Comparison of Skilled Labor Costs in Mexico vs. the U.S.

Compared to the U.S., the labor rates in Mexico allow manufacturers to stay competitive and save on costs. Though, when comparing labor costs, it’s not only about salaries. It’s necessary to consider the benefits and be knowledgeable about labor law/compliance and also, compensation expectations in Mexico as well. All of these factors play an equal role when calculating the true cost of skilled labor when manufacturing in Mexico versus operating in the U.S.

Salary Breakdown in Mexico

For many industrial roles, foreign manufacturers can expect to pay labor rates in Mexico equaling approximately $7-$8 USD per hour for advanced-skill workers. This salary accounts for Mexico’s 48-hour work week compared to the typical 40-hour work week in the U.S. However, it’s important to pay attention to the compensation language since many companies don’t include a fully burdened total (which includes benefits). Whereas, with a shelter company, the pricing for salary plus benefits is provided upfront so there are no surprise costs.

Expected Benefits and Days Off

Like in the U.S., employee benefits are one of the biggest factors when recruiting and retaining qualified workers. Traditional benefits in the U.S. include health insurance, retirement accounts, and paid time off. Though these are also part of compensation in Mexico, there are additional mandatory benefits designated by the government as part of the base pay. These include:

• 12 days of paid vacation (which increases by two days per year of seniority)
• 15 days of Christmas bonuses
• 7 paid holidays
• 25% vacation premium
• Social security, housing credit, and retirement pension
• 84 days of maternity leave
• 5 days of paternity leave

When manufacturing in Mexico, benefits make a big difference in addition to compensation. It’s essential to know what’s required, as well as what’s expected in terms of being competitive.

Additional Benefits Offered by Manufacturers in Mexico

In addition to Mexico’s mandatory benefits, additional benefits that are typically offered by manufacturing companies or recommended through the shelter model include:

• Additional vacation days and vacation premium percentage
• Additional Christmas bonus days, as well as paid days off for birthdays, Christmas Eve, and Good Friday
• Civil marriage and family death paid days off
• Medical insurance
• Weekly food coupons
• Punctuality and attendance coupons
• Savings fund
• Life insurance
• Cafeteria subsidy
• Transportation services

Because of the differences between labor rates in Mexico vs. the U.S., understanding the recruiting process is essential. It requires thorough background checks, writing and implementing contracts, navigating compliance, and evaluating the performance of employees. Furthermore, a shelter can evaluate each company’s unique needs and bundle and create a compensation package that is competitive as well as within budget.

Working with a Shelter Saves Costs

For U.S. and other foreign companies that only have one HR representative to handle all of these areas, it’s easier for costly mistakes to occur. This includes potential severance rule penalties. Permanent-status workers in Mexico are entitled to 90 days’ worth of wages equal to their most recent pay rate. They also receive 12 days of pay (at their most recent pay rate or double the federal minimum wage, whichever is less) for each year of service worked.

There is also a 20-day severance entitlement and other caveats to be aware of when terminating employees in Mexico. Having the experience and expertise of a shelter company minimizes compliance risk and subsequent expenses.

The cost of industrial labor in the U.S. continues to rise while the availability of manufacturing employees declines. Meanwhile, Mexico is a cost-effective strategy with a strong workforce in place. However, due to the high competitiveness, foreign operators should be prepared to optimize their compensation packages to save costs on hiring and retention.

In general, labor law in Mexico is a dedicated matter where you will need a fully experienced team. HR is one of the many service offerings included as part of our comprehensive shelter model.

Learn how we can help you reach your manufacturing goals today.