HR Software for Mexico
Leave Policy
Maternity Leave
Pregnant employees are entitled to 84 days of paid leave. The leave must begin 40 days before the birth of the child and continue without interruption. The worker receives 100% of her average salary during this period and the Mexican Social Security Institute (IMSS) is responsible for this payment.
In the six months after the birth, the so-called breastfeeding period, employees can request additional rest breaks. The employee can extend the vacation, it is unpaid.
You can use the leave module in IceHrm to manage maternity leave in Mexico.
Paternity Leave
Employees are entitled to five days of paid paternity leave. The employee receives 100% of his average salary during this period and the employer is responsible for this compensation.
The employee can extend the vacation at the discretion of the employer, which is then unpaid.
Parental Leave
Parental leave is not regulated by law in Mexico. However, employees may be entitled to maternity and paternity leave.
Sick Leave
Employees are entitled to up to 52 weeks of paid sick leave, and the Mexican Social Security Agency may grant additional weeks depending on the type of illness. Depending on the duration, this vacation is paid at different rates and by different payers:
Pay & Tax
Minimum Wage Requirements
The minimum wage in Mexico depends on the location of the worker:
- In the Northern Border Free Zone (NBFZ) it is 312.42 MXN/day or 114,029.65 MXN/year.
- In the rest of the country it is 207.44 MXN/day or 75,715.65 MXN/year.
Please note: When calculating the minimum wage, both working and rest days in the year are taken into account.
Individual Income Tax
Individual income tax ranges from 1% to 35%. Income tax is calculated at progressive rates.
| Gross Annual Income | Tax Rate (%) |
|---|---|
| Up to MXN 7,735.00 | 1.92% |
| Up to MXN 65,651.07 | 6.40% |
| Up to MXN 115,375.90 | 10.88% |
| Up to MXN 134,119.41 | 16% |
| Up to MXN 160,577.65 | 17.92% |
| Up to MXN 323,862.00 | 21.36% |
| Up to MXN 510,451.00 | 23.52% |
| Up to MXN 974,535.03 | 30% |
| Up to MXN 1,299,380 | 32% |
| Up to MXN 3,898,140.12 | 34% |
| Over MXN 3,898,140.13 | 35% |
In Mexico there is a new special regulation that can reduce income tax if the employee meets the criteria: “Regimen Simplificado de Confianza”. Even if the employee is entitled to this tax break, he can choose whether to take advantage of it or continue to pay the average income tax.
Payroll Cost
The cost to the employer is generally estimated at 20.3% of the employee’s salary.
Monthly charges
- Social Security IMSS – MXN 643.71
- Local tax – 3.00%
- Surplus fee (additional social security costs for special salaries) – 1.10%*
- Occupational risk – 0.50%*
- Retirement and old age – 4.241%*
- Retirement – 2.0%*
- Disability benefit – 0.70%*
- Disability and life insurance – 1.75%*
- Child care and social benefits – 1.0%*
- Medical costs – 1.05%*
- Infonavit (mortgage fund) – 5.0%*
Annual costs
- Monthly vacation pay – 25% of the value obtained by multiplying the employee’s daily salary by the number of vacation days he or she has.
- Monthly year-end bonus/Christmas bonus – 15 working days’ wages for employees with one year of service, pro rata for employees with less than one year of service
- Profit Sharing – 10% of the company’s profits in the financial year distributed to eligible employees.
*These costs are calculated based on the employee’s Basic Contribution Salary (SBC). The basic contribution salary is stated when the employee registers with the Mexican Social Security Institute (IMSS). The basic salary subject to contributions consists of payments for the daily workload, bonuses, perceptions, meals, accommodation, bonuses, commissions, benefits in kind and all other amounts granted to the employee for his services. To determine the social security contributions for both the employer and the employee, the days worked or not worked by the employee and the basic salary subject to contributions in each period (fortnightly, monthly or bimonthly) are taken into account.
Overtime Pay & Maximum Hours
Pay for overtime is mandatory. Hours outside of the maximum working hours are considered overtime and there is no maximum number of overtime hours per week. Employees receive compensation for additional hours:
- 200% of the hourly rate for the first eight hours of overtime in a week
- 300% of the hourly rate for overtime beyond the first eight hours.
Normal working hours are eight hours per day and a maximum of 48 hours per week. The normal working week lasts from Monday to Friday when the weekly working time is 40 hours. The extended weekly working time is 48 hours from Monday to Saturday.
Termination
Termination Requirements
Dismissals must take into account complex rules and the regulations of the country in which an employee is employed. Off-boarding is always carried out by the employer with the main participants. It may include ad hoc fees as well as required or recommended steps for specific termination cases.
Terminations in Mexico can be complex. Employers cannot terminate at their own discretion, and if termination occurs without cause, an amicable solution must be found. Compliant terminations are:
- Voluntary termination by the employee
- By mutual agreement: bonus at the end of the year, vacation and severance pay must be paid
- Through expiry of the contract
- Unilaterally by the employer due to:
1. Probation period
2. Disciplinary dismissal in accordance with the Labor Code (Article 47 LFT)
In the case of a termination by mutual consent, the employee should only be notified once the employer has initiated the termination procedure (calculating the severance payment, preparing the letter of termination and informing the human resources department). Notice of termination must be given within 24 hours, including payment to the employee.
The employer must notify the employee and require a wet ink signature on the termination letter submitted by the employee on the same day. The employer has 24 hours to pay the employee the severance pay and accrued benefits.
Notice Period
In Mexico there is no notice period required by law.
Severance for Employees
Employees who are terminated without cause are entitled to the following severance payments:
- 90 days of salary severance, including payment of benefits
- 20 days salary for each year of service completed
- A seniority bonus equal to 12 days of salary per year worked, including paid vacation, Christmas bonus and additional accrued benefits
An employee who has been terminated without good reason has the option of being reinstated at his or her previous job in lieu of severance pay.
To protect you from unforeseen financial risks arising from dismissals, IceHrm applies a severance pay provision in all employment contracts in this country. IceHrm has extensive expertise in managing litigation risk globally and our severance provision calculation is based on prevailing common law or statutory requirements and best local practices. If your employee resigns or is not entitled to severance pay, you will receive a refund of any unused amounts.
Statutory Time Off
Paid Time Off
Full-time employees who work five days per week are entitled to at least 12 days of paid time off (PTO). This entitlement increases annually by 2 days per year in the first five years up to 20 days and every five years thereafter by 2 days up to a maximum of 32 days.
Public Holidays
In Mexico, seven national and one regional holidays are celebrated, depending on where the employee lives.
National holidays include:
- New Year’s Day
- Constitution Day
- Benito Juárez’s Day
- Labor Day
- Independence Day
- Revolution Day
- Christmas Day
Onboarding
Onboarding
Onboarding takes 2 business days after the customer signs the SOW.
Additional Info
Employment Contract Details
The contracts must be written in Spanish and can be bilingual. They must be in writing and signed by both parties.
A contract must contain:
- Name
- Start date
- Length of the employment
- Job description
- Termination conditions
- Christmas Bonus
- Beneficiaries, according to article 25 of the Federal Labor Law.
Probation Period
Employees hired through IceHrm are subject to a 30-day probationary period, which you can extend up to 180 days for management positions and specialized technical roles. From January 2022, it is IceHrm’s company policy to include probationary periods in all employment contracts.
The probationary period helps employers and employees make sure they are a good fit for each other. This means the company can quickly decide whether the position is right for them, and the employee can see whether it matches their career goals.