Mandatory employee benefits in Mexico include vacation pay, profit sharing, seniority premiums, and registration with Mexico’s social security system which entitles employees to free medical care and other social provisions. Supplementary employee benefits include life insurance, AD&D, major medical, retirement plans, food vouchers, and commuting services and support.
Intertec Agente de Seguros y de Fianzas
Mandatory Employee Benefits
- Vacation Days – After one year of employment, workers are entitled to the following paid vacation time:
|Years of seniority||Days of vacations|
|From 5 to 9||14|
|From 10 to 14||16|
|From 15 to 19||18|
|From 10 to 24||20|
|From 25 to 29||22|
- Rest days – Federal Labor Law requires employees receive one paid rest day a week. Labor law seeks it to be on Sunday.
- There are 8 mandatory paid public holidays in Mexico:
- January 1st.
- The first Monday of February in commemoration of February 5th;
- The third Monday of March in commemoration of March 21st.
- May 1st.
- September 16
- The third Monday of November in commemoration of November 20th;
- December 1 of every six years, when it corresponds to the transfer of the Federal Executive.
- December 25
- Election day
- Rest days – Federal Labor Law requires employees receive one rest day a week. Labor law seeks it to be on Sunday.
- The Mexican Stock Exchange, all banks, stockbrokers, insurance and surety companies are closed on 4 bank holidays.
- Thursday of Easter Week
- Friday of Easter Week
- November 2nd. Day of the Dead
- December 12th. Virgin Mary’s Day
These days are also paid, and it is common for other sectors or industries to grant these days.
- Sunday Premium – Employees required to work on a Sunday must, at a minimum, receive an additional 25% of their daily salary on top of their normal daily salary.
- Employers typically grant ten days of paid vacation during the first four years of the employee’s seniority.
- Vacation Premium – In addition to paid vacation days, employees are entitled to 25% of their daily wages for each day they are on vacation. For example, if an employee makes $10 a day, then they make $2.50 for a vacation day. This Vacation Premium does not apply to mandatory rest days, and bank holidays.
- Christmas bonus – The Federal Law says that employees must receive 15 days of salary upon reaching one year of employment for their Christmas bonus. Otherwise the Christmas bonus is prorated for actual days worked during the year using 15 days as the annual criteria. It is frequently that employers increase this Christmas bonus with another 15 days of salary.
- Maternity leave – Woman are entitled to six weeks of leave before childbirth and six weeks after childbirth. While pregnant, they cannot perform any activities that may risk both the mother’s and the baby’s health.
The mother has the right to the payment of these 12 weeks of leave, which will be paid by the Mexican Social Security Institute taking her integrated daily salary. For instance, the integrated daily salary should be calculated taking into consideration:
|Daily salary||1,000 Mx.P.||1,000 Mx.P.|
|Christmas Bonus (15 days)||15,000 Mx.P|
|Proportional Christmas Bonus (15/365)||+ 41.09 Mx.P|
|Vacation Premium (25% of 6 days)||1,500 Mx.P.|
|Proportional Vacation Premium (6/365)||+. 4.10 Mx.P|
|Integrated daily salary||1,045.19 Mx.P|
|Maternity leave salary (84 days)||87,795.96 MxP.|
If the employee’s integrated monthly salary is higher than 25 times the UMA, the maternity leave salary will be calculated with this cap.
For getting this benefit, the mother has to be registered and quoting to the Social Security, at least 30 weeks before the leave period.
- Adoption and Paternity leave – Those women who adopt a child are entitled to six weeks of leave.
The leave period payment will be done with regards to the integrated monthly salary mentioned in the previous bullet.
Men are entitled to five paid days of leave for either adoption or paternity. The employer pay the men’s leave.
If the company has rooms where the baby can be fed, the worker may take two 30-minute periods per day to do so. Otherwise, her working day shall be reduced to one hour. This period lasts for about six months.
Social Security System
All workers are entitled to be registered in the Mexican Institute for Social Security (IMSS) so they can receive free medical care as necessary. Though the IMSS, the employee is covered for:
- Occupational hazards
- Illness and / or maternity insurance
- Childcare facilities, nursery, and social provisions
- Nursery services
Through the Retirement Savings System (SAR), the employee has life and disability insurance.
Through the National Institute for the Workers’ Housing Fund (INFONAVIT) the employee is entitled to participate in the following programs:
- Mortgage credit
Whenever a company in Mexico generates profits, it is required to pay 10% of this profit to the workers. The amount shared is divided in two. The first half is distributed among the workers according to the worked days over the year. The second part is applied in proportions to the employee’s income level.
This benefit does not apply to CEOs, CFOs, General Managers, and Administration and Finance Directors.
Additional payment is granted to permanent workers when they leave the employment; the payment is based on their length of service. This premium consists of twelve days salary for each year of service, or twelve days of two times the monthly UMA for each year of service, whichever is lower. If the employee does not work the whole year, a proportional share shall be prorated.
This benefit is enacted in cases of:
- Termination without a justified cause
- Voluntary Resignation (only if the employee has 15 years or more of seniority)
- Retirement (only if the employee has 15 seniority years or more)
Unjustified Dismissal Provisions
Employees have the following right:
- Severance Payment that consists of three months’ salary plus twenty days of salary for each seniority year.
- Payment of proportional parts that is calculated from the employee’s hire date or January 1st of the ongoing year, whichever is later.
- Salaries corresponding to the worked and unpaid days
- Christmas bonus
- Vacation premium
- Sharing of appropriate profits
- Seniority premium
- Outstanding salaries
Supplementary Employee Benefits
Basic Coverage – Group life insurance plans are granted for companies with 10+ employees. The underwriting process, coverage, special clauses, ages of participation, and the premiums may vary according to the size of the group.
Eighty five percent of global companies grant life insurance coverage to their employees, while only 50% of the Mexican companies do so. Life insurance benefits granted to non-unionized employees is based on a multiplication of the employee’s monthly salary.
Life insurance benefits granted to non-unionized employees are based on multiple times the employee’s monthly salary. Note that some companies that grant a higher number of times the wage for their top executives or Directors.
Unionized employees’ life insurance is negotiated by the union and stated in their collective labor contract.
In most of the cases, the sum insured is fixed between USD 2,600 to 10,500 USD or any other fixed sum insured.
Total and Permanent Disability (Long Term Disability)
If the employee is declared as having a total and permanent disability they are entitled to:
- A lump sum payment equal or lower than the basic benefit. Formerly this benefit was paid to the insured person as a monthly pension. Due to the Mexican Peso exchange rate and interest rates, the benefit was changed to a lump sum.
- A waiver of premiums where the employee remains insured with the same basic coverage, without paying any insurance premium.
The total and permanent disability benefits described are additional coverage of the life insurance policy, and those cannot be contracted independently.
In the event of an accidental death the employee’s beneficiaries will receive the contracted insured sum. The policy will also cover accidental dismemberment caused by an accident.
The compensation for the loss of limbs is determined by one of the two scales:
|For the loss of||Percentage of the basic coverage|
|Scale A||Scale B|
|Both hands or both feet or vision in both eyes||100%||100%|
|One hand and one foot||100%||100%|
|One hand or one foot, along with vision in one eye||100%||100%|
|Vision in one eye||30%||30%|
|Partial amputation of a foot, including all toes||30%|
|Three fingers, including the thumb or index finger of one hand||30%|
|Three fingers other than the thumb or index finger of one hand.||25%|
|Thumb and finger other than the index finger of a hand||25%|
|Total and irreversible hearing in both ears||25%|
|The index finger and a finger other than the thumb of one hand||20%|
|Shortening of a lower limb by at least 5 cm||15%|
|One index finger||10%||10%|
|Middle, ring or little finger||5%|
It has become more common to include an additional coverage for covering the employee’s last expenses within the life insurance policy. This benefit ranges between $1,500 USD and $5,000 USD. Spouse and children may be included in this benefit.
Major Medical Insurance
In Mexico there are nearly 60 million people without social security, and those who do have it often find that the government sponsored healthcare system does not meet the populations’ demand. Major medical insurance is increasingly valued and used by employees, making this benefit one of the most important factors considered when evaluating a job offer.
Figures from the Mexican Association of Insurance Companies (AMIS) show that at the end of 2018 there were over ten million five hundred thousand people insured by their employer with a major medical expenses policy. Ninety three percent of the global companies in Mexico grant a major medical benefit to their personnel, while only 60% of Mexican companies grant this provision. Note that this benefit is typically granted to non-unionized employees.
In the Mexican insurance market, group policies are considered for companies with ten employees and over.
Commonly this insurance is contracted covering all over the country and in the event of an emergency abroad.
Small groups or individual policies applies waiting periods for Preexisting conditions, Birth & Caesarean, Gynecological conditions, Proctologic conditions, Congenital disorders.
It is common to provide this insurance to the employee, the spouse and their children under 25.
Although almost all the insurance companies establish the policy limits and scopes in Monthly Unit for Measurement and Updating (UMAs) or in Times Monthly Minimum Wage (TMMW), we are presenting all figures in their equivalent to US dollars.
Roughly speaking the average sum insured, deductible and coinsurance provided by employers are:
- Individual sum insured per each illness or each accident = USD 500,000
- Deductible per each illness = USD 400
- Coinsurance per illness = 10%
- Maximum coinsurance cap per event = USD 1,500
- Birth or Caesarean Limit = $3,000 USD
The coverages that should be considered in a competitive policy of major medical expenses are:
- Birth or Caesarean Limit
- Catastrophic coverage in terminal diseases.
- Congenital conditions
- Coverage for medical complications due to a not covered condition.
- Dangerous sports
- Emergency abroad
- Eye refractive surgery
- Healthy newborn
- HIV / AIDS
- Nose and sinuses
- Organ transplant donor
- Preexisting Conditions
- Private Aviation
- Psychiatric attention due to specific conditions
- Recreational Motorcycling
- Right to convert the group coverage into an individual policy (Portability).
- Surgical fees catalog: To raise into 100 or 150% of the Usual and Customary Expenses criteria used by the insurance company in the reimbursement of a claim.
Dental and Vision Insurance
These benefits are usually provided through the major medical Insurance though some companies acquire it independently. It consists of an economic benefit, with or without employee copayments, which are normally no more than 20%. These services typically cover first level medical conditions, both for both dental and vision.
Dental insurance typically covers:
- Basic services
- Minor surgical procedures
- Third molar (wisdom teeth) removal
- Crowns and prosthodontics
- Annual coverage amount
Vision insurance typically covers:
- Sight examinations
- Frame, prescribed lenses (annual limits)
- Prescribed contact lenses (annual limits)
- Hard cases
- Contact lens cleaning solution
- Discounts in higher level glasses and/or not covered products
- Discounts in replacements (once a year)
Minor Medical Insurance
Minor medical insurance or a services grant offers the following services through a closed network managed by the insurance company:
- Health prevention and maintenance
- Discounts in diagnostics and auxiliary services such as lab, X-ray, tomography, and MRI scans
- Limited odontology services
Food vouchers act just like cash and are 10% of the employee’s salary up to one month’s minimum wage. The vouchers are exchangeable for goods in predetermined stores and allow employees to purchase food. This benefit is tax-free for the employees and is accessed through debit cards provided by the employer.
Employees are encouraged to save a certain amount of their monthly salary each year. Typically, the company will match the percentage the employee saves up to 13% of the employee’s salary if the following rules are followed:
- The employer and the employee should contribute the same percentage
- The company contribution may be up to 13% of the employee’s salary, up to 10 times the 13% of the minimum monthly wage which is $207 USD approximately
- Assets must be used to provide loans to employees
- The fund and generated interest will be withdrawn by the employee once a year
- The employee shall receive their total fund tax-free
In addition to the benefits granted through the Saving Retirement System, private retirement plans consider:
- The retirement ages: Early retirement at 60 years old, normal retirement at 65 years old
- 35% to 40% of global companies grant a retirement plan to their employees
- The trend is to establish a defined contribution plan
- An employee’s contribution ranges from 2% to 10% of their salary
- The company’s contribution matches the employee’s 1 to 1
- The company’s contribution plus the employee’s contribution should not be more than 12.50% of employee’s annual salary.
- Vested rights are granted from the third year of participation in the plan.
Dining Hall Service
In some industries where most employees are blue-collar workers, companies install an industrial dining hall run by an outside company where workers buy their meals at a discounted price. Others allocate space where the workers can eat their meals, placing tables, refrigerator, microwave ovens, etc. About 49% of employers offer this benefit. In both cases employees are entitled to the same service
Some companies offer a car to certain key employees, such as managers, directors, salespersons, medical representatives or insurance agents. Generally, the employee may keep the vehicle after some time by paying an amount under its commercial value. Cars are usually leased by the company which is a deductible expense.
Commuting Service or Support
This is granted in two different ways. One is with gasoline vouchers that the worker can use to pay for fuel. The other provides an allowance to workers who commute from designated locations to the office, and back.
In some cases, companies will pay for an employee’s parking space or meter.
Some companies offer low interest loans to employees. These loans are generally personal credit, mortgage loans or car loans.
Companies can either install a sports club inside their facilities or offer employees discounted memberships to sports clubs or gymnasiums. Some companies grant golf course memberships for their senior executives.
As the name indicates, this is an amount of money paid to the worker each month for arriving early to work.
Productivity bonuses are a percentage paid to the workers if they meet annual performance goals.
This information about employee benefits in Mexico is provided by INTERTEC, Asinta’s employee benefits consulting partner in the Mexico.