Mexican Labor Rates: A Comprehensive Guide
05.09.18If you’re reading this, you’re probably well aware that there are significant differences between labor costs in the US and Mexico. And it’s true: companies that move operations from the US to Mexico see the biggest savings in their labor costs.
But there’s much more to Mexican labor rates than a daily minimum wage of about $4.70. Let’s take a look at some of the things you should be aware of when moving your manufacturing operations to Mexico:
Salary & Benefits
Although as of December 2017, the Mexican labor rate mandated a daily minimum wage of 88.36 pesos, or just over $4.70 (depending on exchange rates), in the manufacturing sector, no one is working for that little. We currently see these average daily costs for different types of workers:
Basic operator: $15-16/day
Technician: $42/day
Engineer: $100/day
Those numbers include all the mandated benefits Mexican workers receive, which include:
- Vacation time (starting at 6 days/year)
- 7 paid national holidays (plus Change of Federal Power Day every six years, when a new president is sworn in)
- Christmas bonuses (equivalent to 15 days salary, paid in December every year)
The employer also makes contributions to various government agencies that include the Mexican Social Security Institute (IMSS), the national housing fund (INFONAVIT), the government payroll tax, and others. Just like in the US, Mexican labor laws can be difficult to navigate, which is why it’s important to have an experienced HR team, ideally through your shelter provider, to ensure that you stay in compliance.
Mexican Shift Work & Overtime
Unlike in the US, where hourly employees have to work 40 hours in a week before getting paid overtime, Mexican workers must work 48 hours in a week before receiving overtime. Mexican overtime rates are double the usual salary for the first nine additional hours and triple the usual salary after that.
Workers in Mexico also receive overtime for working more hours than mandated in their shift. There are three defined work shifts in Mexico:
- The day shift is 8 hours and can be scheduled between 6AM and 8PM
- The night shift is 7 hours and can be scheduled between 8PM and 6AM
- The mixed shift is 7.5 hours and overlaps the day and night shifts (with no more than 3.5 hours between 8PM and 6 AM)
Employers are also required to provide paid meal breaks (30 minutes each shift), so you’ll get about 45 effective working hours for every 48 hours paid. It’s not uncommon for companies to offer additional break time for workers as well (an extra 10-15 minutes to give people a chance to get some fresh air or eat an extra snack).
Mexican Labor Laws
Mexican labor law tends to be very protective of the employee. With an experienced HR team, you can be proactive and avoid issues with labor laws, instead of reacting to potential issues as they arise. It’s important to have a good understanding of Mexican labor laws before setting up operations and hiring employees so you can plan appropriately.
Mexican Worker Protections & Allowances
For example, in Mexico, expecting and new mothers are guaranteed more protections than the US. An expecting or new mother can take 84 days off (six weeks prior to delivery and six weeks after delivery) with full salary and benefits covered by IMSS, which means as an employer, you’ll need to hire temporary employees to handle the workload of new mothers. New mothers must also be given rest breaks during the nursing period (up to one hour a day for 6 months after delivery). New fathers receive 5 days paid after the birth or adoption of a child.
Training
According to Article 132 of the Federal Labor Law, employers are required to “provide workers with the training that is necessary to carry out their assigned tasks.” Of course, you can reduce training expenses by hiring experienced workers, but providing training increases retention and motivation.
Severance Packages
Mexico doesn’t recognize at-will employment, so anytime you let an employee go, it must be with just cause. The Federal Labor Law has clearly defined what constitutes a “just cause.” If you fire an employee for other reasons, that employee can file for reinstatement or compensation, and he or she can be awarded up to 90 days salary.
That said, most employers can avoid this payment by having proper documentation when you fire someone. This is again where an experienced HR team that can guide you through the process is indispensable.
Employment Contracts
There are a few different kinds of employment contracts you can offer in Mexico. Before you even start hiring, you need to clearly state what type of positions you need: full-time, part-time, seasonal, or temporary, for example. Not having the correct contract is a common mistake employers make.
The contract also serves to protect the employer: especially for technical or engineering positions, the employee may guarantee that he or she has certain skills or abilities for the position.