If you’re considering expanding or relocating your manufacturing operations to Mexico, you’re probably already aware of the affordable labor costs. Now you’ll need to familiarize yourself with the Mexican Federal Labor Law (FLL). While there are some commonalities, such as the establishment of overtime pay, Mexico’s labor laws generally offer different types of protection for workers than the laws in the United States.
Here’s our short guide to some of the key regulations you’ll need to be aware of to ensure your company stays fully compliant should you make the move to Mexico:
Unlike in the United States, there is no “employment at will” in Mexico. Employment contracts are required, and there are several key points of information that must be included. According to the FLL, the contract must state the place(s) where the employee will work, the date and place where employees will receive their salary, and descriptions of any employee training. Other essential information includes:
- Salary and benefits
- Highly detailed job description
- Work schedule
- Nationality, civil status, tax ID number, and more.
- And in some cases, the residence of the employee and employer
Hours of work:
Employers in the United States do not have limits regarding how long their employees can work, as long as they are compensated appropriately. Mexico, on the other hand, has specific time slots in which an employee can work and you’ll need to take this into account when looking to hire from local labor forces. That said, there are “common market practices” that are accepted by most city labor boards but may not appear compliant with the national laws. Working with a company that understands the “local” practices to implement efficient work schedules may be useful.
Typical business hours run from 8 a.m. to 6 p.m., but Mexican labor law recognizes three work shifts:
- Day shifts: any eight hours (assuming a 6-day workweek) between 6 a.m. and 8 p.m.
- Night shifts: any seven hours (assuming a 6-day workweek) between 8 p.m. and 6 a.m.
- Mixed: seven and a half hours between both day and night hours (but the night shift must not exceed three and a half hours)
Again, common market practices may differ from the written law with regard to the above work schedules.
Pay and overtime:
In addition to strict regulations of when employees can work, specific laws govern how often an employee is legally allowed to work. To remain compliant, you need to ensure that your employees don’t work more than 12 hours per day or a total of 48-hours in one week without receiving overtime pay.
Any overtime is paid at twice the normal base salary rate. For any overtime going beyond 9 hours per week, employees must be paid at triple their normal base salary rate.
Employees working out of Mexico are also entitled to paid time off. After one year of employment, employees are given a minimum of six vacation days per year. This number increases according to seniority and does not include the seven annual paid public holidays.
In addition to the vacation and holiday benefits employers must offer, the FLL mandates that employers must give their employees a yearly bonus. This bonus must equal at least 15 days of the employee’s daily salary, and it must be paid to the employee by December 20.
There is nothing prohibiting employers from requesting a background check; however, the Mexican Federal Law on the Protection of Personal Data Held by Private Parties governs the treatment of the data collected, giving the individual the right to determine by who, and for what purposes, the data is used.
Work culture and behavior:
In the United States, at-will employment means an employer may dismiss an employee for any reason (as long as that reason is not illegal), but in Mexico, there must always be just cause for dismissal or the employee will be eligible for severance pay. These causes are often grounded in employee behavior.
Lack of Integrity
The failure to work with integrity is one cause for termination. If they can provide sufficient proof, an employer may dismiss an employee if they fail to work with “intense effort, care, and attention, in the agreed-upon time, place, and manner.”
Laid out in Mexico’s Federal Labor Laws, other grounds for dismissal based on employee behavior include:
- Dishonesty or violence against employer or co-workers—unless in instances of self-defense
- Immoral acts, such as harassment or sexual harassment
- Negligence that compromises the safety of others in the workplace
- Failure or refusal to adopt preventative measures to safeguard against illness and accident
New subcontracting labor laws:
Just a month ago, the FLL passed a new law prohibiting subcontracting to limit company reliance on subcontracted labor. Under these new regulations, subcontracting can only be carried out for specialized tasks that are not part of the main “economic activity” of the company receiving the services. If you’re operating out of Mexico and decide to outsource your recruitment processes, staffing agencies may only assist in recruiting and training candidates. The company receiving services must be the one to conduct the hiring.
How NAPS can help
This is by no means an exhaustive list of the rules and regulations with which you’ll need to comply when outsourcing your manufacturing to Mexico, and navigating these complex labor laws can be tricky—especially for a foreign company.
With more than 30 years of experience in helping companies find long-term success in Mexico, NAPS is well-versed in the details of Mexico’s labor laws and payroll in Mexico. We have the connections and expertise to help your business reach its goals—whether you’re looking just to move your fulfillment centers or relocate all of your operations.
Contact us to learn more about how you can take advantage of the benefits of manufacturing in Mexico while remaining fully compliant.