Expanding operations to Mexico has been the right move for hundreds of manufacturing companies in recent decades. It has enabled different businesses, primarily in the automobile, aeronautics, and HVAC industries, to pay reduced expenses while still enjoying high levels of efficiency and productivity, resulting in excellent quality products.
One of the biggest draws of manufacturing in Mexico is the low labor expenses, which go for almost a fraction of what you’d otherwise be paying for laborers in the US. For an estimate of the cost advantage of labor across the border, try Tetakawi’s payroll expenses calculator for Mexico.
Paying Wages in Mexico
When paying wages in Mexico, it’s important to understand that they’re expressed as daily wages and are paid for 365 days a year. This daily amount is used to calculate salaries, as well as certain benefits such as overtime rates and severance pay.
That said, it’s also common for locals to reference their wages as a monthly or annual rate. Sometimes, they may not even be aware of their gross daily rate as they focus more on their final take-home pay, minus taxes and deductions.
Payroll Expenses in Mexico
Much like in the US, salary isn’t the only financial expense you’ll incur when calculating payroll. You also have to consider other mandatory and additional benefits, such as paid leaves, overtime pay, and bonuses. Here’s what you should know about payroll expenses in Mexico:
Salary
The average salary of unskilled laborers in Mexico is $4.90 per hour—and that’s in the border regions; it goes even lower at locations further away from the US. Plus, the rate is already above minimum wage (which even grew 20% at the beginning of 2023) in the country at ₱207.44, or approximately $11.70, a day. This is a stark contrast to the direct manufacturing labor wage in the US, which goes to around $17.40 per hour.
Paid Leave
Employees are entitled to at least twelve days of paid leave a year, of which there are seven required by the government as holidays. Generally, workers are given six days of paid vacation after their first year, with more leave days added the longer they stay with their employer.
Overtime
In Mexico, a normal work week ranges from forty to forty-eight hours a week, which can be divided into a maximum of six days a week. Outside of these, not more than three hours a day or nine hours a week, are considered overtime and will require the relevant pay.
Bonuses
Employers are mandated to pay employees Aguinaldo pay, which is an end-of-year bonus calculated based on the number of days they worked that year.
Calculating Payroll in Mexico
The cost savings in labor can make a significant impact on your company’s operational expenses, which is why moving to Mexico may be a good idea for your business. Know what you can expect to pay (and save) by using Tetakawi’s payroll expenses calculator for Mexico.
