Accountancy in Mexico

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Social security law

Social Security guarantees employees and workers medical care and the social services necessary for the welfare of the individuals and their families.

Social security contributions are mandatory for all individuals working for an employer and are based on total wages, excluding overtime and certain bonuses, with a maximum base of 10 times the minimum wage, and are due by the 17th day of the following month.

Minimum wage for a full-time worker  (US$/month) in Mexico is $92.27.

Worker’s housing fund law

The Workers’ Housing Fund Law (INFONAVIT) requires a contribution from the employer to provide workers with loans to build or improve their homes. The contribution is equivalent to 5% of total compensation to employees with a maximum base of 10 times the minimum wage, and is due by the 17th day of the month following each two-month period.

Federal labor law

All labor and working relations are regulated by this law except for those rendering professional services. These may also fall into the category of a labor relationship and, therefore, be subject to the Federal Labor Law, given various circumstances such as subordination, dependence of one individual on another, or the rendering of services at the address of the beneficiary. The spirit of the law is to provide protection to employees. The law explains the basis for numerous statutes of limitation and prohibitions.

Work days and vacation

For every six days of work, employees are entitled to a day of rest with full pay. In most manufacturing entities, a 44 or 48 hour work week is normal. Workers are entitled to six days of vacation after one year of work and two additional days for each subsequent year, up to four years. After five years, two vacation days are added for each five years worked. Vacation time must be paid in full, plus a vacation bonus of 25% of regular salary.

National holidays

The following holidays are obligatory:

  • January 1st, New Year’s Day
  • First Monday of February, Constitution Day
  • Third Monday of March, Juarez’s Birthday
  • May 1st, Labor Day
  • September 16th, Independence Day
  • Third Monday of November, Revolution Day
  • December 25th, Christmas Day
  • December 1st (once every six years), Inauguration Day.

Year end bonus

Employees and workers are entitled to an annual year-end (Christmas) bonus, payable prior to December 20, which must equal at least 15 days of salary. If a person ceases to work before the said date, that person must be paid the prorated amount earned up to the time of separation.

Seniority premium

This premium consists of twelve days of salary for each work year, with a maximum base of two times the daily minimum wage, and is granted as follows:

  • When separation is voluntary and the person has worked 15 years or more;
  • In case of death, regardless of the person’s seniority;
  • In the case of both justified and unjustified dismissal.

Severance payments

  • If an employment contract is rescinded for reasons imputable to the employer, the employee must be compensated with an amount equal to three months’ salary and twenty days salary for each year of service.
  • The employer is permitted to dismiss an employee without compensation, when there is a justifiable cause.
  • Justifiable causes include acts such as insubordination, continued absences, or drunkenness. Employees who leave voluntarily cannot demand severance pay.

Employees’ profit sharing

In Mexico, employees are entitled to share in company profits. At present, this is 10% of the employer’s annual profit as determined in accordance with income tax law, and should be paid by May 31st of the following year.

Prior year losses are not deductible for computing the profit sharing base.

Cost of mandatory benefits

Annual wages represent at least 12.55 times the monthly nominal salary to account for the Christmas bonus and the vacation bonus, plus 25% of social benefits as follows (approximate percentages): • 15% Social Security

  • 5% Housing Fund Contribution
  • 2% Retirement Fund Contribution
  • 3% State Payroll Tax

The social security dues may vary depending on the level of salary. The  state payroll tax also changes from state  to state.


Latest version updated 25th October 2017

Country Breakdown

127.5

Million

Population

$

Mexican Peso

Currency

$ 8200

GDP

1.964

Million

km2