If you’re considering expanding your business operations and are eyeing the United States’ neighbor to the south, you’re following in the footsteps of many major industries and should start researching Mexico employment law. Expanding your business into Mexico provides new opportunities in both the consumer market and talent pool. While many regulations are similar to the U.S.’, there are some unique aspects to Mexico employment law.
Below, we provide a guide to get you started and to help you come up with a list of questions to ask your legal counsel.
7 Differences in Mexico Employment Law
Profit Sharing
Mexican employees receive the benefit of shared ownership of the businesses for which they work. If you have an entity in Mexico, be prepared for this profit-sharing requirement when hiring new team members. Employees are entitled to a share of their employer’s profits, which is currently fixed at 10% of the company’s pre-tax income.
Mandatory Rest Breaks in Mexican Employment Law
It’s typical in most countries to have maximum time restraints for employees. In Mexico, employees are entitled to at least one fully paid day of rest every six days. An employee can voluntarily agree to work on this mandatory day off. If they do, the employee is entitled to triple their normal wages for that day’s work.
In addition to days off, all employees must receive a rest break of at least 30 minutes during a complete working day.
Social Security Requirements in Mexico
All employees in Mexico must be registered and contribute to the Mexican Institute of Social Security (IMSS). The country’s social security funds pay for and provide working citizens with medical services, child care, disability compensation, pensions, and pregnancy benefits.
Employers must also withhold funds for the National Workers’ Housing Fund Institute and the Retirement Savings Program. In order to remain compliant and ensure that you’re managing withholdings properly, consider teaming up with an international payroll provider.
Mandatory Year-End Bonus
Employees in Mexico have a right to receive a year-end bonus known as Aguinaldo. The bonus is distributed in December and equates to at least 15 days’ wages if the team member worked for a complete year. If the employee worked for less than a year, the employer distributes a bonus equaling a proportional percentage of their earnings.
Holiday Pay Requirements in Mexico Employment Law
Employees are not required to work on public holidays that fall during the normal work week. If the team member chooses to work, they are entitled to receive three times their normal rate of pay. The amount of work must be agreed upon between the employer and the employee before the day arrives.
If an employee chooses to work on a non-mandatory holiday, they still receive an extra 25% bonus towards their regular salary. These holidays include New Year’s Day, Constitution Day, Labor Day, and Christmas.
Seniority Premium
The longer Mexican employees work with one company, the more likely they are to receive a seniority premium. Essentially, this is a bonus. Seniority premiums, according to Mexico Employment Law, are bonuses given to employees that work for an employer for 15 years or longer. The bonus equates to 12 days’ wages for every year worked.
Intellectual Property in Mexico Employment Law
IP is complicated, especially when you take your business operations to another country. In the U.S., forms of IP are classified as patents, copyrights, trade secrets, and trademarks. When you move into new markets, do your research or ask a legal expert for assistance to understand how you can protect your valuable assets.
In Mexico, statutes for IP are more comprehensive and detailed than in the U.S. Some IP provisions set rigid guidelines to assure that courts will provide uniform enforcement depending on the industry. For example, the 1991 Mexican Industrial Property Law encompasses only intellectual properties which have industrial applications. These recognized forms include items such as patents, utility models, industrial design, and trade secrets.
IP protection, along with any advice on Mexico employment law, should be sought from your trusted legal advisor or an international consultant. This information is purely a guide to get you thinking about these complex issues for your business.
Expand into Mexico with Confidence—and With an Experienced Expansion Partner
Navigating Mexico’s employment landscape can be challenging, especially if operating on a tight timeline. Velocity Global’s Employer of Record (EoR) solution is designed to accelerate organizations’ market entry—virtually anywhere. As your Employer of Record, we hire the right global talent on your behalf, ensuring compliance with local regulation every time.
Interested in doing business in Mexico? Read our guide to hiring employees in Mexico!
Or contact our team to learn how we can help you confidently and compliantly grow your team in Mexico and across the globe.
