Ask someone in Michigan what a machine operator is paid and there is a good chance their answer will be a certain number of dollars per hour. In Mexico, however, the same question is more likely to be answered in pesos per day. One of the potentially confusing things about doing business in Mexico is that getting from one rate to the other is not as simple as dividing by the hours worked per day.
The Difference Starts With The Mexican Labor Law
Mexican federal law governs all aspects of labor and employment including wages and hours of work. Wages are expressed as a daily rate of pay that must be paid for all 365 days of the year.
The law also specifies how many hours per week an employee must work in return for his or her wages. The number of hours owed to the employer is determined by the employee’s scheduled start and finish times. Employees working for the same company at the same pay rate but on different shifts receive the same amount of money each week but work a different number of hours. Monetary shift premiums or bonuses are uncommon.
Employees who start work at 6 am or later and finish before 8 pm are on the day-shift. They are required to work 48 hours per week. Employees who start after 8 pm and finish before six am are on the night-shift. They are only required to work 42 hours per week. Shifts that overlap the day and night-shift (but do not include more than three and one half hours of night-shift) are called mixed shifts. These employees must work 45 hours per week. A shift that overlaps the night-shift by more than three and one-half hours falls under night-shift rules even if some day-shift hours are included.
The law was developed assuming a six day work week but does not mandate employer schedules. As long as an employer keeps the weekly hours worked within the legal requirements for the scheduled start finish times they can schedule work as they wish. Many employers work longer days but maintain a shorter work week — usually five days to keep a weekend schedule. Three shift operations need a sixth day to reach the weekly total of 135 hours for all three shifts but are still able to set whatever daily schedule they prefer.
Calculating Hourly Wages in Mexican Manufacturing
To calculate an hourly wage that would compare to a US pay rate you first need to multiply the daily rate by 365 to get the annually pay. The annual hours worked equals the weekly hours per shift times 52.1 weeks per year. Dividing the annual pay by the annual hours worked gives you a comparable hourly rate.
Just as they do in other countries, paid vacation days and statutory holidays reduce the days an employee works and increases the cost per hour worked. Federal law requires a minimum level of vacation after one year of service and establishes seven paid statutory holidays (eight in the year when a new president is inaugurated). Union agreements may add holidays or vacation entitlement beyond the legal minimums.
If you are after an hourly wage for the hours actually worked it is a simple matter of deducting the paid vacation and holidays from the yearly days worked and recalculating the total hours.
While an hourly rate makes it easier to compare wages with those in the United States, the daily rate is important for certain benefits and legal requirements. For example, Christmas bonuses (the Aguinaldo) are mandated by law. At least 15 days of pay at the employee’s usual daily rate is required as a Christmas bonus by law. Unions and senior employees may negotiate for larger bonuses but they are still typically expressed as a number of days at the employee’s daily rate.
Overtime and Other Pay Factors
Overtime on the other hand is based on an hourly rate and paid either at double or triple time. Overtime applies to any hours the employee works beyond the legal requirement in a week.
There is also no difference under the law for most salaried employees. It is common for salaried employees to follow the custom of expressing their pay in terms of a monthly salary but the underlying daily rate still applies when dealing with legal requirements.
One other important point to remember. While the employers and governments talk in terms of daily rates of pay it is not uncommon for hourly employees to not know their daily rate. They typically focus on their take home pay after taxes and deductions and this may be all they know or care about. Salaried employees on the other hand typically talk in terms of their gross pay as is common in the US and elsewhere.
The key to understanding Mexican pay rates is to remember that they are commonly expressed as a daily rate that is paid 365 days per year. This goes hand in hand with the mandatory hours of work determined by the daily start and finish times. Day-shift employees work 48 hours per week, mixed shift employees work 45 hours per week and night shift employees work 42 hours per week. From there a bit of simple arithmetic gives you an hourly rate of pay you can compare.
Keep in mind that some employer obligations and benefits depend on one rate and some on the other. Also remember that salaried employees often talk in terms of monthly salaries but the underlying legal base is still a daily rate. Understanding of the customary ways of expressing pay rates in Mexico will help you avoid misunderstandings with Human Resource professionals and employees in Mexico. When someone in Mexico tells you they make 350 pesos per day, you will know what they mean.