By Alexandra Perales, Benefits Specialist, LATAM – Internal HR, GoGlobal
Foreign direct investment (FDI) into Mexico has been skyrocketing in recent years, largely fueled by a surge in nearshoring activity. This trend has led to increased interest from international companies looking to hire a local workforce in Mexico. These savvy investors are drawn to the country’s convenient location, skilled labor and growing economic potential.
As interest in the Mexican labor market grows, local professionals have more workplace options to choose from – potentially leading to an emerging talent shortage. In this competitive environment, companies must be strategic in attracting and retaining top talent. Offering a compliant and comprehensive benefits package is a powerful tool to achieve this.
To support international companies eyeing Mexico for nearshoring and hiring, we’ve developed a comprehensive two-part blog series on employee benefits. In this first installment, we uncover the statutory benefits all employers in Mexico must provide to their workforce.
Mandatory social security benefits
The Mexican Social Security Institute (IMSS) administers the country’s social security programs under the Social Security Law (LSS) of 1997. These programs are funded by contributions from employers, employees and the government, based on salary levels to promote equity in the system. The social security system in Mexico covers several key areas:
- Occupational Accidents and Illnesses: Coverage for workplace injuries and occupational diseases, ensuring employees receive medical treatment and compensation.
- Old Age, Retirement and Survivor Pensions: Financial support for employees upon retirement or for their dependents in case of death.
- Disability Benefits: Compensation and medical care for employees who are unable to work due to a disability.
- Medical Benefits: Access to healthcare services, including preventive care, hospitalization, and medication.
- Maternity Benefits: Financial support and medical care for pregnant employees, including pre and postnatal care.
- Childcare Services: Access to childcare facilities and services to support working parents.
- Social Services: Programs designed to improve the quality of life, such as housing assistance and recreational services.
Employers must register their employees with the IMSS and make regular contributions so all eligible employees can receive these benefits.
Profit sharing
Profit sharing, known locally as Participación de los Trabajadores en las Utilidades (PTU), is a statutory benefit in Mexico. It requires employers to distribute 10% of their pre-tax profits among their employees.
To qualify, employees must have worked for the company for at least 60 days within the previous tax year. This benefit aims to reward employees for their contributions to the company’s success and provide an additional financial incentive.
Profit-sharing payments are typically made between April and May each year and are capped at three months’ salary. For employees with less than a year of service, the amount is prorated.
Christmas bonus
Aguinaldo, or Christmas bonus, is another statutory requirement in Mexico. All employees are entitled to a minimum of 15 days’ worth of their daily base salary as a bonus each year. This bonus must be paid by December 20th and provides employees with financial support during the holiday season.
The Christmas Bonus is a long-standing tradition in Mexico and a significant component of employee compensation. It helps employees and their family members cover end-of-year expenses and enjoy the festive season.
Paid time off
Paid time off is an essential statutory benefit in Mexico. Here are the minimum requirements:
- Vacation: After one year of service, employees are entitled to a minimum of 12 days of paid vacation. This amount increases with seniority. Additionally, a prima vacacional, or vacation bonus, must be provided, which is at least 25% of the employee’s daily wage for the vacation days taken.
- Sick Leave: Employees who are unable to work due to illness are entitled to paid sick leave, as covered by the IMSS.
- Maternity Leave: Female employees are entitled to 84 days of paid maternity leave, funded by the IMSS. This leave covers both pre and postnatal periods, allowing employees to focus on their health and the health of their newborns.
- Paternity Leave: Fathers are entitled to five days of paid paternity leave.
Up next: supplemental benefits in Mexico
Adhering to statutory benefits is not just a legal obligation for employers in Mexico. It’s an essential component of fostering a supportive and productive workforce. By providing these mandatory benefits, employees enjoy greater protection, motivation and satisfaction. This, in turn, contributes to the overall success of the business.
In our next blog post, we will explore supplemental benefits available in Mexico. Although these benefits are not mandated by law, they greatly enhance your company’s attractiveness to top talent. They can be a powerful tool for carving out a distinct advantage in the competitive job market.
Stay tuned for more insights on how to refine your benefits strategy in Mexico.
Learn more about regulations and hiring in Mexico here: Hire in Mexico | GoGlobal
Contact us today to discover how the GoGlobal Global Benefits Team can help you design benefits that fuel business expansion and hiring in Mexico.