Offering comprehensive, compliant benefits is a crucial factor for finding success in a new market.
Any company hiring talent in Mexico must comply with government-mandated benefits requirements to avoid fines, delays, and potential legal consequences. But going beyond statutory benefits and offering competitive supplemental benefits like dental, vision, and life insurance can set your business apart as an attractive landing spot for top talent.
This guide covers everything global employers need to know about employee benefits in Mexico. Find a list of statutory benefits all employers must offer in Mexico, discover common supplemental perks that can give your company a competitive hiring edge, and learn how to easily administer benefits for a Mexican workforce from anywhere.
What are the employee benefits in Mexico?
Statutory employee benefits in Mexico include the Instituto Mexicano del Seguro Social (IMSS), which comprises healthcare, unemployment, life insurance, sick leave, and other programs. Other mandatory benefits include the aguinaldo (Christmas bonus), profit-sharing, severance pay, annual leave, and national holidays, while common supplementary benefits include private health and life insurance.
Statutory employee benefits in Mexico
Mexico’s statutory employee benefits serve as a safety net for the country’s workforce, providing income support and financial assistance for various life events, such as illness, disability, and child care.
Below, we will discuss specific statutory benefits, including the IMSS fund, aguinaldo, profit-sharing, severance pay, annual leave, and public holidays.
Social security (IMSS)
The IMSS is a robust social security fund that comprises multiple programs, including the following:
- Healthcare
- Retirement
- Disability and life insurance
- Unemployment
- Parental leave
- Occupational risk
- Nursery benefits
- Social housing
Employers do not supply these entitlements directly—the IMSS provides them. However, employers and employees must contribute to the IMSS. Total employer contributions range from 34% to 50% of their employees’ gross monthly wages, depending on factors like the employee’s income bracket and their industry’s risk category. Employees pay roughly 2.78%.
The IMSS fund serves the general working population, including all private and some public-sector employees. Benefits extend to employees’ spouses or partners, children under 16 (or under 25 if the children are students), and parents who live with covered employees.
A lesser-known fund, the Instituto de Seguridad y Servicios Sociales de Los Trabajadores del Estado (ISSSTE), provides similar benefits but serves only federal government employees.
Global companies hiring employees in Mexico must enlist an experienced HR team and provide them with the necessary resources to navigate Mexico’s complex payroll and tax regulations.
Running compliant payroll is critical for avoiding penalties and ensuring your team receives timely payments. An easy solution is to partner with a global payroll expert, such as an employer of record (EOR), to handle payroll compliance on your behalf.
Learn more: Mexico Payroll and Taxes: An Overview for Global Employers
Aguinaldo
Aguinaldo is an annual Christmas bonus that all employers in Mexico must pay their employees.
Otherwise known as a 13th-month salary, the aguinaldo is a taxable, federally mandated bonus worth at least 15 days of an employee’s standard wages. However, many large organizations in Mexico offer a full month’s salary.
Employers must deliver the aguinaldo by December 20 of each year. Failing to pay the bonus or paying it incompletely or late can result in fines of up to MXN 365,200 (US$19,744).
Profit-sharing
While profit-sharing is an optional incentive in most countries, it is a constitutional obligation in Mexico. All employers must distribute 10% of their pretax earnings to their workforce in two payments: one proportionate to the days an employee worked in the previous tax year and a second proportionate to their salary level.
Mandatory profit-sharing guarantees compensation for employees’ positive impact on their organization’s economic success. Remember, profit-sharing is not the same as equity incentives. While profit-sharing is mandatory in Mexico, equity incentives are optional benefits companies can offer at their discretion.
It’s important for global companies operating in Mexico to understand this distinction, as they must ensure compliance with local mandates and their own global compensation policy.
Severance pay
According to the Mexican Federal Labor Law, there is no minimum notice period for terminating an employment agreement. However, employers must offer severance pay.
Severance amounts vary depending on the reasons for termination. For instance, if an employer dismisses an employee without just cause, they must provide the employee with the following amounts:
- 90 days’ wages as a constitutional indemnification
- A seniority bonus worth 12 days’ standard wages for each year of service
- Accrued wages and prorated benefits, including unused leave days, a vacation premium, aguinaldo, and profit-shared earnings
Where there is just cause for dismissal, employees only receive the seniority bonus and accrued earnings and benefits.
Conversely, employees receive a full severance package plus 20 days’ standard wages for each year of service if they leave their jobs due to employer misconduct. Note that the only situation in which an employee isn’t entitled to the seniority bonus is if they voluntarily resign before completing 15 years of service.
Remember, collective bargaining agreements (CBAs) can stipulate additional requirements beyond the federal minimums. For instance, CBAs in some industries require a seniority bonus regardless of the employee’s length of service.
Leave entitlements in Mexico
Employees in Mexico are entitled to the following leave entitlements:
- Annual leave. Employees receive 12 days of paid annual leave after one year of service, two additional days each following year up to 18 days, and two more days per subsequent five-year period. In addition to regular pay, businesses must offer employees a vacation premium, or “prima,” worth 25% of their leave earnings.
- Maternity leave. Pregnant employees receive 12 weeks of paid maternity leave—six weeks before the birth and six after. For adoptions, female employees receive six weeks of leave from the day they receive the child.
- Paternity leave. Fathers receive five days of paid paternity leave for the birth or adoption of a child.
- Child care leave. One parent is entitled to 60% paid leave for up to 28 days for any child under 16 who needs medical rest or treatment for a serious illness or condition, such as cancer. The parent can take multiple leaves over three years up to 364 leave days.
- Sick leave. Employees receive up to 52 weeks of paid sick leave. To take sick leave, they must obtain an incapacity order from IMSS, which states the number of days they should rest.
Statutory holidays in Mexico
In addition to paid annual leave, all employees in Mexico enjoy the following paid national holidays:
- Año Nuevo (New Year) on January 1
- Dia de la Constitución (Constitution Day) on the first Monday in February, commemorating February 5
- Cumpleaños de Benito Juarez (Benito Juarez Day) on the third Monday in March, commemorating March 21
- Dia del Trabajo (Workers’ Day) on May 1
- Dia de la Independencia (Independence Day) on September 16
- Dia de la Revolución (Revolution Day) on the third Monday in November, commemorating November 20
- Transmisión del Poder Ejecutivo Federal (Inauguration Day) on December 1, once every six years
- Dia de Navidad (Christmas) on December 25
Local electoral laws may grant additional paid days off to carry out local elections. Employees who work on a public holiday receive three times their standard wages for that day.
Supplemental employee benefits in Mexico
While the IMSS features multiple provisions for various health and social needs, most employers in Mexico offer additional private plans to ensure comprehensive coverage for their employees.
Supplemental benefits provide employees with a sense of financial security and peace of mind while supporting job satisfaction, motivation, and productivity. As a result, these policies are critical to any global benefits strategy.
Private healthcare and life insurance are the two most common supplemental benefits employers offer employees in Mexico. We discuss each of these in detail below.
Download our essential global employee benefits guide to learn how to offer compliant, competitive benefits packages to talent in Mexico and 185+ countries.
Private medical insurance
While Mexico’s public healthcare system features reputable clinics with qualified and experienced doctors, the quality of care varies drastically across the country. Public hospitals can be crowded with long waits, and the IMSS doesn’t cover dental, vision, or elective surgeries.
As a result, nearly all local and multinational employers in Mexico offer supplemental healthcare options.
Employers can choose from various providers across the country. Coverage varies widely between providers and plans; however, a comprehensive policy should cover at least the following:
- Standard dental care
- Standard vision care
- Elective surgeries, such as corrective eye surgery
- Emergency treatment abroad
- Treatment for sports-related injuries
- Physical rehabilitation
- Maternity care
Many providers also offer year-round, 24/7 telemedicine services.
Private life insurance and AD&D plans
While life insurance and accidental death and dismemberment (AD&D) plans are similar, they feature distinct differences. Life insurance financially supports an employee’s dependents if the employee suddenly passes away, regardless of the circumstances. These plans do not cover accidents or injuries that lead to long-term disabilities.
Conversely, AD&D insurance plans cover only accidental deaths. However, they provide long-term financial support for events that lead to dismemberment or disability.
When choosing a plan, remember to vet multiple insurance providers. Clarify their policy limitations and determine if their offer meets your budget and your employees’ needs.
A comprehensive life and AD&D policy in Mexico would likely cover the following:
- Death by any cause
- Permanent disability due to illness
- Permanent disability due to an accident
- Dismemberment
- Funeral costs
Offer compliant and competitive employee benefits in Mexico
Providing employees with compliant, comprehensive benefits can make or break your success in the Mexican market. Partner with Velocity Global to access affordable, compliant, and competitive benefits options that will help you attract and retain top talent to drive your business growth.
Our Global Benefits solution makes it easy for companies of any size to offer comprehensive benefits packages to employees in over 185 countries, including Mexico.
Whether you’re hiring one or one thousand, our diversified benefits portfolio can support the growing needs of any organization operating in Mexico and beyond.
With our global reach and international legal expertise, we can handle benefits administration and governance for your Mexican workforce and offer fast, local support whenever your team needs it.
Our comprehensive benefits options aren’t just a perk—they are an essential investment in your talent, driving productivity and innovation for your organization.
Partner with Velocity Global to create a benefits strategy that can transform your workplace and fuel success as you expand to Mexico and beyond. Contact us today to get started.
Disclaimer: The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. © 2024 Velocity Global, LLC. All rights reserved.
