Create a Competitive Operation in Hermosillo to Attract and Retain Experienced Labor
June 10, 2019
Hermosillo, the capital of the State of Sonora, Mexico, has a long history in automotive manufacturing. Ford Motor Co. established a plant in the southern part of the city back in 1986, and since then the area’s manufacturing expertise has only grown. Today Hermosillo is home to leading manufacturers including sensor producer TE Connectivity and beverage brands Coca-Cola and PepsiCo. The sector as a whole employs 15% of the city’s active workforce.
An additional 26% of that economically active population is perusing newspaper ads for employment opportunities in manufacturing, according to the field study behind the Tetakawi white paper, Recruiting and Compensating the Direct Labor Workforce Talent in Hermosillo, Sonora, Mexico.
The key to finding that labor is creating a workplace that is competitive with other local operations, benefitting employees, and employer alike.
A strong direct labor force looking for work
Hermosillo’s proximity to the U.S. border — just 350 miles from Phoenix and less than 250 miles to Tucson — has helped establish a strong presence for manufacturing and related services. It sits along the Tucson-Guaymas commercial route, which gives the location easy access to highways connecting to other large industrial hubs. But the region’s relatively young and experienced workforce also makes it a particularly attractive investment target.
The workforce here has an average age of 30, about eight years below the U.S. average of 37.8 years old. Even more useful to manufacturers is the fact that about 35% of the population is between the ages of 17 and 35 years. A significant part of the working population has industrial experience; approximately one-third of the employees interviewed for the Tetakawi field study having reported experience working for a foreign-owned Maquiladora. While you’re unlikely to find formal trade certifications from your applicants, many of the workers in the city have some level of technical qualifications. In fact, Tetakawi has found that hiring technically experienced staff in Hermosillo is easier than in many other regions of Mexico.
What’s more, many of those individuals seeking employment in manufacturing are willing to work at a wage equal to or below the sector median.
Competitive wages are key
Nearly half (45%) of all direct labor workers in Hermosillo earn about 2.7 times the minimum wage (equal to $88.36 Pesos per day). This is particularly important in that 20% of employees surveyed for the field study reported that they had left a previous employer for higher pay, making this the leading driver of company turnover. So, it’s important that companies coming into this market be prepared to pay competitively — while also understanding that the rate of compensation here is consistent with the country’s average and less than what would be paid in nearby U.S. border regions.
The Hermosillo field study found day shift manufacturing workers received a gross hourly wage ranging from USD $1.00 to $5.19, at an exchange rate of $19.04 Pesos per USD $1. Costs increase somewhat for afternoon and night shifts, as is typical throughout the region.
According to the Hermosillo field study, attention to the pay rate is a leading reason that both voluntary and involuntary turnover in the region is lower than other regions in Mexico. Excellent benefits and a positive work environment also reportedly keep experienced workers from seeking employment elsewhere.
Offer leading benefits to attract top labor
About 78% of the direct labor employees interviewed for this study receive at least some company paid benefits beyond those mandated by Mexican law. The five leading benefits in the region include:
- Paid transportation – Few of the city’s direct labor workers can afford a personal car, and in many cases public transportation is inconvenient or unavailable. Seventy-eight percent of direct labor manufacturing workers in Hermosillo reported their company paid for transportation to and from work. For large employers this may mean contracting a bus service to pick up employees at neighborhood stops. Smaller employers may use vans or a shared bus service provided by an industrial park or shelter service. This perk helps limits absenteeism and is critical in attracting employees to more remote factories.
- Food coupons – More than 75% of direct labor workers interviewed in Hermosillo reported receiving food coupons, which are used at grocery stores and some big box stores to pay for certain products. The average value dispensed is approximately $5.60 USD, although companies can provide these coupons in any value up to the max limit set by the government. These are a preferred benefit because the employee is not taxed on the value of the food coupons up to a maximum of 40% of the minimum wage or $88.36 Pesos per
- Punctuality bonus – The field study found more than 75% of the Hermosillo direct labor workforce receives this bonus, which is used to encourage and reward attendance. Bonuses might be based on weekly, monthly or annual attendance records.
- Performance bonus – Just over 71% of the Hermosillo direct labor workforce interviewed for the field study reported their employer offered some sort of bonus based on direct performance.
- Saving bank – Approximately 69% of the Hermosillo direct labor workforce interviewed for the field study reported their employer offered a saving bank. In addition, nearly 40% of interviewees reported participating in an employer savings fund, in which companies deduct a set percentage from employee paychecks and match the funds with an equal amount. The employee receives the total amount plus interest after 12 months.
Strike the right balance
While the manufacturing sector isn’t as concentrated in Hermosillo as it is in some other regions, direct labor workers in this area are experienced and eager to work with foreign-owned manufacturing companies. For employers new to the region, the right blend of competitive pay, solid benefits and a respectful work environment will be key to the hiring and retention strategy. Finding that right blend becomes much easier when working with a qualified consultant that holds experience investing in Hermosillo-based operations.