons to your employees can give you a tax advantage. You can write them off as a business expense.

Savings funds

You can offer your employees savings funds. You’ll open these funds at a financial institution on behalf of your employee.

The employee can make contributions, which you as the employer will then match. You can withhold part of your employee’s salary at their choosing and deposit it directly in the savings fund. Employer contributions will be made up to a specific maximum percentage of the salary.

Once per year, the employee will be able to withdraw the savings accumulated.

Private health insurance

All Mexicans receive free healthcare through the IMSS. This means that private health insurance isn’t always offered as a supplemental employee benefit.

But you can make your company stand out in certain industries by offering private health insurance.

Credit

You can choose to offer low-interest rate credit and loans to your employees, as an extra benefit.

These could be a mortgage, automobile, personal or payroll loans.

This could end up saving your employees a significant amount in interest payments, compared to going through a bank.

If you offer this as a benefit, you must ensure you comply with Mexican payroll regulations.

Company car and cell phone plan

Workers in higher level roles, such as managers, executives or simply well-paying jobs, often receive company cars as a fringe benefit.

In this case, the car will belong to your company, but the employee can use it for personal and business use.

You can also offer your employees cell phones and phone service plans.

Your employees can then use these cell phones for both personal and business use.

Internet plan

Offering paid internet plans to your employees in Mexico is another way of securing top talent.

This supplemental benefit is especially common among those who need to work from home.

Transportation reimbursement

Offering to cover the cost of your employees’ transport expenses can help you attract top candidates.

This could be done in different ways.

For employees who travel by car, you could offer to cover gasoline costs as well as parking costs.

For employees who travel by public transport, you could cover the cost of train or bus tickets.

Some companies opt to offer their own transportation, which could work out more cost-effective depending on the number of employees you have.

Productivity bonus

Many companies in Mexico offer their employees a productivity bonus. This incentivizes them to work to achieve certain company goals.

The bonuses are typically tier structured.

Employees in Mexico tend to appreciate these bonuses, especially as they’re tax-free.

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A Wise Business account can help smooth the process of paying international employees.

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How to Pay International Employees: All You Need to Know International Payroll: The 14 Best Services You Should Know What is an employer of record (EOR)? Employ overseas staff with EOR PEO vs EOR: Which is Best for Your Business?

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Source:

1. Mexican Federal Labor Law In English
2. Profit Sharing In Mexico: Understanding PTU

All sources checked February 2024.