Hiring in Mexico

Mexico's employment framework is built on the Federal Labor Law (Ley Federal del Trabajo, or LFT), which applies nationwide and cannot be overridden by state laws. Unlike countries where rules vary by region, Mexico has a single set of labor rules that covers all workers. The LFT strongly favors employees, and the labor courts (Tribunales Laborales, which replaced the old Conciliation and Arbitration Boards in 2022) tend to side with workers in disputes. Every employment relationship must be documented in a written contract, and if the employer fails to provide one, the law presumes the employee's version of the terms is correct.

Termination in Mexico is expensive and tightly regulated. If you fire someone without just cause (and the list of valid causes in Article 47 of the LFT is narrow), you owe them a constitutional severance package: 3 months of salary (known as the 'three-month indemnity'), 20 days of salary per year of service (the seniority premium under Article 50), a pro-rated share of their annual bonus and vacation, and 12 days of salary per year of service as the regular seniority premium (capped at twice the minimum wage). Even with just cause, you still owe the seniority premium and pro-rated benefits. Most employers end up negotiating settlements because fighting a wrongful dismissal claim in court is slow and the odds favor the employee.

Mexico went through a major vacation reform in January 2023 that doubled the statutory minimum. Employees now get 12 days of paid vacation after their first year of service, increasing by 2 days per year through year 5, then by 2 days for every subsequent 5 years of service. On top of the vacation days, employers must pay a vacation premium (prima vacacional) of at least 25%% of the employee's salary during vacation. Mexico also observes 7 mandatory paid holidays per year, plus inauguration day every 6 years (next one in 2030). If an employee works on a holiday, they get triple pay for that day.

Payroll taxes and social contributions in Mexico are heavily weighted toward the employer. The IMSS (Mexican Social Security Institute) contributions cover everything from disability and life insurance to work risk insurance, and the employer's share ranges from about 20%% to 35%% of salary depending on risk classification and wage levels. On top of IMSS, employers contribute 2%% of salary to SAR (retirement savings), 5%% to Infonavit (the worker housing fund), and pay the ISN (payroll tax) which varies by state from 2%% to 3%%. The employee's share of IMSS is much smaller, roughly 2-3%% of salary. All of this is calculated on the Integrated Daily Wage (Salario Diario Integrado), which bundles base pay with benefits like Aguinaldo and vacation premium.

Two mandatory bonuses define Mexican payroll. The Aguinaldo (13th-month bonus) requires employers to pay at least 15 days of salary by December 20 each year, though many companies pay 30 days or more to stay competitive. Profit sharing (PTU, or Participacion de los Trabajadores en las Utilidades) requires companies to distribute 10%% of their pre-tax profits to employees within 60 days of filing their annual tax return. A 2021 reform capped the individual PTU payout at 3 months of salary or the average of the last 3 years' PTU payment, whichever is higher.

Maternity leave in Mexico is 12 weeks total, split into 6 weeks before and 6 weeks after birth, paid at 100%% of salary through IMSS. Paternity leave is 5 working days at full pay. Overtime is capped at 3 hours per day and 9 hours per week, paid at double the regular rate. If an employee works beyond those 9 weekly overtime hours, the rate jumps to triple pay. The standard workweek is 48 hours for day shifts, 42 hours for night shifts, and 45 hours for mixed shifts, though a proposal to reduce the standard week to 40 hours has been under active debate since 2023.