The United States and Mexico have a close relationship, and naturally Mexico is a convenient location for US companies to hire internationally. It's easy to collaborate with Mexican employees because of the similar time zones, and even the exchange rates are favorable. Currently, the US dollar is worth MX$20.29.
Furthermore, Mexico has what US tech companies are looking for: it has the largest information and communication technologies industry in Latin America, and over 20% of its university graduates from have engineering degrees.
As a foreign company, what do you need to know to hire employees in Mexico? In this article, we will provide an overview of Mexico employment laws to get you started.
Employment contracts and the employment relationship 🤝
The Mexican Constitution regulates employment law in Mexico. Section A of the Mexico Constitution regulates private employers and their employees, and Section B regulates government employers and their employees.
Mexican labor law, known as Ley Federal del Trabajo (FLL) regulates Section A of the Mexican Constitution. Under Mexican employment law, FLL stipulates that an employment relationship is one in which a worker is subordinate to their employer. Workers who are employees perform professional activities in exchange for compensation.
All employers must provide individual employment agreements to their workers, and those agreements must be in writing, unless otherwise stipulated by a collective bargaining agreement (CBA). If there is no written agreement, the employee is still entitled to employee rights, and the liability falls on the employer if the employer fails to provide an employment contract.
All employment contracts must include details such as:
- the employer and employee's personal information
- the location of the company
- the duration of employment and whether there will be a probationary period
- the employee's duties
- employee's schedule
- employee's salary
- employee benefits
- training or instructional offerings
- Other mutually agreed upon terms
- the employee's beneficiaries
All employment agreements are assumed to be of an indefinite duration unless it is established that the employee is a temporary employee. Fixed-term contracts may apply if the work is seasonal, if it's for a specific project, or if it's part of a trial period. It can also be applied for mine workers, residential doctors, field employees, ship employees, and Mexican workers performing work abroad.
Categories of workers
The employment contract you offer a worker will depend on the type of work your company requires. Here are a few categories of Mexican workers:
Unionized and non-unionized employees 👷♀️
This category is what you might consider your typical employee. Employees who are part of a legally incorporated trade union, or are entitled to CBAs, are considered unionized employees.
A trust employee is an employee who provides some kind of direction, supervision, inspection, or vigilance over a company's activities. Sometimes they are in direct communication with the employer and provide them with personal services.
Indefinite term, definite term, and seasonal employees 👩🌾
These employees are identified based on the term of their employment relationship. Unionized and non-unionized workers can be further classified using these categories as well.
Self-employed workers 👩💻
These workers are not considered employees, but rather independent contractors who provide services to an employer on a project-by-project basis.
Minimum benefits and employment standards in employment relationships
Employees are entitled to certain benefits and standards under Mexican labor law and federal law. Here are some of those entitlements.
Every Mexican employee has a right to unionize, or have unions represent them in CBAs. Mexico reformed its labor law in May 2019 in an effort to protect union workers and their rights, and that has changed much of the landscape of labor in Mexico.
Some of the changes included in the amendment are the right to secret ballots during union elections, transparent negotiations between employers and union representatives, and an independent labor adjustment court.
Unions operate as their own legal entities with access to their own property. They also have the right to open bank accounts for employees and provide employee representation, should an employee file a claim against an employer.
Collective bargaining agreements 📑
The FLL has implemented a new law as a result of the US-Canada-Mexico Agreement (USMCA), and this has changed the procedure for CBAs. Now, in order for a Mexican union to establish a CBA, the union must obtain a representativeness certificate, one which certifies that they represent a group of employees. These certificates can be obtained through a voting process where the employees elect an employee representative, and have their election validated by the Federal Conciliation and Labour Registration Centre.
Next, the union negotiates the terms of the collective bargaining agreement with the employer representative. Afterwards, there is a consultation process where the employees within the union vote individually on the contents of the CBA in a private voting process.
If the majority votes for the CBA, then the employer representative and union put the CBA in writing and file it with the the Registration Centre. The parties must file the CBA along with the representativeness certificate. Finally, the relevant authority authorizes the CBA.
Outsourced personnel and profit-sharing 📊
Outsourcing occurs when a business hires personnel outside of the company to produce goods or perform work that is normally performed in the company's facility. Often a company will outsource personnel to cut down on company costs.
An amendment to the FLL was passed in 2021 that prohibits employee outsourcing, except in the case of specialist services or specialist projects.
Minimum wage 💵
Minimum wages in Mexico can vary by region. The general minimum wage is currently $172.87 pesos per work day, a 23% rise from 2021, when the minimum wage was $141.70. Along a stretch of territory bordering the United States, known as the "Northern Border Zone," the wages are much higher. Currently the minimum wage in this zone is $260.34 pesos per work day, which is also a 23% increase from 2021's rate.
Employees may not work more than 48 hours in a week, and no more than 42 hours of night work in a week, without receiving overtime pay. Working hours are limited to eight hours a day, and seven hours for night work. Furthermore, one full rest day is required for every six days that an employee works.
Overtime is acceptable under Mexican law, as long as it does not occur more than three times per week, or last for more than three hours per day. For the first nine hours of overtime, an employee receives their regular wages, plus 100% of their hourly wages for every hour of overtime worked. If an employee works more than nine hours of overtime, the additional hours are paid at their normal hourly rate, with an additional payment of 200% of their normal wages.
Protection of personal data 🔐
Federal Protection of Personal Data in Possession of Private Parties is the governing body that regulates treatment of a citizen's private data. In the employment relationship, the consent is required for an employer to collect data from their employees. Employers must inform employees of any personal data collected, and should do so in a privacy notice. They must also ensure that the data is secure with the appropriate safety measures.
Federal law and FLL prohibit any type of discrimination against employees based on:
- ethnic origin or nationality
- health condition
- sexual orientation
- social status
- marital status
- immigration or migratory status
Although employment law does not require an employer to pay an employee compensation for discriminating against them, the law does enforce penalties against employers who discriminate against their employees. If an employer discriminates against an employee, they may face fines of 250 to 5,000 times the daily Updated Metric Unit (UMA), which is an economic reference point used to calculate payments or penalties owed to the government.
Termination agreements and wrongful termination
Unless a collective bargaining agreement is established, a Mexican employer is not required to give notice to the government that they intend to dismiss an employee. If there is a CBA in place that requires government notice, the employer must give the relevant court five working days of notice before the employment agreement is terminated.
Although employers do not have to provide notice of dismissal to the government, necessarily, they must give notice of dismissal to their employees. This notice should include the reason for the dismissal, and provide dates and times of the employee's misconduct. Notice can be given at the time of the employment contract termination.
Reasonable causes for an employee's dismissal include:
- sexual harassment
- four unexcused absences in a 30-day period
- misleading the employer about qualifications
- alcoholism at work
- breach of confidence about the company's private information or intellectual property
- refusing to comply with safety procedures
If there is no just cause for dismissal, the employee can agree to leave with mandatory benefits or compensation. If the employer does not offer benefits or compensation as part of a termination agreement, the employee can sue the employer for wrongful termination. If the employee wins their case, they may be entitled to statutory severance pay, statutory benefits, and any backpay they are owed. In some cases, they may even be able to keep their job at the company.
Labor and employment disputes 👩⚖️
Federal and local labor courts resolve employment disputes. Before an employee files a claim, they must attempt to resolve the issue with their employer, and are given a 45-day period to do so. If they do not reach a resolution, the Federal Conciliation Centre or the local conciliation centre will issue a certificate that corroborates that no resolution was reached.
If an employee claims their employer discriminated against them, or if the employer terminated a contract with a pregnant employee, the parties are not required to undergo the 45-day reconciliation procedure. This is also true in disputes related to the appointment of beneficiaries, collective bargaining claims, or union statutes.
Teleworking is considered paid, subordinate work performed at home or outside the employer's facilities. In 2021, an amendment was made to the FLL that regulated the ways employees work from home. The employer and employee must agree to a work-from-home arrangement, and it is only feasible if more than 40% of the employee's work can be done outside of the company's facility, and if their privacy and data can be protected.
Should the employer decide to change an employee's work modality from teleworking to in-office, the employee must agree to return to the office. Teleworking must be included in a CBA or in the company's employment regulations.
Holiday entitlement 🎉
The FLL allows seven days of rest per year for employees. Employees are also entitled to annual leave. The amount of leave varies depending on the employee's length of service. Employees are entitled to:
- Six days' vacation after one year of employment.
- Eight days' vacation after two years of employment.
- 10 days' vacation after three years of employment.
- 12 days' vacation after four years of employment.
After the employee's fourth year of employment, their annual vacation entitlement increases by two days, and increases again by two days every five years thereafter.
Medical leave 🤕
For employees to be entitled to paid time off for an illness or injury, their ailment must be certified by the Mexican Social Security Institute (IMSS). The employee can take 52 weeks of medical leave before qualifying for total or partial permanent disability. The employee may alternatively qualify for disability for non-occupational illness/injury status.
Staying compliant when hiring abroad ✅
Staying on top of employment laws can be challenging, especially when compliance varies from country to country, and the laws themselves are complex.
In Mexico in particular, amendments such as the US-Canada-Mexico Agreement can change the labor landscape, and it's important to know how your company's hiring process will be affected. Partnering with a company that specializes in international compliance can prevent oversteps in employment regulation that can lead to legal trouble and costly fines.
How Pilot Can Help 🙋♀️
Pilot specializes in payroll, benefits, and compliance for remote teams. With Pilot, we can assist your company with everything you need to hire abroad. We can help your company with administering payroll, classifying workers, and questions about securing work permits.
Your employees will love our payroll system: our system covers over 240 countries around the world, and unlike other payments services, we don't mark up exchange rates. We don't require that contractors use an e-wallet to access their funds, either. With Pilot, funds go straight to your workers' bank accounts.
Interested in learning more about Pilot? Schedule a demo with one of our experts.
⚖️ Legal Disclaimer: The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.