10 things employers need to know about Mexican labor and employment laws

Employment and labor laws in Mexico are extremely complex—many employers, especially those who aren't based in Mexico, struggle to navigate this maze of nuanced regulations.

Many of the laws that mandate employee rights in Mexico come straight from the Mexican Constitution, which establishes the Federal Labor Law (FLL) and the Social Security Law. Doing business in Mexico means complying with these and other labor and employment laws—or risking fines, fees, and legal action.

So before you sign employment agreements for any employees in Mexico, read this guide—below, you'll find the basics of what you need to know to stay compliant when hiring in Mexico.

1. In Mexico, there's a difference between employment laws and labor laws

In many countries, the terms "employment laws" and "labor laws" can be used interchangeably. Not the case in Mexico, where employment laws refer to legislation regarding the one-to-one relationship between employers and employees, while Mexico's labor laws are all about the relationship between employers and unions—and unions' right to equal participation in setting standards for working conditions.

2. At-will employment only exists in Mexico for employees who wish to terminate their own employment

This means employees can end an employment relationship at any time and for any reason, but employers cannot terminate Mexican workers without cause unless they pay the required severance packages, which can be substantial.

3. Any Mexican employee who leaves a job is entitled to severance payments—even if they resign

In many countries where severance pay is required for terminated employees, it isn't required if an employee resigns or is terminated for just cause. This is not the case in Mexico, where any employee who leaves their job for any reason is entitled to a severance package.

4. It's extremely difficult to involuntarily terminate employment for any reason in Mexico

There are limited grounds for dismissing an employee in Mexico, and it's up to the employer to prove their reasoning if they terminate an employee with cause. Terminated employees can appeal to the Mexican government, who may require their employer to reinstate them or pay additional severance. Collective bargaining agreements (CBAs) may place further restrictions on terminations, and employers are required to abide by these as well.

5. Misclassifying employees could cost you hundreds of thousands in government fines

Employees in Mexico must have a subordinated relationship with their employer, which means the employer has the authority to direct and supervise the employee's work and can determine the terms and conditions of employment.
Independent contractors, on the other hand, are individual service providers or self-employed persons who work for clients or customers without subordination—contractors have more control over their work and the terms and conditions of the services they provide.

Misclassifying workers in Mexico can come with steep penalties:

• Back pay and benefits
• Fines from the Mexican government (up to $222,000 in some cases)
• Severance pay
• Legal damages
• Criminal charges

6. You need to safeguard employees’ personal information

Since 2010, Mexico has had strict data privacy laws in effect. Job seekers and employees must give express consent to a company before it can handle or process their personal data. Individuals also have ARCO rights—the right to access, rectify, cancel, and object to the processing of their data, as well as to revoke consent.

By law, individuals must receive notice about the scope, terms, and conditions before their personal information is collected. If they believe their personal data has been mishandled, they can report it to Mexico's National Institute of Transparency, Access to Information, and Personal Data Protection (INAI), which can result in fines and other sanctions.

7. Non-disclosure agreements (NDAs) are legally binding in Mexico—with restrictions

As a general rule, Mexican courts have upheld NDAs as legally enforceable, as long as they meet a few requirements:

• They must comply with Mexican contract laws
• They must have mutual consent of the parties involved
• They must have a clear offer and acceptance
• They must have consideration (something of value exchanged, such as access to confidential information or the opportunity to engage in a business relationship)

8. Workers in Mexico have a constitutional right to unionize

The Mexican Constitution gives all workers in the country the right to form labor unions, bargain collectively, and strike. CBAs should be included in all employment contracts to ensure that employers abide by them—otherwise, they could face costly legal action.

9. Unions in Mexico can act in an employee's interest even without the cooperation of the employee

This means that employers should always abide by CBAs (especially when terminating an employee if the CBA includes termination guidelines), even if an employee wants to waive the CBA.

10. All employees in Mexico are entitled to profit sharing

All employees in Mexico are entitled to profit sharing. Under employment laws, companies are required to share 10% of their pre-tax profits with employees.

Frequently asked questions about Mexican labor laws

What types of work contracts are legal in Mexico?

In Mexico, short-term work contracts—especially for seasonal work—are more common than in many other places. There are three main types of employment contracts you're likely to encounter:

• Indefinite term contracts. These are the most common type of work contract for employees in Mexico, and don't end until one or both parties take action to end the work agreement.
• Fixed-term contracts. These contracts are only used when the nature of the work requires it, such as for a specific project or to fill in for another employee who is on extended leave.
• Seasonal contracts. These contracts are for work that only occurs during specific parts of the year, such as the holiday season, tourist season, or harvest.

In addition to work contracts, Mexican employers will have CBAs for many employees. These cover:

• The duration and nature of employment
• Working schedules
• Working conditions
• Rest days and holidays
• Salary amounts
• Initial training for new hires
• Creation and operation of an Employee/Employer Committee as required by law

What is the minimum wage in Mexico?

Mexico's minimum wage is 207.44 pesos per day.

Note that employees in Mexico are entitled to a mandatory Christmas bonus, so their yearly salary will be 13 times their monthly salary.

What are the overtime laws in Mexico?

Employees in Mexico can have up to six working days per week—all employees are entitled to one full day of rest per week. Employees may work no more than 48 hours per week, but many CBAs set lower limits, at 40 or 45 hours.

Mexican labor laws recognize three different work shifts:

• Day shift, which lasts eight hours between 6 AM and 8 PM
• Night shift, which lasts seven hours between 8 PM and 6 AM
• Swing or mixed shift, which lasts seven-and-a-half hours with at least three-and-a-half of those hours occurring during the night shift work schedule

For employees who work more than the maximum number of hours for their shift or workweek, overtime pay is required. Employees are entitled to double their usual pay for up to nine hours of overtime per week and triple their usual pay for any overtime over nine hours in a week. Overtime is not allowed for workers under 16, pregnant or nursing mothers, or anyone whose life would be endangered by working overtime.

What are the required benefits in Mexico?

Employers in Mexico are legally required to provide these entitlements to all their employees:

• Contributions to the Mexican Social Security Institute (Instituto Mexicano de Seguro Social or IMSS). Social security contributions cover healthcare, pension plans, employment insurance, work risk insurance, life insurance, disability pay, sick leave, maternity leave, paternity leave, childcare, and a social housing fund
• Profit sharing
• Severance pay. More on this further down.
• Paid vacation and a vacation bonus. The amount of vacation days an employee receives is based on their years of service to the company. Vacation bonuses must be equal to at least 25% of the employee's regular salary.
• Statutory holidays
• Weekly rest days
• 13th month salary, also known as a Christmas bonus

There are other employee benefits that are not required but are commonly offered in Mexico, such as food vouchers and productivity bonuses.

For more information on mandatory benefits in Mexico, read our complete guide.

How do I terminate employees in Mexico?

Terminating an employee in Mexico (with or without cause) is very difficult. All terminated employees, regardless of the reason and circumstances surrounding their termination, are entitled to severance pay. Severance packages can be substantial in Mexico.

There are four ways employment can be terminated in Mexico. Here's what to expect with each:

Voluntary resignation. If an employee chooses to leave their job, they are still entitled to severance including:

• Payment for all days worked but not yet paid
• Prorated Christmas bonus, calculated based on total days worked in the incomplete year
• All paid vacation days accrued
• Any other payments outlined in the employment contract, which can include bonuses, food vouchers, savings fund contributions, and company profit sharing

Termination during the probationary period. Probationary periods last at least 30 days but can last up to 180 days for highly skilled roles. Terminating an employee during the probation period does not guarantee legal immunity for employers; they may still need to prove the cause of the termination, and should carefully document their reason for not continuing employment past the probation period.

Termination with cause. The onus is on employers to prove the reason for termination. If they can't, the Mexican government may ask them to reinstate the terminated employee or pay more severance.

Valid reasons for termination with cause include:

• Misrepresentation of their qualifications for the job
• Dishonesty at work
• Threats or acts of violence at work
• Causing intentional damage to the employer's property
• Causing serious damage to the employer's property through negligence
• Compromising the safety of the workplace
• Committing immoral acts at work
• Revealing the employer's trade secrets or other confidential information
• Having more than three absences within a 30-day period without a reason or permission
• Insubordination
• Failure to follow workplace safety procedures
• Coming to work under the influence of alcohol or drugs
• Being sentenced to prison
• Bullying
• Sexual harassment

Employees who are terminated with cause are still entitled to severance, including:

• Payment for all days worked but not yet paid
• 12 working days' worth of salary for each year of employment
• Prorated Christmas bonus, calculated based on total days worked in the incomplete year
• All paid vacation days accrued
• Any other payments outlined in the employment contract, which can include bonuses, food vouchers, savings fund contributions, and company profit sharing

Termination without cause can be done but requires the highest severance payments. Employees who are terminated without cause are entitled to:

• Payment for all days worked but not yet paid
• A minimum of 3 months' salary
• Seniority premium of 12 working days of salary for each year of service past 15 years, capped at twice the average daily salary in the region
• Any expired wages for up to 12 months from the date of the notice of termination
• Prorated Christmas bonus, calculated based on total days worked in the incomplete year
• Proportional profit share, calculated based on total days worked in the incomplete year
• All paid vacation days accrued
• Any other payments outlined in the employment contract, which can include bonuses, food vouchers, savings fund contributions, and company profit sharing

No matter the reason for termination, employers must give notice in person whenever possible. If it's not possible, the employer can notify the employee through the Board of Conciliation and Arbitration (Junta de Conciliación y Arbitraje) or via certified mail.

For the brass tacks on Mexican termination requirements—including notice periods and wrongful dismissal claims—consult our guide.

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Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.