Overview of Labor Costs in Mexico

In this episode, Ricardo Rascon and David McQueen, discuss the costs of manufacturing in Mexico and what information companies need to know about labor costs before starting projects there. First, David discusses how the cost to manufacture in Mexico is closely tied to manpower. In Mexico, the labor law system is federal and you have to pay wages to employees in the form of pesos per day, not dollars per hour. The employer pays a rate per day that must equal or exceed the minimum wage, which could be around 172.87 pesos per day to 260.37 pesos per day on the border. Employees must work a certain percentage of days per week and the hours employees work are in the control of the employer. Another difference between the Mexican workforce is that employees work 48 hours per week, but they can’t overlap the night shift by more than 3 hours, otherwise, it is double pay. Employees can only work a maximum of 9 hours overtime per week and if overtime hours exceed that, then triple time applies. In addition, there is no temporary layoff in Mexico, but you have to terminate or retain employees. There is also no probation period for full-time employees, but contracts are restricted to a maximum of 6 months. In addition, any termination of an employee in Mexico requires severance pay, which is excluded for violence and intoxication on the job. David uses the phrase “hire slowly, fire quickly” when discussing terminations in Mexico. He advises you to do your due diligence before you hire them, verify their suitability for the job, and hire a contract first if you can so you don’t have to pay severance. Ricardo and David also discuss how most employers in Mexico are unionized and how the government encourages unions in Mexico. David states that there is business versus conflict-oriented unions in Mexico, but that the goal of most unions in Mexico is to negotiate wages and benefits. David also discusses how skilled trades in Mexico are a little harder to classify and determine wages and skills for. He suggests validating qualifications and then paying accordingly. He estimates that unskilled workers are paid around $2.65-5.25 per hour, semi-skilled workers are compensated between $3.00-6.00 per hour and skilled trade is higher. In conclusion, David states that in order to accurately estimate the salary of employees in Mexico, you first need to develop a staffing plan and a brief job description. Then, you will need to choose a location and consider the neighborhood and the kind of workers you will have (skilled or unskilled), and then get reliable help to have someone accurately estimate the cost of wages. He advises exploring all factors, and not just making decisions based on wages. Links: Read this blog post about wages in Mexico to learn more: https://insights.tetakawi.com/wages-for-manufacturing-in-mexico