Mexico: Proposed changes to normal workweek, Christmas bonus and seniority premium

Employer Action Code: Monitor

Congress is considering various draft bills that would change the Federal Labor Law (Ley Federal del Trabajo – LFT) to, among other things, reduce the maximum normal workweek from 48 hours over six days to 40 hours over five days, double the mandatory annual Christmas bonus from 15 to 30 days' wages and increase the seniority premium (payable on termination) from 12 to 15 days' pay per year of service. The proposal to reduce the normal workweek has garnered the most attention, as the government appears to be advocating for speedy implementation of the reduction in working time if the bill is approved. Employees in Mexico have among the highest levels of actual working hours among OECD countries, averaging 2,226 hours in 2022, second only to Colombia (at 2,405 hours in 2021) and well above the OECD average of 1,752 hours per year. Colombia is in fact in the process of reducing its statutory normal workweek from 48 to 42 hours in stages over 2023 to 2026. Chile (with the fourth-highest annual hours among OECD members) is also gradually reducing its normal workweek from 45 to 40 hours starting in 2024.

Key details

The proposed amendments would make the following changes:

• Reduce the statutory normal workweek from 48 to 40 hours, with a minimum of two days of rest for all employees. The existing limits on overtime (no more than three hours per day nor more than three times per week) would remain in effect; however, reducing the normal workweek would require amending both the LFT and Article 123 of Mexico’s Constitution (which guarantees employees one day of rest per week).
• Double the mandatory minimum Christmas bonus (Aguinaldo) paid by employers from 15 to 30 days' wages.
• Increase the seniority premium (Prima de Antigüedad) paid by employers from 12 to 15 days' pay (up to two times the daily minimum wage) per year of service and reduce the years of service requirement for eligibility for payment on resignation from 15 to 12 years. (The seniority premium is payable regardless of seniority in cases of retirement, disability, death and dismissal.)

Employer implications

In practice, nearly all of the companies surveyed by WTW observe five-day 40-hour workweeks in offices; however, in industrial worksites, 61% have 45- or 48-hour workweeks, in most cases based on a five-day workweek. Among retail establishments surveyed, a 48-hour, six-day workweek is the most common work schedule. Employers should consider the potential staffing, operational and cost effects of the proposals and monitor their progress. The fact that the changes would require amending both the FLL and the Constitution presents an additional challenge to the proposal, but the length of Mexico’s normal workweek does appear to be out of step with changes in the region and the growing interest in permitting shorter (e.g., four-day) workweeks around the world.

Many companies already pay Christmas bonuses above the current minimum, but for those that do not the proposal would increase payroll costs (by roughly around 5%) and potentially affect employer liabilities and costs for the mandatory defined benefit (DB) termination indemnity and any DB pension arrangements. In addition, liabilities and costs for the DB seniority premium would rise as a result of the proposed 25% benefit increase.