Everything You Need to Know About Employee Benefits in Mexico
March 11, 2020
Federal law in Mexico mandates certain employee benefits, including paid time off, set vacation days, and a mandatory Christmas bonus (Aguinaldo). However, if you want to become an employer of choice in Mexico, it takes more than the bare minimum to attract and retain the most qualified candidates.
Most manufacturing companies extend additional benefits to ensure employee loyalty, satisfaction, and overall production. In fact, Tetakawi’s independent field research indicates that between 72 and 90 percent of manufacturing companies, depending on their location, offer benefits beyond the legal requirements. By building a competitive benefits package, manufacturing companies can reduce employee turnover and ultimately reduce their overall labor costs.
Below you will find some of the most popular benefits being offered to manufacturing employees across Mexico.
Employer-provided or funded transportation is a popular benefit for employees and one that provides major benefits to employers. The reason is that many direct labor workers cannot afford a personal car. For employers in more remote areas, this can make recruitment a challenge. However, even in areas where public transportation is more accessible, paid transportation can help reduce absenteeism. Tetakawi’s field research indicates that between 60 and 78 percent of employers, depending on their region, provide some form of transportation benefit.
Larger organizations may contract bus services to pick up employees at neighborhood stops near their homes. This type of service can also help employers target certain neighborhoods in their specific recruitment efforts. Small organizations may use vans to pick-up employees at home or even participate in a shared bus service courtesy of an industrial park or shelter service provider. Costs for bus service typically range between $25 and USD 120 per month per employee, although the total cost depends on the type of vehicle used, the distance employees are transported, and how frequently the service is used.
2. Food-related benefits
Grocery coupons, or food cards, are another popular benefit among employees. These offerings grew up under Mexico’s Law of Alimentary Assistance for Workers to protect worker health and prevent diseases linked to poor nutrition and today are among the more popular tax-deductible bonuses. These coupons are redeemable at grocery stores and certain big box stores for a specific list of products. These coupons are particularly attractive to employees as they are not taxed on the value of the food coupons up to a maximum of 40 percent of the minimum wage per day.
Other employers, particularly in more remote areas, may offer cafeteria services. While this is often a popular request from unions, it can prove a challenging benefit to provide. That’s because your manufacturing operation must invest in food prep for hot meals and make sure the quality of the food provided meets everyone’s expectations. In most cases, employees pay a portion of the meal cost. As a result, deviations in quality tend to prompt quick complaints.
3. Medical services
Employees in Mexico are covered by a public healthcare system under the Mexican Social Security Institute. The country also has a private system, where services tend to have shorter wait times, better facilities, and a broader range of preventive and diagnostic services but at much higher rates. In some cases, employers may provide supplementary medical insurance to senior employees to cover these additional services. Other organizations may offer on-site or itinerant medical services. These services are made accessible to active employees during working hours and generally include both preventive and curative treatments. This offering can help reduce absenteeism among your staff.
4. Cash bonuses
Cash bonuses are always an employee favorite. Punctuality bonuses are one common option that employers can use to encourage prompt attendance. Employers also opt to offer rewards based on quality, productivity, or other performance measures. In some areas, this is more common for senior employees than direct laborers, but this practice varies by region. Companies vary in how frequently they payout these bonuses.
Some organizations go beyond the thirteenth salary, often called the Christmas bonus, because it must be paid by December 20 (although not technically a bonus, as it is mandated by federal law). Companies that do offer a supplemental bonus often express it in terms of a number of paydays, following the same format laid out by the legislated requirement. This may range anywhere from an average of eight to 18 days paid. Typical practice is to offer a more substantial bonus to more senior employees to encourage loyalty.
5. Savings fund
In place of the employer-supported 401k plans found at many U.S. companies, employers in Mexico may opt to provide employees with a tax-deductible savings fund to help save for retirement. Employers have the option to match all, or a percentage of the total amount employees choose to save, automatically deducting the total from the employee’s paycheck. Employers that offer this benefit, according to Tetakawi’s field research, tend to contribute to this fund between 6 to 8 percent of an employee’s gross pay.
6. Variable use benefits
Some employers offer variable use benefits, which only cost the employer when the employees opt to use the services. The challenge, of course, that it can be challenging to estimate the long-term cost of these programs, since only a fraction of your employees may opt to use them. But one option that can pay off for employers is employer-subsidized tuition. While this tends to be more common for salaried staff than direct laborers, companies working to fill certain skilled or managerial positions may find this investment helps them fill new positions down the road.
The key to long-term success is strategically selecting which benefits employees in your region assign the most value and which will provide you with the most significant return on your investment. While the number of options available may seem overwhelming, but it doesn’t have to be.
Tetakawi’s regional Labor Market Reports provide insight into where specific benefits may have the most significant impact, but this is only a starting point. To tailor a competitive benefits package for your target employee base in Mexico, contact Tetakawi today.