Employee Rights in Mexico
Capital
Mexico City
Official Language
Spanish
Currency
Mexican Peso
Payroll cycle
Bi-monthly
Quick facts about Mexico
Located at the southern end of North America, Mexico is one of the most important economic partners to the United States and Canada. Mexico’s rich history and its ever growing economy has turned the country into an appealing destination for digital nomads. The country’s strong university system also makes Mexico one of the best places to recruit developers, marketers, and other knowledge workers.
If you’re hoping to expand and hire employees in Mexico, you’ll need to understand employee rights in the country.
Labor laws in Mexico are heavily regulated and a little convoluted, so understanding them can be a bit tricky at first. For example, all employees are entitled to 10% profit sharing from their employer before their net profit is calculated for taxes each year.
In this guide, we’ll break down all of the information you need to know about employee rights in Mexico to ensure that you’re remaining compliant and aware.
Labor Laws in Mexico
The Federal Labor Law
The Federal Labor Law (Ley Federal del Trabajo) is the Mexican labor law governing employment relationships. The law was first enacted in 1931, and has been revised several times since then, with the most recent major revision in 2019.
The Federal Labor Law covers a wide range of labor-related issues, including hiring and firing, worker wages & benefits, working hours, days of rest, health & safety, discrimination & harassment, collective bargaining, and labor disputes.
Some of the key provisions of the Federal Labor Law include:
Hiring and firing: Employers must provide written contracts to employees that specify the terms and conditions of employment. Employers must also follow specific procedures when terminating an employee, including providing notice and, in some cases, severance pay.
Wages and benefits: The law sets out minimum wage rates, overtime pay, and other employee benefits in Mexico that employers are required to provide to employees, including social security benefits and paid vacation.
Working hours: This law sets forth the minimum daily hours that employees can work per day and per week, and sets out rules for rest periods and breaks. Employers must also pay overtime to employees who work more than the maximum number of hours allowed.
Health and safety: Employers must provide a safe working environment for employees and comply with workplace safety regulations. Employees have the right to refuse to work in unsafe conditions without fear of retaliation.
Discrimination and harassment: The law prohibits discrimination and harassment based on various grounds, including gender, race, ethnicity, age, and disability. Employers must take steps to prevent and address discrimination and harassment in the workplace.
Collective bargaining: Employees have the right to form and join unions, and employers must engage in collective bargaining with unions. The law also sets out procedures for strikes and lockouts.
Labor disputes: The law establishes the mechanisms for resolving labor disputes, including mediation, arbitration, and litigation.
Social Security Law
The Social Security Law (Ley del Seguro Social) in Mexico is a federal law that establishes and provides a comprehensive social security system to provide health care, retirement benefits, disability benefits, and other social benefits to eligible individuals.
The social security system is managed by the Mexican Social Security Institute (Instituto Mexicano del Seguro Social or IMSS), which is a federal agency.
To be eligible for social security benefits under the Social Security Law, individuals must be employed and make contributions to the social security system.
Employers are required to register their employees with the IMSS and make contributions on their behalf. Self-employed individuals and independent contractors can also voluntarily register with the IMSS and make contributions to the social security system.
The Federal Law to Prevent and Eliminate Discrimination
The Federal Law to Prevent and Eliminate Discrimination (Ley Federal para Prevenir y Eliminar la Discriminación) is a section of the Federal Labor Law.
Under this law, discrimination is prohibited in the workplace on the basis of ethnicity, race, gender, age, religion, sexual orientation, disability, or social status. This law defines discrimination as any act or omission that denies or restricts the full exercise of human rights.
The National Council to Prevent Discrimination was created to promote respect for diversity and to investigate and address instances of discrimination.
Some of the key provisions of the Federal Law to Prevent and Eliminate Discrimination include:
Prohibition of discrimination: The law prohibits discrimination on the basis of ethnicity, race, gender, age, religion, sexual orientation, disability, or social status.
Obligations of public and private entities: Public and private entities are required to promote respect for diversity and to ensure that their policies and practices do not discriminate against individuals or groups.
Education and awareness-raising: The law requires the promotion of education and awareness-raising activities to prevent discrimination and promote respect for diversity.
Complaints and investigation: The law provides for the filing of complaints regarding instances of discrimination, and for the investigation and resolution of those complaints.
Sanctions: The law establishes sanctions against individuals or institutions that engage in discriminatory practices, including fines.
Employee rights in Mexico
Rights for foreign workers
Foreign workers in Mexico have the same rights as Mexican workers under the Federal Labor Law. These rights include:
Equal treatment
Minimum wage
Social security
Rest periods
Union membership
Job security
Occupational health and safety
Rights for remote workers
According to the Federal Labour Law in Mexico, anyone who performs more than 40% of their online work at home or at a location other than the employer’s official business, is considered a teleworker. Remote work must be specified in the employment agreement.
In 2021, the Mexican government published an official decree called Project NOM-036 amending the Federal Labour Law about the terms and conditions of telework and telehealth for Mexico citizens and permanent residents as many companies started to allow their employees to work remotely.
The Ministry of Labour and Social Work established a further decree in 2022 for employer’s workplace safety and health obligations for teleworkers.
Employers are required to:
Keep an updated list of teleworkers and the requirements of the working relationship in the employment contract
Provide a telework policy
Provide ergonomic chairs to support employee’s performance and health
Document the differences between in-person work and remote work
Pay for, install, and maintain the necessary equipment to perform telework
Pay for internet expenses and electricity (they are responsible for calculating the benefit and tax expenses)
Respect employee’s work/life balance at the end of the working day
Register remote workers for social security
Protect their personal data like email, name, social security, etc.
Under this amendment, employees also have obligations to uphold in order to remain compliant as teleworkers.
Employees are required to:
Have safe conditions for employer to visit the home or working area to verify compliance with health and safety regulations
Comply with employer’s telework policy
Provide employer with notice of address change or workplace change
Inform employer of occupational hazards
Comply with employer’s privacy policy for protecting sensitive data
Comply with employer’s provisions for occupational health and safety
Equal pay
Under the Federal Labor Law, men and women must receive equal pay for equal work. This means that employers cannot discriminate on the basis of gender and must provide equal pay to men and women who perform the same or similar jobs, with the same qualifications and experience.
The concept of equal pay for equal work is based on the principle of non-discrimination and is intended to promote gender equality in the workplace.
It is important to note that while the law provides for equal pay for equal work, there may still be instances where gender pay gaps exist. Factors such as education, experience, and job responsibilities can all impact wages, and it is important for employers to conduct regular reviews of their pay structures to ensure compliance with the law and to address any gender pay gaps that may exist.
Protections against unfair dismissals
Employees are not required to give their employer notice when they quit, but it’s highly unlikely that employees in Mexico will quit without giving some form of notice as stipulated in their employment contract.
Termination
To terminate an employee in Mexico, employers need to provide a reason, employees cannot be fired without just cause. If your business does not have a justified cause when terminating the employee, the company must compensate the unfairly terminated employee.
Just causes for termination
These are the only justifiable reasons for terminating employees under Mexican labor laws:
Showing up to work drunk or under the influence of nonprescription substances
Misrepresenting qualifications for a job
Threats or acts of violence at work
Causing damage to employer’s property
Compromising the safety of the workplace
Disclosing trade secrets or confidential information
Being absent from work for more than 3 days in a 30 day period without notice or a justifiable excuse
Insubordination
Not following safety protocols
Being sentenced to prison
Bullying or sexual harassment
Severance for indefinite contract employees
Severance pay is required for terminated employees. However, the amount of severance offered varies based on the collective bargaining agreement made when the employee first started. Independent contracts are not entitled to severance pay.
If an indefinite contract employee voluntarily resigns, the employer must pay all the fringe benefits such as vacations, vacation premium, and their Christmas bonus.
If the employee is terminated with a cause, the employer must pay all of the employee’s severance. However, if an employee is terminated without a cause, the severance payout is a bit more complicated.
Workers terminated without cause are entitled to the following severance:
Three months of the employee’s daily aggregated salary as Constitutional Indemnification
Twenty days of the employee’s daily aggregated salary for each year with the company
Seniority premium
Fringe benefits, including vacations, vacation premium, and Christmas bonus
Definite employee severance
For definite contract employees, the severance is more extensive. If an employee voluntarily resigns, they are entitled to all of their vacation, fringe and Christmas bonus. An employee terminated for a cause is still entitled to all of their fringe benefits.
Definite contract employees terminated without cause are entitled to the following severance:
50% of wages paid if contract duration lasted for less than a year OR six months of wages for the first year and twenty days of the employee’s daily aggregated salary for each following year if contract duration last for more than a year
Fringe benefits, including vacations, vacation premium, and Christmas bonus
Employees terminated without cause are entitled to the following severance:
50% of wages paid if contract duration lasted for less than a year OR six months of wages for the first year and twenty days of the employee’s daily aggregated salary for each following year if contract duration last for more than a year
Fringe benefits, including vacations, vacation premium, and Christmas bonus
Whistleblower rights
The Federal Law for the Protection of Whistleblowers (Ley Federal de Protección al Denunciante) provides protection for individuals who report corruption or illegal activities within the public sector, as well as in private companies that receive federal funds or are involved in certain regulated activities.
Under this law, whistleblowers are protected from retaliation, including termination, demotion, or other discriminatory actions, for reporting illegal activities or misconduct.
The law also provides for the confidentiality of the whistleblower's identity, and prohibits any form of reprisal against the whistleblower or any person who cooperates with the investigation.
Protection in case of business transfer
In the event of a transfer of a business or part of a business, the employment relationships of the affected employees are considered to be transferred to the new employer, who assumes all of the rights and obligations of the previous employer.
The Federal Labor Law defines a business transfer as a transfer of ownership or management of a business or part of a business, in which the identity of the business is maintained. This can include a transfer of assets, a merger, or an acquisition.
In the event of a business transfer, the new employer must respect the existing terms and conditions of employment, including wages, benefits, seniority, and other rights and obligations. Employees cannot be terminated as a result of the transfer, and their employment contracts must continue without interruption.
Additionally, if the new employer intends to make changes to the terms and conditions of employment, they must negotiate with the employees to reach an agreement. If an agreement cannot be reached, the new employer may terminate the employment relationship, but must provide the affected employees with the appropriate severance pay.
Unions in Mexico
In Mexico, there are two main types of unions: independent unions and company unions. Independent unions are formed and run by workers themselves, while company unions are typically established by employers to represent their workers.
Collective bargaining agreements negotiated by unions can cover a range of issues, including wages, working conditions, benefits, and job security. These agreements are legally binding, and employers are required to comply with their terms.
Unions in Mexico also have the right to strike, subject to certain legal requirements. To strike legally, a union must follow a specific process, which includes giving notice to the employer and obtaining the approval of a majority of union members.
Types of leave in Mexico
Employees are entitled to various types of leave in Mexico under the Federal Labor Law. Here are some of the main types of employee leave in Mexico:
Paid Vacation Leave: Employees in Mexico are entitled to paid vacation leave after completing one year of service with their employer. The amount of vacation time was just extended to 12 days a year. For the first 5 years, employees receive an additional 2 days of leave for each year of employment.
Maternity Leave: Female employees in Mexico are entitled to a period of paid maternity leave, which is generally six weeks before and six weeks after the birth of a child. In some cases, this leave can be extended if there are medical complications.
Paternity Leave: Male employees in Mexico are entitled to a period of paid paternity leave, which is generally five days after the birth of a child.
Medical Leave: Employees in Mexico are entitled to a period of paid medical leave if they are unable to work due to illness or injury. The length of this leave depends on the nature of the illness or injury, and can be extended if necessary.
Bereavement Leave: Employees in Mexico are entitled to a period of paid bereavement leave in the event of the death of a family member.
Marriage Leave: Employees in Mexico are entitled to a period of paid marriage leave, which is generally three days.
Leave for Religious Holidays: Employees in Mexico are entitled to a period of leave for certain religious holidays, as recognized by law.
Christmas bonus/Aguinaldo
On or before the 20th of December, workers must be paid a Christmas bonus, also known as Aguinaldo. The amount is worth 15 days of the employee’s base salary for one year.
Profit sharing
Profit sharing is also another perk that employees are legally entitled to when working in Mexico. Employees are entitled to 10% of the profits generated during the year for any company with profits over 300,000 MXN. Employers are not required to pay profit sharing during their first year of business.
Permanent workers, subcontractors and temporary workers with over 60 days of employment are entitled to profit sharing payments. Employers must pay this 10% profit sharing no later than 60 days after the company the tax deadline.
What HR leaders need to know in Mexico
Companies that want to hire workers and expand in Mexico need to have a solid HR department or partner with an EOR like Via to help navigate and manage compliance and employee rights.
Employment contracts
As an employer in Mexico, you will be responsible for creating contracts for your employees. In Mexico, there are three major types of employment contracts in Mexico (definite employment contracts, temporary workers, indefinite).
The type of employment contract should be specified when drafted. Specifics in employment contracts are of the utmost importance–not only to protect the employee but also to protect the employer.
Types of employment contracts in Mexico
The main employment contract when hiring employees in Mexico is the definite employment contract, or the contracto de determinado. This contract is outlined for permanent workers and defines the stipulations and expectations of full-time workers.
Next, you can onboard temporary workers, consultants, or freelancers as independent contractors or honorarios. Businesses need to make sure they don’t accidentally classify full-time employees as contractors.
Finally, there are indefinite employment contracts, or contracto por tiempo indeterminado. This is for employees who are working for an unspecified period of time.
Pay slips
HR is required to give employees pay slips in order to ensure fair wages. The pay slip should specify the hours worked, pay, and any overtime hours.
To avoid having to set up an entire HR department, you can instead partner with an employer-of-record in Mexico that already has legal entities and expert knowledge of the country's labor laws.
Why companies partner with Via
As a global EOR provider, Via makes hiring Mexican talent and building your global team seamless. Instead of having to learn every specific nuance in every province, you can focus on finding the talent that fits your company. Whether you need to hire remote workers or independent contractors in Mexico, we support you throughout the entire process. Via helps you manage local HR processes for direct employment such as work visas & permits, benefits, payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts ensure that your company remains compliant while expanding abroad. As your employer-of-record/entity in Mexico, Via assumes responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team.
