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Mexican Labor Compensation and Benefits in Ciudad Juarez

The Mexican Constitution includes such a wide variety of specific and extensive rights and privileges for workers, because it was born out of a revolution that grew out of a perceived abuse of workers. The late 1800s were a time of economic growth and wealth creation under the leadership of a dictator, Porfirio Diaz, who promoted a strong presence of foreign companies that helped to build the country’s infrastructure. This led to a perception of foreign organizations as being protected by the dictatorship and exploitive with resepect to Mexican labor compensation. The result was a founding national document ratified in 1917 that enumerates explicit and far-reaching protections to employees in Mexico – and the Ciudad Juárez workplace demonstrates this somewhat new employer-employee relationship quite clearly.

In Ciudad Juárez (and all of Mexico), employees enjoy certain Mexican government mandated worker benefits, rights and protections, such as:

  • Profit Sharing – employees receive 10% of a company’s annual profits.
  • Minimum wage – employers must pay a living wage.
  • Christmas Bonus – employees of over a year receive the equivalent of at least two weeks’ pay.
  • Legal Holidays – Mexican Labor Law establishes seven paid holidays per year.
  • Vacation – employees receive six days of paid vacation after one year of service plus two days each year until five years, after which two more days are added for each additional five years. Vacation pay must be at least 25% higher than usual pay.
  • Social Security – employees are automatically covered under the Mexican Institute of Social Security. Employers contribute 17.42% of each worker’s salary into the social security fund.
  • Employee Housing – to make housing less of a problem for workers, employers must pay a 5% payroll tax to finance the Institute for the National Fund for Employee Housing, which provides housing benefits to employees.
  • Retirement Insurance – employers contribute 2% of the employee’s salary to a retirement fund much like an IRA as part of Mexican labor compensation. This contribution is capped at 25% of minimum wage.

In addition to these federally mandated provisions, successful and competitive firms frequently differentiate themselves by going the extra mile in their approaches and internal policies towards Mexico labor compensation. It is customary for employers in Ciudad Juárez to offer additional market-driven benefits, such as:

  • Meal Service – workers are typically given access to 2 meals a day at a cafeteria subsidized by the company up to 100%.
  • Grocery/Food Coupons – about once a month, some employers distribute these coupons to all workers equally that are redeemable at grocery stores and big-box retailers for basic grocery necessities.
  • Savings Fund – each week, competitive employers deduct a mutually agreed upon amount from the employee’s paycheck, matches that amount, and deposits the total into a fund that is paid out at the end of the year.
  • Additional bonuses – some companies pay out additional bonuses/incentives for perfect attendance or punctuality.
  • Transportation – bus routes are sometimes provided at reduced rates for employees.

When considering the issue of non-mandated Mexican labor compensation, it is important to keep in mind that perks and benefits given in some geographies may not typically be paid in others. Different regions are subject to distinct labor market conditions, therefore, when researching the possibility of establishing manufacturing operations in Mexico to become familiar with the particularities of each labor market.

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This quarterly publication will be populated with content that is useful and relevant to readers that are contemplating Mexico investments, have operations already within the Republic, as well as to other individuals that have an interest in Mexico and its manufacturing sector.