Understanding Basic Workweek, Wage, and Payroll Factors in Mexico

August 07, 2020

Companies looking to start or expand manufacturing in Mexico often do so to take advantage of one of the country's key attractors: highly-skilled, readily-available, and cost-effective labor. To fully recognize the benefits of Mexico's labor market, it is important to understand the workweek-related nuances of the labor system. In this post, we cover the basics of working hours, wages, and other payroll factors in Mexico.

From labor unions and collective bargaining to work schedules, Mexico's Federal Labor Law governs all stipulations relating to working conditions, employee rights, and many other aspects of labor. Working hours in Mexico are held to a specific standard that allows for flexibility in the workweek. The additional intricacies of employee overtime, termination, and resignation are based on Labor Law stipulations and cooperate with government standards.

Free Download: The Guide to Navigating Mexican Labor Laws

What are the working hours in Mexico?

Manufacturing Welder in Mexico working on day shift

How are the Mexican workweek and working hours in Mexico determined? According to Mexican Labor Law (Article 59-62), the legal length of the Mexican workweek depends upon the shift on which an employee renders service. Average working hours in Mexico vary, but at maximum, the Mexican workweek for a full-time employee is 48 hours. The hours for each shift are spread over a six-day workweek that runs from Monday through Saturday.

The Mexican workday is divided into three specific shifts:

  • The day shift in Mexico is eight hours long. These hours can fit flexibly between the hours of 6:00 a.m. and 8:00 p.m. A full-time Mexican day shift worker spends 48 total hours on the job during the workweek.
  • The night shift in Mexico occurs during a seven-hour period between 8:00 p.m. and 6:00 a.m. Full-time night shift workers in Mexico spend a total of 42 hours on the job during their workweek.
  • The mixed shift in Mexico is 7.5 hours long, and can consist of hours considered partly day and partly night shift. The night shift component of a mixed shift is limited to 3.5 hours. Full-time mixed shift workers spend a total of 45 hours on the job during their workweek.

As stipulated by Mexican Labor Law, workers are entitled to a thirty-minute meal break during each shift. In addition to this, many companies in Mexico commonly provide extra break time to help workers focus and remain fresh.

How are wages in Mexico calculated?

calculating-mexican-wages

When researching competitive wages in Mexico, wages are rarely expressed as hourly rates. Instead, Mexican Federal Labor Law dictates that wages be expressed as a daily rate of pay for all 365 days of the year. These wages are accounted for daily, instead of hourly, and are customarily paid out weekly. The daily rate is based on the specific shift the employee works, and any other benefits or factored into their contract.

In 2020, Mexico increased the minimum daily wage by 5 percent to 185.56 pesos (USD $9.51) along the northern border and 20 percent to 123.22 pesos (USD $6.36) per day in the rest of the country. Though this number varies based on location, position, and other industry-related factors, the general calculation remains the same. Each workweek shift is provided with the same pay, accounting for the differences in the number of hours worked in the day, night, and mixed shift schedules.

Must Read Article: How to Calculate Wages in Mexico

Does Mexico pay overtime hours for workers?

In Mexico, overtime applies to any hours the employee works beyond the legal requirement in a week (according to Article 66 of the Federal Labor Law and Section XI of Article 123 of the Mexican Constitution). More specifically, overtime is paid after employees reach the legal number of hours stipulated by their shift. In general, employees in Mexico are paid double the typical salary for the first additional 9 hours of overtime, and then the rate triples.

Whether a worker is hourly or salaried, this overtime rule generally applies. Though it is common for salaried employees to follow the custom of expressing their pay in terms of a monthly salary, the underlying daily rate still applies when dealing with legal requirements.

Do federal holidays apply to the workweek in Mexico?

Employees that work holiday shifts are entitled to holiday compensation that is 200 percent over their regular daily pay (Articles 74 and 75 of the Federal Labor Law). Mexican federal holidays include:

  • January 1: New Year
  • February 5: Constitution Day (occurs the first Monday in February)
  • March 21: President's Day / Benito Juarez Day (occurs the third Monday in March)
  • May 1: Labor Day
  • September 16: Independence Day
  • November 20: Revolution Day (occurs the third Monday in November)
  • December 1: Presidential Inauguration Day (every six years)
  • December 25: Christmas Day

Beyond the federal holidays, many employers also allow workers time off for other religious or national celebrations. Mexico's Labor Law (Article 132) also specifies that workers will be entitled to an annual bonus to be paid in December, equivalent to a specific percentage of a worker's salary. This end-of-year bonus, or "aguinaldo," is also known as "13th-month pay" and is disbursed before Christmas on December 20.

What other payroll factors impact wages in Mexico?

Outside of hours worked, employees in Mexico also receive leave for events such as maternity, adoption, paternity, sickness, and care of minors (specifically, cancer care) as mandated by Mexican Labor Law. Annual leave is awarded based on years of service and provides employees time off for years worked. Retirement, insurance, and other fully-fringed benefits also impact an employee's take-home wages.

What happens at the end of the working relationship?

Terminating an employee in Mexico

Termination of employees

Termination without cause: employees that are terminated without cause are entitled to certain benefits. Under Mexican Labor Law, an employee with two or more years of service that is terminated without cause has the right to file for reinstatement. If not reinstated, the dismissed worker is entitled to a severance package. Components of the package can include:

  1. accrued benefits that may be outstanding (e.g., the prorated portion of vacation, bonus, and saving fund)
  2. seniority premium (which is equal to 12 days of wages per year of service, calculated using the lesser of the most recent daily rate or twice the federal minimum wage)
  3. integrated salary (which is equal to 90 days of wages at the most recent daily rate)
  4. 20-day wage entitlement (in which the employee receives 20 days of wages per year of service, calculated using the daily rate and with no limits on the years of service)

Prompt payment is prudent as the dismissed worker is also entitled to any salary accrued between the time of termination and delivery of the severance package. You can learn more about how severance pay is calculated here.

Employers are obligated to include accrued benefits, the seniority premium, and integrated salary in the severance package. Generally, employers also include the 20-day wage entitlement. If the full 20-day wage entitlement is not included, the terminated employee may file a wrongful dismissal suit to receive it. In this case, a finding against the employer will entitle the employee to an additional payment of three months' salary and compensation for the time it takes to resolve the dispute (capped at up to 12 months of wages).

In contrast, including the full 20-day wage entitlement in the initial severance package revokes the worker's right to sue. This reason, along with preventing a lengthy (and costly) labor dispute, are generally enough to induce employers to include the 20-day wage entitlement outright.

Termination with cause: employees that are terminated with cause are only entitled to receive:

  1. accrued benefits that may be outstanding (e.g., the prorated portion of vacation, bonus, and saving fund)
  2. seniority premium (which is equal to 12 days of wages per year of service, calculated using the lesser of the most recent daily rate or twice the federal minimum wage), only if the employee has at least 15 years of continuous service with the employer

However, the termination of employees is closely regulated in Mexico and the scenarios that warrant fair cause involve significant violations. Situations like minor rule-breaking or low productivity generally do not apply. Legitimate reasons for termination include major delinquency or absenteeism, employee arrest or imprisonment, deception, fraud, or disloyalty (in the form of revealing trade secrets), and other major violations. You can learn more about fair causes for termination here.

Termination by mutual agreement: in some cases, it may be preferable to settle the termination on terms mutually beneficial to both the employee and employer. If, for example, a senior employee is terminated for poor performance or a transgression that may negatively impact career prospects, the employee may not wish to broadly reveal the details in court. Instead, the employee may be willing to admit some liability and accept a mutually agreeable sum. In most cases, this is beneficial as the payment is typically less than full severance, but avoids the cost, time, and exposure of litigation.

When an employee voluntarily resigns

An employee that voluntarily resigns from employment in Mexico is entitled to:

  1. accrued benefits that may be outstanding (e.g., the prorated portion of vacation, bonus, and saving fund)
  2. seniority premium (which is equal to 12 days of wages per year of service, calculated using the lesser of the most recent daily rate or twice the federal minimum wage), only if the employee has at least 15 years of continuous service with the employer

No other payments are obligatory, and employees that willingly depart from their positions or otherwise abandon them do not receive severance pay.

It is extremely important, however, to keep detailed resignation records. In some cases, a worker may argue termination without cause – despite voluntarily resigning – and decide to exercise the right to sue. Without solid evidence and thorough documentation of willing departure, the court's judgement is likely to favor of the worker given the strong culture of employee protections in Mexico.

Learn more about working hours, wages, and Mexico's Federal Labor Law

Almost all labor-related aspects of manufacturing in Mexico are governed in some way by Mexico's Federal Labor Law. Understanding the basics of the Labor Law can be extremely useful for any company thinking about manufacturing in Mexico. To get a primer on Mexico's Federal Labor Laws and how to navigate them, download the free guide here or contact a Tetakawi expert.

 

 

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