Things you Need to Know About Labor Laws in Mexico

Mexico has been one of the most competitive countries for doing business.
Things you Need to Know About Labor Laws in Mexico

In the last few years, Mexico has been one of the most competitive countries for doing business, giving greater opportunities for investments and industry growth. But which are the advantages of starting operations in Mexico?

Advantages of Settling your Company in Mexico

One of the main benefits of settling your business in Mexico is related to its trade policies. This means that the country has a total of 12 free trade agreements (FTAs), networking with 46 countries from all around the world. In this sense, companies facilitate their trading process, which at the same time rises their competitiveness in the global market.

Also, Mexico is considered as an emerging market with a stable economy. For this reason, expanding operations in Mexico can boost your business growth, increase your brand presence, build better partnerships, and provide greater stability for potential investors.

In terms of currency, the Mexican Peso is cheaper compared to the U.S. dollar or the euro, which reduces the costs for equipment, manufacturing, construction, real state, and practically any other purchase. In Mexico, it is proved that production costs are 22.5% lower in comparison with costs in the USA.

However, prior to settling your business, you must take into account the next essential labor laws in Mexico.

90% of the employees should be Mexican

According to the Mexican Federal Labor Law, at least 90% of the workforce hired by a company must be Mexican nationals, and 10% should be foreign employees. However, there’s an exemption for managers and general directors, which are not included for the maximum percentage accepted of foreign workers.

In the case of foreign employees, they must obtain the required permissions from the National Institute of Migration in order to work in the country.

Minimum Rights

Employees are guaranteed with minimum employment rights such as:

  • Minimum wage.
  • Six days of vacation after the first year of working with the company.
  • Vacation bonus.
  • Christmas bonus with a sum equivalent to 15 days of salary.
  • Maximum of 48 working hours per week.
  • Minimum a rest day in a week.
  • Salary deductions.

Written Contracts

When it comes to contracts, the Mexican Federal Labor Law establishes that it must have to be in writing and employees can request it at any moment. The contract of employment must specify the parties involved, the working hours, the term of employment, services that will be provided by the employee, information about employee’s salary, training process, holidays, and termination clauses.

Payment of Contributions

Employers and employees must pay on time all regulatory contributions to the Mexican Social Security Institute (IMSS), the Retirement Savings System (SAR), and the National Institute for the Development of Living Quarters for Workers (INFONAVIT); which are calculated from the employees’ monthly salary payment.

How to hire in Mexico?

Certainly, doing business in Mexico can be a complicated step if there’s a lack of experience in its legal system and labor legislation. For this reason, it is necessary to have a partner that perfectly comprehends the process of hiring and contributes to a labor cost reduction for the business. We’re talking about PEO services.

Advantages of using PEO for labor cost reduction

A company can hire foreign talent in accordance with the specific labor and government compliances in Mexico through PEO services. Additionally, businesses leave behind all the challenges of opening a legal entity, which in a way reduces labor costs. As Mexico is an emerging market, you must consider the overall business opportunities that this country can provide to your company.

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