Employer Action Code: Act
Mexico’s new president, Claudia Sheinbaum, inaugurated on October 1, 2024, has announced planned measures to, among other things, eliminate the gender pay gap and extend social security coverage to digital platform workers. Sheinbaum also announced policy objectives to continue the prior administration’s practice of ongoing significant minimum wage increases and to pursue passage of legislation that would shorten the statutory normal workweek. Sheinbaum’s ruling Morena party and its allies have comfortable majorities in both houses of Congress, making approval of the government’s legislative proposals likely.
Key Details
Policy objectives and proposed changes include the following:
- The new government is targeting a 12% increase to the federal minimum wage in 2025 and in each subsequent year of its six-year term, with the objective that the minimum wage will gradually increase to cover the cost of about 2.5 basic baskets (a standardized measure of 24 staples); currently it covers about 1.6 baskets. The annual consumer price inflation rate in 2024 is forecast to be 4.3% (Oxford Economics data). The planned minimum wage increases well above inflation are a continuation of the prior government’s policy, where the annual increases during 2019 to 2024 averaged over 18%. On October 9, 2024, the Senate unanimously approved a constitutional amendment guaranteeing that increases to the federal minimum wage must at least equal the inflation rate; the bill was originally introduced by the prior government and has been sent to the 32 state legislatures for majority approval.
- The government will pursue passage and gradual implementation of a bill currently with Congress (submitted by the prior government) that would reduce the statutory normal workweek from 48 to 40 hours, with a minimum of two days of rest for all employees (see October 2023 Global News Brief: Mexico: Proposed changes to normal workweek, Christmas bonus and seniority premium). The workweek reduction requires amendment of both the Federal Labor Code (Ley Federal del Trabajo – LFT) and Article 123 of the Constitution, which guarantees employees one day of rest per week.
- Amendments to the Constitution that were drafted by the new government and call for substantive gender equality and eradication of the gender pay gap have been approved by Congress and a majority of state legislatures and were signed into law on November 15, 2024. The amendments provide for equal pay for equal work, irrespective of sex, gender or nationality, and anticipate the passage of laws to establish mechanisms aimed at reducing and eradicating the gender wage gap.
- Digital platform companies would be required to register workers (e.g., delivery drivers and app-based contractors) for social security, enabling employees’ access to federally provided retirement, healthcare and other benefits.
Employer Implications
About 40% of formally employed individuals earn the minimum wage (National Commission on Minimum Wages data). In addition to higher direct salary costs, the substantial planned minimum wage rises would also increase covered earnings of affected employees under pay-related benefit programs such as retirement plans as well as the mandatory defined benefit termination indemnity (indemnización legal) and seniority premium (prima de antigüedad) programs. For all employees, covered earnings used in calculating the minimum seniority premium are capped at twice the minimum wage. Employers should consider the expected resulting labor cost increases and potential effects on the valuation of employer defined benefit liabilities. Regarding the envisioned reduction to the statutory workweek, the majority of companies surveyed by WTW already observe a five-day, 40-hour workweek in offices, while factories and retail businesses most commonly observe a 48-hour workweek over six days (five days in the case of factories). Again, labor costs could increase due to a potential resulting need for additional workers or overtime hours. Following on to the recently enacted constitutional amendments on gender equality, new employer mandates (e.g., equal pay reporting and pay transparency policies) are expected, but specific new requirements are yet to be announced; employers are encouraged to monitor these developments and review their HR policies accordingly.
