Employees in Mexico Gain More Paid Vacation Days

​Employees in Mexico are entitled to more vacation days—at least six additional days, depending on seniority—as of Jan. 1.

Before the change in federal labor law, Mexico had the fewest paid vacation days in Latin America and among the fewest in the world, according to legal experts.

Workers who've been with the same employer for at least a year are now entitled to 12 vacation days, double the previous allotment, at their first employment anniversary.

Employees will receive another two paid days off per year until they reach 20 days, and after six years, they'll be entitled to another two days every five years, noted Erika Collins, an attorney with Faegre Drinker in New York City.

The new regulations also anticipate that employees will be eligible for at least 12 continuous vacation days, she said.

"Global employers must review their vacation policies in order to ensure they are compliant with the new regulations and, where applicable, carry out the corresponding adjustments to ensure that employees' vacation days are adjusted accordingly," Collins said.

Country Lagged in Vacation Days

"Mexico's recent amendment to increase paid vacation days will help employees achieve a better balance between work and personal life improving their productivity at work," wrote Ana Sofia Lazcano Zamora, a Mexico City-based intern and David Puente Tostado, a Monterrey-based attorney with Basham, Ringe y Correa in an e-mail.

Mexico went from being "dead last" in terms of vacation days in Latin America to the middle of the pack, they wrote.

Mexico had among the longest number of working hours per year "and, at the same time, is the least productive. Therefore, it became essential to provide employees with decent time off, to preserve their physical and mental health," they said. "The main goal is for all companies in Mexico to guarantee a better quality of life for their employees to increase their productivity and loyalty to the employer."

Since the Mexican Federal Labor Law became enforceable in 1970, no changes had been made regarding vacations, said Pietro Straulino-Rodriguez, managing partner in the Ogletree Deakins Mexico City office. He cited a World Health Organization estimate that 75 percent of Mexican employees experience burnout or work-related stress.

Another bill under discussion in Mexico would reduce the total number of hours in the work shift per week, according to Lazcano and Puente, who said the Mexican government recognizes there is a problem with mental health. They also noted that the International Labor Organization has a convention suggesting employees should be entitled to 18 vacation days, but Mexico doesn't participate in the convention.

More Spending on Vacation Premiums

The change will cost employers more, as it will require more spending on vacation premiums even though the premium rate stays the same, lawyers said.

Mexican labor law requires employers to pay a vacation premium, a bonus of at least 25 percent of the base salary, so that vacation days are paid at a 125 percent salary rate at a minimum, Collins explained. The increased vacation days could translate into a significant economic impact for employers, that now have to provide for more paid vacation days, she said.

This increase in the base calculation for premiums also directly affects the payment of social security contributions, as such contributions are paid considering the employee's consolidated salary, not only the base, Lazcano and Puente said. Likewise, some states in Mexico collect payroll tax, which most of them also base on consolidated salary, they said.

Finally, severance payments, when employees are terminated without cause, are also calculated with consolidated salary, they noted, which also means an increase in those costs.

Key Points

Employers should keep in mind the following key points, according to Collins:

• Ensure the company's vacation policy is compliant with the new regulation.
• When carrying out any change to an existing policy, ensure these changes do not negatively affect the employees or impinge on their acquired rights.
• Agreements should be reached with employees to ensure the correct flow of vacation period to avoid business disruptions. These agreements should allow for employee consent since the new regulation contemplates an employee's prerogative to determine how and when they take their vacation days.

"The main economic impact … is linked with the vacation premium, which should now be calculated over the new vacation days entitlement," Collins said.

Because 2023 is a transition year for the vacation entitlement, reviewing the amount paid to employees for this concept in the event of termination is of paramount importance to ensure accrued vacation days are taken into consideration, Collins added.

Employers must amend labor employees' individual or collective bargaining agreements if such amendments improve the workers' rights, according to Lazcano and Puente.

Employers must pay special attention to agreements with clauses that mentioned the employees would have a number of days on top of the federal labor law, Lazcano and Puente wrote, as those days would be considered as acquired rights, which means that employers would have to add those days to the increased vacation allotment.

Dinah Wisenberg Brin is a reporter and writer in Philadelphia.