Employee Mandatory benefits in Mexico
Want to onboard an employee in Latin America ?
To accurately manage payroll, you must know the employee mandatory benefits in Mexico. Aside from monthly salary, employers in Mexico need to provide employees with other benefits according to the regulations. On top of this mandatory contributions, employers also have to provide their employees with employer ocntributions.
The following article will help you navigate the employee mandatory or statutory benefits in Mexico ⬇️
Christmas Bonus or Aguinaldo
The article 87 of the Mexican Federal law states that employers must grant employees with a Christmas bonus. The Christmas bonus, also called Aguinaldo, is equal to 15 days of salary at least, though some employers provide 20 days’ pay to their employees. Employees who reached one year of employment will receive the full bonus. Employees hired during the year will receive a proportional part.
The Christmas bonus must be granted no later than the 20th of December of each year so it’s common to issue the bonus during the second week of December.
The Aguinaldo must be pay in cash only and not in kind or in food vouchers.
Paid time off (PTO)
Employees in Mexico are entitled to 12 days off per year after completing one year of service.
Employees earn more paid time off for each subsequent year of service, hitting a cliff after five years:
- One year of service: 12 days
- Two years of service: 14 days
- Three years of service: 16 days
- Four years of service: 18 days
- Five years of service: 20 days
- After the sixth year of service the annual leave will be increased by 2 days every 5 years of service.
Learn more about Paid-time off in Mexico.
Vacation bonus in Mexico, or Prima
In addition to the time itself, legal employers in Mexico must pay a vacation bonus called Prima when the employee takes PTO. The holiday bonus is equal to 25% of the employee monthly salary and must be paid when the employee takes the leave.
Profit sharing, or PTU
Businesses with more than 1 year of existence in Mexico must grant their employees with a 10% share of their profits every year.
Profit sharing payments are capped at three months of an employee’s salary. Only employees who has worked more than 60 days will receive the PTU. This benefit does not apply to CEO, CFO, general managers and other high -ranking employees.
Companies must distribute profit-sharing payment in May, within 60 days after filling the annual tax return.
Social Security
In Mexico, the article 123 of the 1917 Constitution grants social security to employees. Through social security, employees have access to basic healthcare. They are also entitled to maternity and sickness pay. Besides, they contribute to their retirement fund.
Employers must contribute to the social security organ called Instituto Mexicano del Seguro Social (IMSS) and deduct the employee contribution from employee pay slips. The contribution rate vary on the context.
Severance pay
In Mexico, employees are entitled to severance pay when the employment contract is terminated. Either the employee or employer can terminate the employment contract.
There are three possible termination scenarios: resignation, termination with cause and termination without cause. Depending on the scenario, the employee is entitled to different severance packages. See below:
Resignation
Employees who resign are entitled to small severance package including:
- Salary due up to the termination date
- Prorated Christmas bonus
- Accrued and unused holidays
- Prorated Vacation Bonus
- Seniority Bonus
- Any other benefits outlined in the employment contract including bonuses, food vouchers, etc…
Termination with cause
It’s extreamely complicated to terminate an employee with cause in Mexico. In most cases, termination with cause only occurs for employees who violate workplace policies, become incapacitated, or commit a crime. The employer must come prepared with consistently documented evidence to demonstrate that the employee violated workplace rules. The severance package includes the following items:
- Salary due up to the termination date
- Prorated Christmas bonus
- Accrued and unused holidays
- Prorated Vacation Bonus
- Seniority Bonus
- Any other benefits outlined in the employment contract including bonuses, food vouchers, etc…
Termination without cause
Generally, severance package for employees terminated without just cause is larger. It includes the following items:
- At least three months’ salary
- Salary due up to the termination date
- Prorated Christmas bonus
- Accrued and unused holidays
- Prorated Vacation Bonus
- Seniority Bonus
- 20 days of salary for every year they worked
- Any other benefits outlined in the employment contract including bonuses, food vouchers, etc…
FAQ
What are mandatory benefits in Mexico ?
Mandatory benefits in Mexico are:
- Christmas Bonus
- Vacation bonus
- Profit Sharing
Are mandatory benefits waivable?
No, mandatory benefits are required by law and the employer must pay it.
Handling employee mandatory benefits in Mexico with Europortage
Manage employee mandatory benefits in Mexico is complex especially when it comes to compliance. That’s why we recommend working with a direct and local partner like Europortage.
Our team of local experts is on hand to support you throughout the entire employee lifecycle, including time-off management. We can give you clear advice on fringe benefits, in addition to handling employment contracts, payroll, and benefits. That way, you can focus on growing a world-class team and business.
Get in touch to find out more and start hiring top talent in Brazil and Mexico!
