What you need to know before hiring in Mexico: A guide to terminations

Published

May 11, 2023

Author

When you make a global hire, you probably aren't thinking about letting them go. But if you hire employees in Mexico, you'll eventually need to part ways with them—which means you need to know the basics about terminations under Mexican labor laws.

Employees in Mexico have strong protections against dismissal without cause—and even if they resign, they're entitled to severance pay and other benefits. Parting ways with an employee without fulfilling the requirements of the law can land your company in legal trouble, facing even steeper financial penalties.

So before you make your first Mexican hire, read this guide to learn what you need to know about terminating employees in Mexico—and how hiring through an Employer of Record (EOR) can help you stay compliant with local laws no matter where you hire.

6 essential things to know before hiring in Mexico

At-will employment only exists in Mexico for employees who wish to terminate their own employment. Employers cannot terminate Mexican workers without cause unless they pay severance packages, which can be extremely substantial.
All employees in Mexico are entitled to severance payments when they leave a job, regardless of whether they resigned or were terminated, with or without cause.
There are limited grounds for dismissal in Mexico, and the onus is on the employer to provide proof if they choose to terminate an employee with just cause. If a terminated employee appeals to the government, you could be ordered to reinstate them or pay additional severance.
Collective bargaining agreements (CBAs) may place additional restrictions on terminations, and employers must follow these.
Unions in Mexico can act in an employee's interest even without the cooperation of the employee, so employers should abide by CBA termination guidelines even if the employee wants to waive them.
When terminating an employee, employers must give them notice in person whenever possible. If it's not possible, they can notify the employee through the Works Council (Junta de Conciliación y Arbitraje) or via certified mail.

Termination rules in Mexico: What are acceptable grounds for firing an employee?

In Mexico, at-will employment only exists for employees who wish to leave their jobs, meaning they can do so at any time and for any reason. Involuntary termination initiated by the employer is only allowed with cause. Regardless of the reason for termination (voluntary or involuntary, with or without cause), employees are entitled to severance payments.

Here are the different types of termination in Mexico, and what to expect with each:

Termination during the probationary period. In Mexico, there's a minimum of 30 days probation period for new hires, up to 180 days for management or specialized roles. 90 days is a standard probation period, but the length of probation should be set out in the employment contract. The probation period is meant to determine whether the new hire has the necessary skills and experience to successfully perform the job, but terminating an employee during their probation period still requires cause and does not guarantee legal immunity for employers. You'll still need to carefully document the reason for terminating the employee, and be prepared to prove it in court if it's challenged.
Termination for cause. If an employee is terminated for cause, they are still entitled to severance payments. If they challenge their dismissal, the onus is on their employer to prove that it was justified.
Termination without cause. Employees who are terminated without cause are entitled to extremely substantial severance payouts. They can also challenge their dismissal and ask for reinstatement; if their employer refuses to reinstate them, they're entitled to additional payments.

Different countries have different termination requirements, and Mexico is no exception. It's on employers to keep their global hiring compliant with Mexican labor laws and other local regulations.

What are the mandatory notice periods and termination pay for Mexican employees?

In Mexico, labor and employment standards are set by the Federal Labor Law or FLL. This includes rules for the termination of the employment relationship.

While Mexico's federal labor law generally favors employees, employers aren't required to give any advance notice of termination. They are, however, required to pay severance, regardless of the reason or cause of termination.

Severance amounts can be very substantial, especially if employees are found to have been terminated without cause. Here are the mandated severance amounts for different types of terminations:

Severance amount

Voluntary resignation

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 with cause

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

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

The easiest way to comply with Mexican termination requirements

If you employ a global workforce, keeping track of termination requirements gets complicated. Without any assistance, employers need to master conflicting just-cause considerations, probationary and notice periods, and severance pay laws that vary both within and among countries.

An alternative is to hire through an EOR, which can monitor termination requirements for you.

Hire and pay your global team in one single system

See Rippling

Frequently asked questions about terminating employees in Mexico

Do you need a reason to terminate an employee in Mexico?

Yes, you do need a reason to terminate an employee in Mexico.

While you can technically involuntarily dismiss an employee as long as you pay the required severance, they can challenge their dismissal and ask the Mexican government for reinstatement. If you refuse to reinstate them, they'll be entitled to additional payments.

In order to involuntarily terminate an employee in Mexico, you need just cause—and the employer carries the burden of proof in any dispute over the cause of an employee's termination.

What is considered just cause for terminating an employee in Mexico?

In Mexico, an employee can be terminated with cause, meaning they've committed actions that constitute serious misconduct. Under Mexican labor laws, serious misconduct can 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

If an employee commits any of the above acts, their employer likely has a case for terminating them, but they'll have to be able to prove it. That's why all disciplinary procedures and instances of misconduct should be carefully documented.

In addition, if the employee has worked 20 years or longer for the same employer, they can only be terminated with cause if their behavior is deemed to be egregious or recurrent.

What qualifies as wrongful dismissal in Mexico?

In Mexico, wrongful termination is any time an employer dismisses an employee without following the correct laws, regulations, and procedures. That can mean an employer:

Fires an employee with cause but doesn't pay them the proper severance.
Claims they're firing an employee for cause but the reason is illegitimate or they don't have proper evidence to prove it.
Fires an employee without cause.

Employees who believe they've been wrongfully terminated can file a complaint with the Conciliation and Arbitration Board within 60 days. If their employer fails to meet the burden of proof that there was cause for the employee's termination, they will be entitled to:

Reinstatement to their former position plus back wages, or
Their full severance package as required for termination without cause

If they seek reinstatement and their former employer refuses, they are entitled to their full severance package, plus an extra 20 days' salary per year of employment.

What is always required when an employer terminates an employee in Mexico?

When you terminate a Mexican employee, you must provide them with written notice, given in person, whenever possible. If it isn't possible to deliver it in person, it can be sent through the Labor Board or via certified mail, but note that if, for any reason, it isn't delivered, the termination will be deemed without cause.

Employers must also provide all pay and benefits earned up to the date of termination, and any severance payment that is due.

What is the law for dismissing a contractor in Mexico?

The termination process for independent contractors can vary. There should be a procedure outlined in their contract—typically, either party should be able to end the contract at any time, as long as they follow any notice periods or other requirements included in the contract.

If an employee is found to have been misclassified as an independent contractor, they may be able to challenge their termination for reinstatement or severance pay, as well as other benefits they should have received during their employment.

What are layoffs in Mexico?

Layoffs (or collective redundancies) are only allowed in Mexico if the company closes or must reduce jobs due to:

Acts of God
The employer's disability or death (in cases of an individual employer)
The business becoming non-profitable
Bankruptcy

Even in one of these cases, the employer must obtain approval from the Labor Board before instituting any layoffs. Laid-off employees are still entitled to severance packages.

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Global termination requirements can be a tangled web, but Rippling handles all of them, right out of the box—and so much more.

If you’re a foreign company hiring employees and contractors overseas, then Rippling will help you manage your entire employee lifecycle—from onboarding to offboarding your workers. See Rippling today.

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.

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