Mexican Labor Law

Overview

Mexican labor law is governed primarily by the Federal Labor Law (Ley Federal del Trabajo - FLL) and is based on Article 123 of the Mexican Constitution. Unlike many countries, Mexico does not operate under "employment at-will" principles, providing strong protections for workers while establishing clear obligations for employers.

Key Principles:

• Strong job security protections
• Mandatory written employment contracts
• Comprehensive social security system
• Profit-sharing requirements
• Strict termination procedures

Working Hours and Overtime

Standard Working Week

The standard working week in Mexico is 48 hours, consisting of six 8-hour working days and one rest day (typically Sunday). However, in some employment sectors such as government service, banking, and much of the private sector, a 40-hour workweek has been established.

Working Hours by Shift Type

The Federal Labor Law establishes maximum working hours based on shift type:

• Day shift (6:00 AM - 8:00 PM): Maximum 8 hours
• Night shift (8:00 PM - 6:00 AM): Maximum 7 hours
• Mixed shift (combination of day/night): Maximum 7.5 hours

Overtime Regulations

Overtime is limited to 3 hours per day and cannot be performed on more than 3 consecutive days, with a maximum of 9 hours per week. Overtime compensation is:

• First 9 hours per week: 100% premium (double pay)
• Beyond 9 hours per week: 200% premium (triple pay)

Sunday Work Premium

Employees working on Sundays are entitled to a 25% premium on their standard salary.

Proposed Changes

The Mexican legislative body is currently considering reducing the maximum working hours per week to 40, aligning with other developed countries.

Employment Contracts

Contract Types

Mexican labor law recognizes three main types of employment contracts:

1. Indefinite-Term Contracts (Contratos por Tiempo Indeterminado)

• Most common type of employment contract
• Continue until terminated by mutual agreement or just cause
• Provide the highest level of job security
• Any contract lasting more than 3 months automatically becomes an indefinite contract by law

2. Fixed-Term Contracts (Contratos por Tiempo Determinado)

• Used only when justified by the nature of work
• Common for specific projects or temporary replacements (e.g., maternity leave coverage)
• Must have clear end dates and justification

3. Seasonal Contracts (Contratos de Temporada)

• For work limited to specific periods of the year
• Common in tourism, agriculture, and harvest-related industries
• Must clearly define the seasonal scope of work

Contract Requirements

All employment contracts must be in writing and include:

• Job duties and responsibilities
• Salary and payment schedule
• Working hours and conditions
• Termination procedures
• Benefits and entitlements

Failure to provide a written contract can result in serious penalties for employers.

Termination and Severance Pay

Termination Principles

Mexico does not operate within at-will employment. To terminate an employee, there must be just cause. The burden of proof lies on the employer to demonstrate justified reasons for termination.

Just Cause for Termination

Employers may terminate employees for just cause including:

• Dishonesty or lack of integrity
• Acts of violence or aggressive behavior
• Damage to company property
• Disclosure of trade secrets
• Repeated unauthorized absences
• Refusal to follow safety protocols
• Criminal acts against the company

Notice Requirements

There are no statutory minimum notice periods in Mexico; however, federal labor law states that the company must provide written notice to the employee within 30 days of knowing about the misconduct.

Severance Pay Calculations

Voluntary Resignation (Basic Settlement - "Finiquito")

Employees who resign voluntarily are entitled to:

• Payment for all worked hours
• Prorated vacation pay
• Vacation premium (25% bonus)
• Prorated Christmas bonus (aguinaldo)
• Seniority premium (if employed for 15+ years): 12 days of salary per year worked, capped at twice the minimum wage

Termination Without Just Cause

Employees terminated without just cause are entitled to severance payment equivalent to:

• 3 months of salary (constitutional indemnity)
• 20 days of salary per year worked (seniority compensation)
• Basic settlement (prorated vacation, Christmas bonus, etc.)
• Seniority premium (if applicable - 12 days per year for 15+ years service)

Termination With Just Cause

Even with just cause, employees typically receive:

• Payment for worked hours
• Basic settlement components
• Seniority premium (if 15+ years of service)

Employee Rights Upon Dismissal

Employees who have been wrongfully terminated can file a complaint for: (a) payment of statutory severance; or (b) reinstatement to the same position plus back wages.

Leave and Time Off

Annual Vacation Leave

As of January 1, 2023, Mexican employees are entitled to at least 12 days of vacation after completing one year of service (increased from the previous 6 days).

Vacation Accrual Schedule:

• Year 1: 12 days
• Year 2: 14 days
• Year 3: 16 days
• Year 4: 18 days
• Year 5: 20 days
• After Year 5: Additional 2 days every 5 years

Vacation Premium

Employees are entitled to a vacation bonus of 25% more than their standard pay rate during vacation time.

Maternity Leave

Pregnant employees are entitled to 12 weeks (84 days) of fully paid maternity leave: 6 weeks before and 6 weeks after childbirth.

Additional Maternity Benefits:

• During the nursing period of six months, new mothers are entitled to two additional 30-minute rest periods per day to feed their child
• Regular maternity leave can be extended if the employee is unable to return to work due to pregnancy or childbirth
• Payment is made by IMSS (Mexican Social Security Institute) at 100% of registered salary

Eligibility Requirements: To qualify for maternity leave and pay, an employee must have made contributions to IMSS for at least 30 weeks in the 12 months before the start of leave.

Paternity Leave

Male employees are entitled to 5 days of fully paid paternity leave for the birth or adoption of a child.

Proposed Changes: The Mexican parliament has introduced an amendment bill to increase paternity leave from 5 working days to 20 working days, with an additional 10 days in case of complications.

Adoption Leave

• Mothers: 6 weeks of fully paid leave starting from the day the child is placed in their care
• Fathers: 5 days of fully paid leave

Sick Leave

Sick leave is paid by IMSS at 60% of the regular salary, starting from the 4th day of absence and extending up to 52 weeks.

Requirements:

• Must obtain medical certificate from IMSS-approved doctor
• Regular employee must have 4 weeks of contributions to IMSS before the beginning of illness

Bereavement Leave

Mexican Federal Labor Law does not provide specific provisions for paid bereavement leave. Any such leave must be agreed upon with the employer or included in the employment contract.

Public Holidays

Mexico observes seven national public holidays annually, with some variations by region.

Salary, Taxes, and Social Contributions

Minimum Wage (2025)

The national minimum wage in Mexico is 278.80 MXN per day. The Northern Border Zone has a different minimum wage of 419.88 MXN per day.

Employee Tax Deductions

Income tax is deducted progressively at rates ranging from 1.92% to 35% based on monthly earnings, with the top band applying to anyone earning MXN$3,898,140 per year (approximately USD$191,226).

Additional Employee Contributions:

• Social Security: 1.025% of salary
• Pension Contributions: 1.75% of salary

Employer Contributions

Employers must contribute to the social security fund equivalent to 26% of an employee's salary, while a contribution equal to 5.15% must be made to the pension fund. An additional contribution equal to 5% of an employee's salary is made to the National Housing Fund.

Social Security Registration

All employees must be registered with and contribute to:

• IMSS (Mexican Institute of Social Security)
• INFONAVIT (National Workers Housing Fund Institute)
• Retirement Savings Programme
• INFONACOT (National Fund Institute for Workers' Consumption)

Employee Benefits and Rights

Mandatory Benefits

Christmas Bonus (Aguinaldo)

A Christmas bonus consisting of at least 15 days' salary must be paid each year before December 20th.

Profit Sharing (PTU)

Companies must distribute 10% of their annual taxable income among employees. 50% is distributed according to employees' salaries and 50% according to days worked in the year.

Eligibility: An employee must have worked for the business for at least 60 days during the preceding fiscal year.

Seniority Premium

For employees with 15+ years of service:

• 12 days of salary for every year worked, capped at twice the minimum wage
• Applies to voluntary resignation, termination with cause, and termination without cause

Health and Safety Requirements

Employers must create a Health and Safety Commission to oversee related activities and propose safety measures.

Recent Legislative Updates (2024-2025)

Chair Law (December 2024)

Published on December 18, 2024, this reform requires employers to provide seats or chairs with backrests to employees in sectors such as commerce, services, and other similar workplaces.

Digital Platform Workers (December 2024)

An amendment published on December 24, 2024, recognizes as employees those who provide services through digital platforms, ensuring them access to labor rights and social security.

Gender Equality Reforms (November 2024)

Published on November 15, 2024, these reforms advance gender equality, focusing on substantive equality, gender perspective, and equal pay, mandating the State to guarantee women's right to substantive equality.

Vacation Reform (2023)

New provisions doubled paid vacation days from a minimum of 6 days to 12 days after the first year of employment.

Minimum Wage Increases

In January 2024, the minimum wage was raised by 20%, tripling the minimum salary amount over the last five years.

Compliance and Best Practices

Documentation Requirements

• Maintain written employment contracts for all employees
• Keep detailed records of working hours and overtime
• Document any disciplinary actions or performance issues
• Ensure proper termination procedures with written notices

Payroll Compliance

The payroll cycle is semi-monthly, with employees generally paid on the 15th and last day of each month.

Legal Considerations

• Mexico's labor laws strongly favor employees
• Burden of proof lies with employers in termination disputes
• Non-compliance can result in significant financial penalties
• Regular legal review of employment practices is essential

Best Practices for Employers

1. Contract Review: Have all employment contracts reviewed by legal experts familiar with Mexican labor law
2. Documentation: Maintain comprehensive records of all employment-related decisions and actions
3. Training: Ensure management understands termination procedures and just cause requirements
4. Compliance Monitoring: Regularly review and update HR policies to reflect legislative changes
5. Professional Support: Consider working with local HR experts or legal counsel for complex matters

Conclusion

Mexican labor law provides comprehensive protections for employees while establishing clear obligations for employers. The legal framework continues to evolve, with recent reforms focusing on worker welfare, gender equality, and modernizing workplace practices. Employers operating in Mexico must stay informed of these changes and ensure strict compliance to avoid legal complications and maintain positive employee relations.

For businesses entering the Mexican market or reviewing their current practices, it's essential to work with qualified local legal and HR professionals to navigate the complexities of Mexican employment law effectively.