End of Employment 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 thinking about laying off or terminating an employee in Mexico, you’ll need to understand how the end of employment is handled in the country according to federal labor laws. Mexico differs from the United States. The country does not practice at-will employment and strongly favors employee rights during termination.
In this guide, we’ll explore the end of employment in Mexico, which includes when employment can be terminated (by either party), severance, and the notice period that must be given during termination.
Termination in Mexico
When terminating employees in Mexico, employers need to provide a justification. If your business does not have a justified cause when terminating the employee, the company must compensate the wrongfully terminated employee.
Employers may only terminate employees in the following situations:
The employee lied about their ability to perform that duty
Committing acts of violence
Committing serious acts against the employer’s families
Intentionally damaging employer’s property or machinery that they use to work
Problems with workplace safety/not following workplace safety protocols
Physical or sexual harassment
Revealing trade secrets
Attending work under the influence of substances
Going to prison and not being able to work
Lacking the proper documentation to work
In the case of employees, they are able to terminate their employment without any liability in cases of:
The first 30 days of employment if the conditions of the job don’t match what was agreed upon in the employment contract
Harassment to the employee’s family
Having their salary reduced
Not receiving the agreed upon salary
Suffering damages to their work tools directly or indirectly by their employer
Employer is not properly following workplace safety regulations
Lack of safety or carelessness from those they work around
Always try to consult with your human resource department in Mexico to ensure you compliantly terminate employment.
Termination procedure
Mexican labor law states that employers have to follow a specific procedure before dismissing an employee:
Notify the employee in person (e.g., file a complaint with the employee and HR for documentation)
Pay the employee a severance payment of the days worked/not paid for in the last month or week, part of their Christmas bonus, and the appropriate amount of holidays/benefits depending on the type of contract the employee works under
Have employee sign the receipt of severance payment
Submit notice of termination to the IMSS (Mexico’s social security system)
An employee can resign by giving written notice and a reason behind their resignation.
Severance in Mexico
The type of severance packages employers must offer in Mexico are determined by the type of employment contract the employee worked under: indefinite, definite, or trial period.
Severance for indefinite contract employees
Severance pay is required for terminated employees, even if the cause is just. However, the amount of severance offered varies and is based on the employee's contract agreement. Independent contractors 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 salary of the employee’s daily aggregated wages 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 (aguinaldo)
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 6 months of wages for the first year and 20 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 (aguinaldo)
Trial Period Employee Severance
Finally, severance is also an option for trial period employees. For a voluntary resignation, employers again must pay all of the fringe pay, vacation, and Christmas bonus. Employees terminated with a cause are still entitled to their fringe benefits.
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 (aguinaldo)
Why companies partner with Via
Via makes hiring talent around the world and building your global team seamless by helping you onboard workers in as little as 2-3 business days. With our easy-to-use platform, Via helps you manage local HR processes for direct employment such as work visas & permits, employee data privacy compliance, benefits, global payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts provide 24-hour local support and ensure that your company remains compliant while expanding abroad. As your employer-of-record/entity abroad, Via assumes responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team.
