Wages in Mexico: Hourly Labor Rates for Manufacturing in Mexico
April 28, 2020
Before expanding into Mexico, you must have a complete understanding of baseline wages for direct and indirect employees in Mexico. In this article, we will explain how to calculate hourly wages, we will provide some averages, and we will discuss how salaries in Mexico vary by region.
Overview of Labor Costs in Mexico's Manufacturing Sector
Oneof the main benefits driving companies to invest in manufacturing operations in Mexico is the competitive pay for highly skilled workers. However, as in any locality, pay rates range based on the type of work being performed and the specific region where operations are located.
Pay rates also vary based on the technical skill required of a worker. However, what truly makes the competitive pay in Mexico stand apart from other countries is that it often covers high-quality services from a trained workforce. Because manufacturing is prevalent in industrial clusters across many regions, there are many training institutions preparing employees for skilled positions in your operation.
Before determining the right site for your manufacturing operations, it’s important to understand what you’ll be expected to pay your workforce.
How Are Hourly Wages in Mexico Calculated?
You’re not likely to see hourly wages when researching competitive pay in Mexico. That’s because Mexican federal law dictates that wages be expressed as a daily rate of pay that is paid for all 365 days of the year. This gross daily pay rate is used to calculate certain benefit entitlements, such as severance pay, and to determine applicable overtime rates. Taxes and employer contributions for benefits such as income taxes and social benefits are exempt from this daily rate, although they are included in the total compensation costs.
While it’s common to see references to employees’ daily pay rates, professional and administrative employees are more likely to earn monthly or annual salaries. Making matters more complex for hiring managers, many employees who do earn daily rates may, in fact, be unaware of the amount of their gross daily rate. It’s more typical for employees to know their weekly take-home pay, after taxes and deductions. Understanding this can help hiring managers better position their competitive rate of pay as a hiring tool for potential recruits.
Fully Burdened Labor Rates for Factory Workers in Mexico
There are two categories of pay for manufacturing workers in Mexico: direct and indirect (or salaried) positions. Salaries will vary depending on the skill level demanded by the employee. In 2021, Mexico increased the minimum daily wage by 15% to 141.70 pesos ($7.16 USD) per day of work, or 213.39 pesos ($10.78 USD) in the economic free zone along the northern border. However, most workers in the manufacturing industry earn more than the minimum daily wage. As the chart below shows, the average wage in Mexico for an unskilled direct laborer is in the range of USD $2.40 per hour. More skilled direct laborers, such as CNC machinists who may have several years of training to gather the computer-based skills needed for this precision job, may make in the range of USD $6.02 per hour.
Wages in Mexico: Average Fully Fringed Hourly Labor Rates for Direct Labor Employees
Indirect positions (see chart below) show a similar range, although these administrative or management level positions in Mexico tend to begin at a higher starting salary than their direct labor colleagues. This range might include production team leaders, who provide support for machinists, welders and other direct labor positions and earn an average of USD $4.79 per hour, to materials planners, who effectively coordinates the flow of raw materials to keep the schedule running efficiently, and may reap an average salary of USD $13.51 per hour for that skillset.
Wages in Mexico: Average Fully Fringed Hourly Labor Rates for Indirect Labor and Salaried Employees
Of course, these averages are based across a wide range of pay scales across Mexico. Metropolitan areas with high demand for certain skillsets will be pushed to pay more than rural areas with a much deeper hiring pool.
In the busy Monterrey metro area, for example, where the manufacturing sector employs approximately 23% of the active workforce, the median fringed hourly wage for the day shift is about USD $2.93 per hour. In Saltillo, where manufacturing jobs are in high demand, making up 38.5% of local employment, the median fringed hourly wage for the day shift is closer to $2.42 per hour.
Pay rates may also seem to vary for different types of shift work. While daily rates of pay may remain constant for afternoon and night shifts, the weekly hours decrease, so the hourly cost increases.
How Can You Calculate Your Own Payroll Costs In Mexico?
In your target manufacturing region in Mexico, there will be variation, as well. While some organizations may opt to focus on competitive wages, it may be more useful to offer a broader benefits package. Ultimately, it depends on the expectations set by companies competing for the same skillsets in your region.
It’s also important to keep in mind that employee pay is only one piece of the cost puzzle. Companies focused solely on low pay may overlook the high cost of shipping products from a region or the need to invest in training for a specific skillset.
To better understand regional expectations and get the full picture of what your payroll costs could or should be in Mexico use our free online payroll calculator to instantly calculate your costs.
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