Mexico boasts a dynamic trade landscape and flourishing market. As the second-largest economy in Latin America, it presents an ideal environment for business growth. Many global businesses aspire to enter the Mexican market, but this can be a daunting task due to additional responsibilities like administrative operations, employee management, payroll compliance. Payroll is a crucial aspect and major contributor to employee satisfaction. Therefore, having a deep understanding of employee benefits, compliance, payroll cycle in Mexico is paramount.
In this article, we will be navigating through the payroll system in Mexico for businesses striving for a compliant workforce and market presence.
Understanding the payroll cycle in Mexico
The payroll cycle in Mexico operates on a 15-day loop. Employees receive their salaries semi-monthly, on the 15th and the last day of each month. This cycle promotes effective management. Paying semi-monthly helps the employees handle their finances and signifies employers' commitment to timely compensation.
Here are some other practices in the Mexican payroll system.
Aguinaldo or 13th Month Salary
This concept of Aguinaldo, or the 13th month salary, is significant in Mexican payroll. It is a bonus paid to employees as per labor laws and regulations, typically in December. The amount accumulates from the employee’s joining date and is provided at the end of the year for a financial boost.
Employee Benefit in Mexico
Employee benefits play a pivotal role in attracting and retaining top talent. Common employee benefits in Mexico include:
- Private Health Insurance: Employers often provide health insurance coverage up to 7,100 MXN per month, based on factors like age and scope.
- Other Allowances: Various allowances enhance employee satisfaction and foster a positive work culture. These include:
Internet Allowance: Approximately 1,500 MXN per month.
Cell Phone Allowance: Around 1,500 MXN month.
Meals Voucher/Card: Typically, about 2,600 MXN per month.
Wellness/Fitness Allowance: Generally, around 2,000 MXN monthly.
Computer Allowance: Approximately 4,000 MXN.
Working Hours and Overtime
Mexico has defined standard working hours, with employees have 8-hour shifts per day, totaling 48 hours per week.
However, the law recognizes different shifts:
Day Shifts: 48 hours per week (6 AM to 8 PM)
Night Shifts: 42 hours per week (8 PM to 6 AM)
Mixed Shifts: 45 hours per week.
Overtime Regulations:
Employers must track employees' hours, and any overtime must be compensated at premium rates. This structure ensures compliance with labor laws and assures fair wages.
- The first nine hours of overtime per week are paid at 200% of the regular salary.
- Any additional hours beyond nine are compensated for at 300% of the regular salary.
Leave Entitlements
Leave policies are an essential factor that fosters a supportive and positive work environment. In Mexico, employees are entitled to a minimum of 12 paid leaves per year, with additional days granted based on service. These 12 days increase by two days every five years of employment. Unused vacation days can be carried over for six months, and a vacation premium of 25% pay is mandatory for each day of leave taken.
Sick Leave
In Mexico, the employees are entitled to take paid sick leaves. The Mexican sick leave policy is backed by IMSS (Instituto Mexicano del Seguro Social). Probation for sick leave continues as employees who have faced any work-related injuries can be eligible for 100% of the regular pay while others can get up to 52 weeks of sick leave at 60% of their salaries when confirmed by the medical authorities.
Maternity and Paternity Leave
Mexican employers have defined parental leaves for the employees. Maternal leaves are usually 12 weeks, which includes 6 weeks before and 6 weeks after childbirth. Maternity pay is calculated at full salary, capped at 25 times the daily UMA (Unidad de Medida y Actualización), and is covered by the IMSS. The new fathers are eligible to take five days of paternity leave to support their beloved partner in critical time.
Final Thoughts:
Having a deep understanding of the market, payroll compliance and statutory obligations is a must when you aspire to expand on the global front. Countries like Mexico has different employee benefits and peculiar payroll cycle. By understanding it you can potentially learn and offer competitive benefits to the employees adhering to the local laws and regulations. Engaging with local legal and HR experts can further streamline these processes, allowing employers to focus on their core business objectives while fostering a positive workplace culture.
How Can We Help You?
TopSource Worldwide is known for delivering top-notch global expansion services to a vast clientele. We have a decent experience of 20+ years in the industry helping our clients to adhere to the local and global laws and regulations and boost growth. Our dedication and tailored solutions are prominent reasons why we have been successful in defining and refining growth in over 180 countries. If you're interested in global expansion services such as Employer of Record (EOR), entity solutions, global payroll, HR advisory, or accounting, feel free to reach out! We’re here to help you navigate the complexities of expanding your business internationally, contact us!
