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Employee
Pay Requirements
Last update 9 July 2007 |
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Nothing on this page should be considered legal advice; nor can I personally vouch for the accuracy of the information although both David and I have tried to make it correct and up-to-date. Use this as a guide and rely upon your lawyer or accountant for the final word.
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Payday: Employees are to be paid weekly in cash. Payday is the last day worked each week. Payment must be made in cash, not by check or by commodities. If a worker is hired to work by the week, the daily rate is the weekly amount divided by 7. If s/he is hired by the month, the daily rate is the monthly amount divided by 30. Note this method of calculation differs from that used in the USA and Canada. Instituto Mexicano del Seguro Social =
IMSS: In the USA, an employer must withhold income taxes, social security and medicare payments and pay matching social security and medicare amounts. It works differently in Mexico. The employer makes only a very small withholding (see next paragraph) and pays the entire social security and certain other taxes. These payments are paid monthly to the IMSS which does all the record keeping and payment calculations and sends a bill each month. (Actually there is one bill each month for SS and health; and a second bill on alternate months for the housing fund.) All employees, except certain exempt ones noted later, must be registered with the IMSS. You will need a certified public accountant (L.C.P.) to set up your account with the IMSS. He will also take care of registering or de-registering any workers you have. Don’t attempt to do-it-yourself; it requires too much specialized knowledge. He will also do all the computations necessary to figure the actual reportable salary based upon the employee's take-home pay. Almost all wages in Mexico are negotiated and paid on a take-home basis, not the before-tax and deducts as in the USA. Once the account has been set up with the IMSS, you will receive regular bills from them for the payments you owe. If you don’t pay on time (the 17th of each month), there is a penalty. Watch for the bill each month; if it doesn’t come (and sometimes it does get lost), go to the office to get a copy so you can pay and avoid a late penalty. You must pay at a specified bank, not at the IMSS office. Be sure to keep the payment receipts -- forever -- you may need them. Certain workers are classified as exempt from IMSS registration. These workers include: artisans, craftsmen, non-salaried workers, and domestics; i.e., maids, cleaning ladies, cooks, etc., who work only in a person's home. There are several others, but they are very unlikely to be a foreign resident's concern. The law (paraphrased, and not all of it by any means) says that these exempt workers may decide voluntarily to be included in the IMSS program. This is commonly accepted to mean that they have to voluntarily opt not to be registered with IMSS. In practical terms, this means you must discuss IMSS with your maid. If she wants in, you must register. Some Mexicans actually have a written contract with their domestic help since they know that "voluntarily opt in" really means "voluntarily opt out" and they want a signed contract to avoid any future misunderstanding. A foreign resident would be wise to have such a contract as protection from any possible trouble if there happened to be an unfriendly parting of the ways with a domestic worker that wasn't registered with IMSS. Non-salaried workers are those who are paid by the job or by the piece rather than by time worked. They include the plumbing repair guy, the cabinet maker who builds and installs your kitchen cabinets, the electrician who installs a grounded receptacle for your computer, etc. They don't need to be registered. If you hire a building contractor to build or remodel your home, he is responsible for the workers he employs. But the question of who pays the IMSS bills is a matter to be worked out between you and the contractor. Generally the contractor will register the job in your name, and you will responsible for paying the monthly bills. Making you responsible for the IMSS bills assures that the final bill, which will come a month or more after the job is completed and the contractor has left the job, gets paid to IMSS. You should understand that IMSS has very high payment expectations for new construction work, and the final bill may be substantial. (This usually does not apply to remodeling work.) In my Las Casas building project the final end-of-job bill from IMSS was staggering. Be prepared for a large closeout payment. This large final payment comes about because the IMSS has a table of expected payments for certain kinds of work. New home construction is expected to generate X pesos per square meter. At the end of the job when you or the contractor applies for termination papers, the IMSS will send someone to measure the building. Then they calculate the amount of money they expect the project to have generated for them. If you have paid that much, or more, they will terminated the job. No refund if you have over paid. If you have not paid in as much as their calculation says, then you must pay the difference. In my projects we had a lot of family volunteer work, thus our labor cost and IMSS payments were low, so our final closeout bill was quite high. If your contractor agrees to pay the IMSS bills, you need to be very sure that he does so, especially the final closeout bill. If he fails to pay, sooner or later the IMSS will come after you as the owner of the property. I know one case where the IMSS came after the owner two years after the job was completed. The owner had to pay the past due amount and a very large late penalty. Be sure to keep all the payment receipts for years because you may need them. I did. Dealing with the IMSS was the second biggest headache of my building projects -- the cabinet makers were the worst. If you directly hire construction workers to do some repairs or remodeling on your house then you are self-contracting, and you are suppose to register them with IMSS. In reality, for a short job, registration is usually not done. To be sure of avoiding trouble, you should pay the workers by the job rather than by the day or week. That makes them independent contractors -- non-salaried workers -- and exempt from IMSS. (The voluntary rule still applies; so if they ask to be registered, you must do it.) On the other hand, if the job is very long or needs a building permit, the workers need to be registered. The IMSS inspectors usually check the workers at all the permit jobs, and if a non-permit job lasts any length of time, or would be noticeable from outside, it could draw their attention, which would result in a check. In some cities, IMSS agents cruise the streets looking for unreported construction. The IMSS registration papers as well as the building permit should be available at the job site for the inspector to see. There are advantages to the worker to be registered with the IMSS. These include health insurance and qualification for government-subsidized housing among others. There are advantages to the employer as well, including medical care for an on-the-job injury. If a worker is injured on the job and is not registered, you may have to pay his medical care as well as continue his wages while he is unable to work. The bottom line is that although some workers can be exempt, it is not to their advantage to opt out of IMSS, and it may not be good for the employer either. The law requires that the following items be paid whether or not the worker is registered with the IMSS. Aguinaldo (Christmas Bonus) The aguinaldo must be paid on or before the 20th of December – many employers pay it on the payday which precedes that date. The aguinaldo must be paid in cash; gifts, Christmas baskets, and other presents do not fulfill the statutory requirement. The aguinaldo must equal 15 days of salary. To calculate the amount for a part-time employee, divide the number of days worked during the year past by 365. Multiply that figure by 15 x the daily salary to determine the amount of the aguinaldo. Examples: If you have an
employee who works one day a week for $50 pesos: If the worker
is paid by the week and has worked a full year, use a multiplier of 2.14
to make the math easier. If the worker is paid $500 pesos per
week, then it is If the weekly worker has not worked a full year, divide the number of weeks worked by 52.14 X 15 X the daily salary (weekly salary divided by 7) to determine the amount of the aguinaldo. Vacación (Vacation) The vacación must be paid in cash, either before the vacation or before the end of the year if no vacation has been taken. The vacación pay must equal 6 days of salary plus and additional 25% of the six-day amount. To calculate the amount, divide the number of days worked during the year past by 365. Multiply that figure by 7.5 to determine the amount of the vacación pay due. As you can see this is exactly 1/2 of the aguinaldo. Examples: If you have an
employee who works one day a week for $50 pesos: If the worker
is paid $500 pesos per week: Note: The 6-day minimum vacation is only for the first year worked. The basis increases by 2 days each year through the 4th year. The 5th year it increases 3 days to 15 days. Thereafter, the time increases by 3 days each 5th year. Year 1 -- 6 days Holidays: If your worker works on any of the Mexican legal holidays, you must pay double time plus the regular pay; i.e., triple time. If the worker is paid for the holiday, but doesn't work, you cannot deduct the day from the "days worked" in the preceding computations for aguinaldo or vacación. If your worker works on any Sunday, you must pay an additional 25% of the daily wage. For weekly workers, you divide the salary by 7, then add 25% to the daily amount for the Sunday pay. This assumes that you have given the employee some other day off during the week. If the employee worked the full 7 days that week you owe overtime pay also. That gets much more complicated. Talk with your accountant. The Mexican legal holidays are: Jan 1, New Year's Day There are
several other commonly accepted holidays (the banks may even be closed),
but these seven are the only legal holidays. |
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Maternity Leave: A woman is entitled to six weeks before and six weeks after delivery with full pay. If she is unable to return to work after that leave, she's entitled to a period not to exceed 60 days at half pay. Termination Pay: The labor laws are very pro worker. Nowhere is this more evident than in the draconian termination law. When an employee is terminated, he is entitled to termination pay; unless: 1. The employment was for a specified period of time, such as while building a house, or for house sitting for the winter while the owner is away, etc. It is best to have the time stipulation in writing. 2. For just cause. This is a very complicated issue, and you may need the help of a labor lawyer if the employee appeals to the labor review board. Just cause is spelled out in detail in the law. The termination pay shall include 3-months salary plus 20 days for each year worked plus prorated vacation and Christmas pay. If this termination package cannot be paid at the time of termination, regular salary shall continue until the termination is paid in full. If
the employee quits voluntarily, termination pay is not required. A
common tactic to avoid termination pay is to induce the employee to
quit. One must take care with this because the law cited above
spells out what an employer cannot do to harass a worker and his family. |
