What is an Aguinaldo in Mexico? Christmas bonus or mandatory benefit?

November 26, 2019

As the month of December nears, many workers in Mexico are eagerly awaiting their annual end-of-year bonus, also known as aguinaldo. In this post, we’ll go over the origins of this fundamental Mexican labor law, who receives it, and how to calculate it.

Definition of Mexico's aguinaldo bonus/payment:

Also known as “13th month pay”, the aguinaldo is an end of year payment disbursed in the month of December. The origins of the payment are rooted in Mexico’s labor law system. Designed to improve and protect workers’ rights, benefits, payroll services, and social security (among other matters), Mexican labor law is governed by the Ley Federaldel Trabajo (Federal Work Law), which was established in 1930. Today’s aguinaldo payment developed out of a reform of this law in 1970, with the addition of Article 87. This update 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.

Who is eligible to receive an aguinaldo bonus? 

Given the legal basis for the aguinaldo, it is important to acknowledge that it is not in fact a Christmas bonus – it’s a fundamental legal right. This distinction is important because unlike bonuses (which can be subjectively based on business agreements, job performance, or benevolence by the employer) payment of the aguinaldo, and who receives it, is governed by Federal Work Law.

From domestic workers to executives, employee contract type has no bearing on whether or not an employee will receive an aguinaldo. Regardless of status, every person that works for a company or business in Mexico has the right to this protected benefit. The sole exclusion to aguinaldo recipients is freelancers – typically, freelancers are self-employed and are not actually part of the established payroll.

In the event of an employee’s passing, the aguinaldo benefit is disbursed to the employee’s dedicated beneficiaries. This is also legally mandated; if a company choosesnot adhere to the law, it may face lawsuits or other legal liability at both the local and federal level.

How much is an aguinaldo worth? 

For retention purposes many companies opt to pay an extra full month’s salary (30 days), hence the term “13th month pay”. This, however, is subject to negotiation between the employer and employee. Legally, an aguinaldo payment is equivalent to:

  • A minimum of 15 days of salary, or
  • A sum proportional to the time someone has worked for the company

The 15-day minimum includes national holidays, as well as any doctor-approved sick days (which must be verified by the Mexican Social Security Institute).

According to the legislation, employees who do not work for an entire year must still be compensated based on an amount proportional to their time in their position. Maternity and paternity leave pay is also included in the payment as of the 2015 update to Article 87.

How do you calculate the aguinaldo payment for employees in Mexico?

The aguinaldo is determined by taking the daily wage value and multiplying it by the 15-day minimum.

Aguinaldo = Daily Payment x 15 Days

The final value of an aguinaldo varies depending on an employee’s calculated daily payment. The values used for calculation depend on employee contract; daily wage contracts are calculated differently to workers on hourly contracts. In a daily employee’s contract, the wage is predetermined. For an hourly worker, salary can vary drastically from day to day based on the amount of time worked. In this case, the daily wage calculation is based on total earnings divided by the number of days in a year (365, or the total amount of days that employee worked that year). In summary,

For workers with a daily wage contract:

Daily Payment = Daily Wage

For workers with an hourly wage contract:

Daily Payment = (Hourly Wage x Total Hours) / Total # Days Worked

 breakdown of how aguinaldo bonus is calculated

Aguinaldo payment calculator

We created this online calculator to help you estimate the legally mandated aguinaldo payment for your employees in Mexico. Please keep in mind that this is just an approximation, if you would like a more detailed breakdown, we recommend that you talk to your HR team or a payroll outsourcing company in Mexico.

 

Employee's Monthly Salary in MXN:

Monthly Salary: Result

Daily Salary: Result

Aguinaldo: Result

When is the aguinaldo payment deadline? 

As previously mentioned, the aguinaldo must be disbursed no later than December 20th– no situation excuses an employer from payment to employees. These benefits must be fulfilled, whether or not a company is facing economic problems, for example.

 Aguinaldo must be paid out by December 20th

The aguinaldo payment is one of the most important rights that workers have in Mexico. Aside from its legal standing, the aguinaldo can be a boon to employee retention. Contract employees sometimes lack the opportunity for subjective bonuses and other benefits (especially at lower levels in the organization), but the aguinaldo is something all workers can receive and enjoy.

The aguinaldo provides additional income to employees during a time of the year when money can seem short. Many workers count on the annual aguinaldo to pay down debt at the end of the year, save for a rainy day, or to bring a bit of cheer to the holiday season. All in all, this payment makes the employee feel that their hard work is appreciated and properly compensated.

To learn more about the aguinaldo or how to properly calculate this legally mandated benefit, contact a Tetakawi expert.

 

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