Considerations Regarding Hiring and Firing Employees in Mexico

Mexico’s labor laws favor the side of the employee; it is crucial as a business owner to understand the labor laws in Mexico before hiring or firing an employee.  It is important to screen your potential employees for the right fit as firing an employee can be expensive and complicated.

• Confirm their immigration status: The company owner is obligated to ensure all employees have the legal right to work in Mexico. The business owner may resolve the matter by offering the candidate a job offer, but ensure their immigration status is resolved before hiring them to avoid fines to the business and potential deportation of the employee.

• Criminal records: Employers can ask any candidate for a criminal record report; a letter confirming “non-criminal activity” can be issued by the local police station.

• References: As in any country, it is a good idea to check the candidate’s references and contact previous employers.

• Employment contract: It is imperative you enter into a labor contract with your employees; the contract should include wage, duration of employment, hours and days off, duties, termination causes, and conditions of the work. If the employment agreement is not in writing the workers rights will take priority over the businesses.

• Finiquito: Establish in the contract conditions of termination, including the finiquito – the amount of money you will pay the employee if they leave your company.

• Trial period: You may wish to include a trial period in the contract; during this time you can determine if the new hire is suitable for the job without the full commitment and the need to pay severance if you let the employee go during this period.

• Work week: A full-time work week is six days with one rest day; the salary is based on the full week.Anything over 48 hours is considered overtime, and holidays worked must be compensated.

• Reduction of hours: Changing the terms and conditions of employment, such as reduction of hours/pay which cause the employee to quit will require payment of full severance pay.

• Keep pay receipts: Have the employee sign a receipt for each time they are paid, or use a pagadora which directly deposits the pay cheque in their bank account (providing records of payment).

• Pay benefits: Be prepared to make contributions to social security (IMSS), the housing fund (INFONAVIT) and the pension system (SAR), provide vacation pay, bonuses, and Aguinaldo.  Businesses who are late with payments to the government agencies will be temporarily closed until payments are up to date.

• Terminating employees: If a disgruntled employee takes you to court, the burden of proof will be on the employer, and you will require a labor lawyer to represent your business. Depending on the circumstances of the release of an employee, the company must pay severance pay, prorated vacation pay, Christmas pay, and if the employee has 15 years or longer with the company, they are eligible for a seniority premium.

• Release letter: It is highly recommended you have employees sign a receipt for the payout, along with a signed and witnessed letter ending the employee-employer relationship.

• Termination pay: Employees who voluntarily resign or those who are justifiably fired will only be entitled to accrued benefits up to the date of termination. ​Termination pay must be paid at the time of dismissal, or the regular wage will continue until the termination pay is paid in full.

• If there is a lawsuit regarding the dismissal and the employee wins, the regular pay from termination to trial must be paid by the employer.
• Termination notice: Federal Labour Law states that the company must provide the employee notice in writing within 30 days of knowing about the misconduct, explaining the grounds for dismissal, or the Labour Board must issue a termination notice. Two witnesses must be present if notice is given directly to the employee. If an employee refuses to accept the dismissal, the company must file with the Labour Board within five days otherwise the incident may be viewed as unjust dismissal the (ex)employee will receive full severance pay.

MexLaw will help you administer individual and collective hiring of employees, assisting in the reconciliation of labour disputes and guidance with regards to aspects of Mexican labour law for the proper administration of employee activities.

For information and advice about Mexico’s labor laws and employee benefits, email an accountant at contact@mexlaw.ca.