Are you interested in hiring local talent from Mexico? If so, it’s essential to provide your Mexican team members with a Christmas bonus, commonly referred to as an aguinaldo or the 13th month's salary.
The aguinaldo is an annual statutory benefit that Mexican employees are entitled to receive from their employers. Although it’s labeled as a “Christmas bonus” (as the aguinaldo is due in December) it’s critical for employers to recognize that the aguinaldo is not reward-based on merit. It is a legally mandated benefit.
The amount employees will receive for their aguinaldo depends on their base salary, the length of time they’ve worked at the company, and their employer's approach to compensation. Read on to gain insight into the requirements, background, and practices surrounding the aguinaldo.
Eligibility Criteria
Every formal employee in Mexico qualifies for Mexico’s range of employee benefits, including the aguinaldo. Individuals are considered employees if they provide a personal service, are paid a salary, and are subordinate to an entity or another individual. It is important to note that both Mexican citizens and foreign nationals can be employees.
Mexican nationals working abroad can also qualify for the aguinaldo if they meet particular requirements. These criteria include being hired in Mexico or being recruited via a system that has the approval of both the Mexican and the foreign government where the Mexican national is located.
Background / Why Does It Exist?
After years of labor reform, the aguinaldo became part of Mexican law in 1970 where there was a greater emphasis on employee benefits.
In addition to the aguinaldo, the reformed labor laws include a range of statutory benefits which protect Mexican workers. Mexico’s long-standing history of social turmoil with regards to workers rights, have led the Mexican courts to become more employee friendly, rather than employer friendly. Consequently, formal labor is heavily regulated and employers must strictly comply with Mexican labor laws.
Unfortunately, most Mexican workers are hired informally to circumvent these rules, causing many workers to be deprived of their rights.
Mexico is currently trying to combat this issue by working to formalize employment at the state and national levels. There is hope that further regulating formal labor practices will help to reduce economic and social inequality.
Minimum Compliance
Employers must pay their employees the aguinaldo (equating to a minimum of 15 days of salary) by December 20th of each year.
Employees who have worked for less than one year must receive a prorated aguinaldo based on the length of actual time worked.
Employers who fail to comply with the minimum requirements are at risk of being penalized. Fines can be as much as 5000x the daily minimum wage in Mexico, which currently stands at 207 Mexican pesos (about $15 CAD or $11 USD). This means that the risk of non-compliance could be as much $75,000 CAD or $55,000 USD.
How much of an aguinaldo do the majority of employers offer?
Many employers provide their employees with an aguinaldo equivalent to 20-30 days of work. Large businesses generally have a standard offering of 30 days. However, this depends on the area and industry. For example, employees working in retail typically receive a larger aguinaldo.
This approach to the aguinaldo helps foster employee loyalty and improve recruitment. Offering more than the minimum required by law demonstrates that employers value their team and keeps the employer competitive.
The majority of employers also offer the aguinaldo in multiple installments. It’s common to divide the payment into 2 installments, with the timing of the first payment varying between employers.
How can employers stand out from the crowd?
Offering a more generous aguinaldo than most employers can help you attract and retain top talent. Mexico’s pool of skilled workers has been on the rise in recent years. The amount of qualified professionals specializing in technical industries is steadily increasing. To effectively tap into this group of skilled workers, it’s wise to offer an even greater aguinaldo.
Large, well-established employers are known to offer an aguinaldo equivalent to 40 or more days of work, alongside other types of bonuses.
How can Borderless help?
Whether you want to offer the minimum or something far more robust, we are here to help! As EOR service providers we will work with you to keep you compliant and to determine an Aguinaldo that makes sense for your organization.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
