termination of employment in Mexico: laws & severance policies

Legal Grounds for Termination of Employment in Mexico

When it comes to terminating employment in Mexico, understanding the legal obligations regarding severance pay and contributions is essential. Below is a detailed overview of the key considerations for both employers and employees.

In Mexico, employment relationships are protected by law, and termination is strictly regulated. Employers may only dismiss employees for just cause, as defined by the Federal Labor Law (FLL). Valid reasons for termination include:

 
• False statements about work qualifications.
 
• Breaches of obedience or honesty principles.
 
• Acts of violence or harassment in the workplace.
 
• Vandalism and intentional damage to the employer's property.
 
• Revealing company secrets.
 
• Unjustified absences exceeding three times in a 30-day period.
 
• Refusal to comply with safety procedures.
 
• Attending work under the influence of alcohol or drugs.

It’s important to note that poor performance is not considered a valid reason for dismissal in Mexico.

Employment Laws and Severance Policies in Mexico

Notice Period in Mexico

In Mexico, there are no mandated minimum notice periods, but according to federal labor law, if a situation warrants, the employer must write a notice to the employee within 30 days of becoming aware of any misconduct.

For employees on definite or time-limited contracts, the terms of the agreement should specify the procedures for early termination. It’s crucial to consult these terms to ensure compliance.

Severance Pay in Mexico

Severance pay in Mexico varies depending on the circumstances of termination:

 
• Voluntary Resignation: Employees are entitled to payment for days worked but not yet paid, a proportional amount of the Christmas bonus, accrued vacation pay, and other contractual benefits.
 
• Termination with Cause: Employees receive payment for days worked, a proportional Christmas bonus, accrued vacation pay, and a seniority premium of 12 days’ salary per year of service, capped at twice the minimum daily salary.
 
• Termination without Cause: Employees are entitled to at least three months’ salary, a seniority bonus of 12 days’ pay per year worked (starting after 15 years of employment), any expired wages (up to 12 months from the termination notice), an additional payment of 20 days’ salary per year worked if reinstatement is refused, and other accrued benefits.

Probation Period in Mexico

In Mexico, probationary periods can last up to 30 days for most positions and up to 180 days for managerial or specialized roles. During this period, employers can assess an employee’s performance and suitability for the role. However, terminating an employee during the probationary period still requires just cause, and employers must document the reasons for termination to defend against potential legal challenges.

Process for Ending Employment in Mexico

 
• Documentation: Maintain detailed records of any incidents or behaviors that justify termination.
 
• Notification: Inform the employee of the termination decision, either personally or through the competent labor authority.
 
• Final Payments: Calculate and provide all due payments, including wages, bonuses, and accrued benefits.
 
• Settlement Agreement: If applicable, draft a separation agreement outlining the terms of termination and ensure it is ratified before the Conciliation and Arbitration Labor Board.
 
• Legal Compliance: Submit the employee’s notice of termination to the Mexican Social Security Institute (IMSS) and comply with any other legal requirements.

Employee Rights During Termination in Mexico

Unfair Dismissal Protections

Employees in Mexico are protected against unfair dismissal. If an employee believes they have been wrongfully terminated, they can file a complaint with the Conciliation and Arbitration Board within 60 days. If the employer cannot prove just cause for the termination, the employee may be entitled to reinstatement with back pay or severance compensation.

Grievance Procedures

Grievance procedures in Mexico provide a formal mechanism for employees to raise concerns or disputes related to their employment. These procedures typically involve:

 
• Filing a Complaint: The employee submits a formal complaint to the employer or relevant labor authority.
 
• Conciliation: Both parties engage in a conciliation process to reach an amicable resolution.
 
• Arbitration: If conciliation fails, the dispute may proceed to arbitration before the Conciliation and Arbitration Board.

Final Pay and Benefits

Upon termination, employers are responsible for settling all final payments to the employee, including:

 
• Outstanding wages for all days worked but not yet paid.
 
• Accrued benefits such as the Christmas bonus, vacation pay, and any other contractual entitlements.
 
• Severance pay if applicable.

What Termination Documentation Is Required by Law?

Employers in Mexico must provide certain documents upon termination:

 
• Termination Letter: Employers must deliver a written notice specifying the reasons for termination.
 
• Final Payslip: Employees must receive a breakdown of their final payments, including accrued wages and benefits.
 
• Tax Documents: Any required tax documents must be provided to the employee.

How to Stay Compliant as An Employer in Mexico

Expanding your workforce across international borders is an exciting step, but it can be a logistical nightmare to hire and pay employees in different countries. And if you need to terminate employment, it’s critical to adhere to local compliance laws. That’s the advantage of using a trusted Employer of Record like Playroll. They can:‍

• ‍Handle international compliance: Different countries each have their own federal and local laws governing employee rights. An EOR helps ensure that you are compliant with the unique set of laws for any country in which your company operates. 
• ‍Run payroll for your global team: An EOR will act as your payroll provider, paying your employees on your behalf in the local currency. The company will also have in-depth knowledge of local tax codes, regulatory practices, and everything else that goes into managing global payroll.
• ‍Scale your team anywhere: Legally hire and swiftly onboard new hires in 180+ regions without the need for entity set-up by leveraging Playroll's infrastructure, so you can freely explore new markets and focus on growth.