Mexico labor laws: A comprehensive overview

If you’re hiring employees in Mexico (or any other country, really), you’ll need a thorough understanding of the country’s labor laws. Not only will this help you make appealing offers to top talent, but you’ll also avoid any issues with Mexican authorities. This is especially important because labor laws in Mexico are heavily regulated, and there are more nuances and provisions for Mexican employees than for those in the United States, for example.

One example is that Mexican employees are entitled to a mandatory profit share of 10% of the company's before-tax profits, and can be fired only for a restricted number of valid reasons. Plus, they’re entitled to severance compensation if fired without cause.

To boot, the law considers all work contracts in Mexico indefinite (entitling workers to benefits) unless a contract specifies otherwise. Employers who want to set a specific timeline for a job contract must do so in writing before the job starts. If an employee begins working before a contract is signed, the employee's tenure may be considered indefinite.

Despite how complex they may seem, these laws are not meant to be unfriendly to employers. With adequate information and guidance, you can hire employees in Mexico while remaining compliant with regulations. 

This blog post will go over everything you need to know about Mexican labor laws—from salaries to leaves to compliance.

Let's start with a quick look at the evolution of labor and employment laws in Mexico. 

History of labor and employment laws in Mexico

Employee rights have long been a priority for the Mexican government. The country was the first in history to recognize and make provisions for labor rights in its constitution.

• Under Article 123 of the 1917 Constitution, workers had the freedom to form labor unions, bargain collectively, and strike. The constitution also established women's and children's rights, the eight-hour workday, and a minimum wage.
• The rights stated in the 1917 Constitution remained mere promises until 1931, when the government adopted the Ley Federal de Trabajo, or Federal Labor Law (FLL). The LFT founded the Juntas de Conciliación y Arbitraje (Boards of Conciliation and Arbitration), which comprised representatives from the government, employers, and labor organizations.
• The Federal Labor Law of 1970 eventually replaced the Labor Law of 1931 and further improved working conditions for employees. The law included new provisions relating to occupational hazards not covered in 1931. There were also laws pertaining to specific occupations, such as those in the airline and maritime industries. Generally, the 1970 bill expanded the scope of employee well-being regulated by the law—covering issues like overtime, Sunday work, housing, salaries and bonuses, vacation, and profit-sharing.

• In 1980, amid economic and political tension, the Federal Labor Law was updated again. This time, it primarily focused on allowing employers broader hiring options outside of labor union relationships.
• More reforms followed in 2012, with new telecommuting, outsourcing, and contractual employment regulations. The 2012 amendment also covered new provisions of employee rights for Mexicans working abroad and detailed definitions of and sanctions for sexual harassment in the workplace.
• In 2017, a new Constitutional amendment established that judicial courts would handle conflict resolution between employees and employers. The transfer of jurisdiction only took effect after another significant modification of the FLL in 2019, which implemented new procedural rules.
• The 2019 amendment also focused on union democracy, providing unionized employees the right to vote to choose their union leaders. It also guaranteed their rights to know about and approve their collective bargaining agreements.
• In 2021, the Mexican government approved legislation prohibiting firms from outsourcing or subcontracting employment. This was an effort to encourage direct hiring and combat abusive practices in outsourcing. The amendment also contained new guidelines for determining which work-from-home arrangements qualify as law-backed teleworking.
• Effective January 2022, the Mexican National Minimum Wage Commission increased Mexico's general minimum wage to $172.87 Mexican pesos (or 8.45 USD) per day for the country and $260.34 Mexican pesos (or 12.77 USD) per day in the Free Zone of the North Border. That’s a 22% increase from the 2021 Mexican minimum wage.

Difference between labor and employment laws

Before we unpack the nitty-gritty of Mexico’s labor and employment laws, it’s important to mention that they are two distinct legislations with different scopes.

Employment laws in Mexico cover elements of a one-to-one relationship between employee and employer. These laws govern employment contracts, including provisions for the standards of:

• National minimum wage. 
• Maternity/paternity leave.
• Overtime pay.
• Paid leaves. 
• Working hours.
• Social Security rights (such as the establishment of a housing fund for workers).
• Right to unionize, to strike and lockout, and to collectively bargain.
• Christmas bonus.
• Mandatory training.
• Workplace safety. 
• Rights to profit-sharing.
• Diversity, inclusion, and equality, among other things.

Labor laws, on the other hand, extend these standards to worker unions, preserving their rights to equal participation in setting their work conditions. 

Labor and employment laws exist to define and safeguard employees' and workers' essential statuses, rights, and privileges. They are critical in ensuring that firms adhere to a specific standard and that workers get fair, humane working conditions. 

The Mexican constitution establishes labor and employment laws in Mexico, including the Federal Labor Law (FLL) and the Social Security Law. The FLL defines the criteria that qualify working/labor relationships, and the Social Security Law covers the various benefits available to employees in a labor relationship.

Now let’s get into all the details.

Employment contracts in Mexico

There is no such thing as "employment at will" in Mexico. At-will employment means that an employer can fire an employee for any reason, with or without cause, as long as the reason isn't illegal.

In Mexico, every employer must have a written agreement with each employee that clearly states the conditions of the agreement.

Generally, employment contracts in Mexico must contain:

• Name, nationality, age, sex, civil status, tax ID number, and address of the employee and the employer.
• Nature and duration of employment, as well as training/probationary periods.
• Job description.
• The place or places where the employee will work.
• The work schedule.
• Salary amount and fringe benefits.
• Date of salary payment.
• Amount of rest and vacation days and any other conditions agreed to by the employee and the employer.

When it comes to employment agreements with labor unions, both parties must enter a written Collective Bargaining Agreement (CBA). The CBA should include:

• Names and addresses of the parties executing the agreement.
• Addresses of the facilities where the CBA will be applicable.
• Nature and duration of employment.
• Work schedules.
• Rest days and holidays.
• Salary amounts.
• Initial training for new hires.
• Integration and operation of the Employee/Employer Committees as established by law.

An employer must have a good reason (as defined by the FLL) to terminate an employment relationship. If not, the employer must compensate the unjustly terminated employee according to the FLL stipulation for severance payments. More details are in the sections below.

Still, in cases where an employment relationship exists without a written agreement, the employee’s constitutional and statutory rights are not waived or affected by this omission.

Types of contracts under employment law in Mexico

Employers typically use one of three forms of contracts that are permissible under Mexican labor law:

1. Indefinite contracts. Indefinite-period contracts are the most common in Mexico, and they only expire when both parties agree, or one can act independently. For example, an employer can legally terminate an indefinite agreement if an employee resigns or is fired for misconduct.
2. Definite contracts. Typically, employers only use definite contracts when the nature of the job requires it, such as for a specific project or to temporarily replace another employee who is absent for an extended period.
3. Seasonal contracts. Seasonal contracts cover fixed, limited work that occurs only at a specified period of the year, such as a tourist season, holiday events, or harvest.

Minimum working conditions in Mexico

These laws guide legal working conditions for employees in Mexico:

Minimum salary

Since January 2022, Mexico's general minimum wage has been $172.87 Mexican pesos (or 8.45 USD) per day for the country and $260.34 Mexican pesos (or 12.77 USD) per day in the Free Zone of the North Border.

It’s important to mention that the minimum salary is set annually and becomes effective every January 1, so the amounts listed above could change.

The working week

Employees can legally work six days (Monday through Saturday), depending on their agreement with the employer. All employees in Mexico are entitled to one full day of rest per week (Sunday). Also, employees can work no more than 48 hours a week, but some employers may limit this to 40 or 45 hours.

Shifts

Mexican labor law recognizes three work shifts:

• An 8-hour day shift, between 6:00 a.m. and 8:00 p.m.

• A 7-hour night shift, between 8:00 p.m. and 6:00 a.m.

• A swing or mixed shift, lasting seven and a half hours, divided between the day and night shifts, provided that less than three and a half hours of the time is during the night shift.

Rest periods

Employees in Mexico are entitled to at least a 30-minute break during a shift or workday.

Overtime

An employee can work up to three hours of overtime per day for up to nine hours per week at double the standard hourly rate. Employers must compensate employees who work more than nine overtime hours at three times their regular hourly rate.

The law prohibits overtime work for anyone under the age of 16, and pregnant or nursing mothers if it endangers the worker's or the child's life.

Termination and severance

Employees in Mexico are not required to offer a minimum notice time when they quit. They can resign with immediate effect without penalty under Mexican labor law.

Still, it is common for employment contracts to include a notice period.

When employees voluntarily leave the company, they are entitled to be paid for any hours worked and a seniority subsidy if they have worked for the company for more than 15 years. That subsidy is usually equal to 12 days of pay for every year the employee worked.

Additionally, legal termination is only possible with just cause. Employees are protected from dismissal unless they have engaged in illegal behavior. This includes:

If an employer fires an employee without cause, the employee is entitled to the following benefits:

• Payment for all hours worked.
• Three months’ worth of salary payments.
• 20 days of pay for every year worked.
• A seniority subsidy, where applicable. 
• Payment for outstanding vacations.
• A percentage of their annual bonus based on the number of months they worked during the year.

Paid and unpaid leave in Mexico

According to Mexico’s employment law, employees are entitled to six days of paid leave per year, provided they’ve worked with the employer for at least a year. Employees get an extra two days off each year they work until the fifth year of employment. 

After the fifth year, employees receive two additional days of paid time off for every five years of service.

Maternity and paternity leave in Mexico 

New mothers are entitled to 12 weeks of maternity leave in Mexico, beginning six weeks before a medically confirmed due date.

In the case of an adoption, a new mother gets six weeks of maternity leave, starting from the day of adoption. 

New fathers only get five days of paternity leave in the case of either birth or adoption.

Sick leave

Employees with a non-occupational illness or injury are eligible for paid sick leave, provided they paid into the social security system for at least four weeks before the illness or injury developed.

Sick leave is paid at 60% of an employee’s normal salary from the fourth day of the illness or injury, and may be extended for 52 weeks.

Manage team members in Mexico with Oyster

Labor and employment laws are essential for protecting employees' rights and ensuring that companies treat them fairly.

Understanding and implementing these laws will help your company attract and retain top talent while avoiding the fines and penalties of non-compliance. 

To eliminate all the hassles of compliant hiring in Mexico, visit Oyster today. We’re a global HR platform that provides clients with all the necessary assistance to engage and manage team members worldwide. Automate compliance across 180+ countries and easily manage HR and payroll—all in one easy-to-use platform.

For more information about what it takes to hire employees in Mexico, check out our detailed Mexico hiring guide.

About Oyster

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