Before December 20th, all companies operating in Mexico are under the obligation to pay the Year-End bonus to their employees.
This obligation arises from the tradition of certain employers who gave money as a token of appreciation during the month of December in order aid employees with Holiday festivities and vacation; legislators instituted this initiative as mandatory in 1970.
In 1975, legislators published the current law article establishing this obligation, and it literally reads: “Employees shall be entitled to a Year-End bonus to be paid before December 20th, equal toat least 15 days’ worth of salary. Those who have not rendered services for a full year, regardless of whether they are working at the time the year-end payment is made, shall be entitled to receive a portion thereof, pursuant to the period of time they worked, regardless of the length of this period.”
In accordance with the preceding article, regardless of the date the employee entered the company or the date of the termination of the legal relation, the employee is entitled to a portion of this item, in addition, there are certain jurisprudences clarifying the treatment for absence whether due to disability periods or absences, justified or not.
For example, in the case of justified or unjustified absences or leave due to general illness; the employer is authorized to discount these days for the payment of the year-end bonus, in the understanding that the benefit shall only be paid for the portion of days effectively worked.
In the case of maternity leave, the Federal Labor Act states that during the period working mothers are absent they are entitled to receive their full salary, that is, not only women are protected as to salaries, but also as to their entire benefits. The same is the case for leave due to Labor Risk, courts approve counting these days towards payment as the employee’s condition is the result of a consequence caused by the employer and not the employee.
In addition to the year-end bonus, companies shall calculate the annual Income Tax for employees and compare against the amounts with held on account of the annual tax, in order to make the corresponding adjustments. However, calculation for employees is not performed in the following assumptions:
a) When they have begun rendering services after January 1st of the corresponding year or they have ceased to provide services to the withholder before December 1st of the year for which the calculation is made.
b) When they obtained annual income for the items on this Chapter in excess of $400,000.00.
c) Upon written notice to the employer stating the employee will file the tax return independently.
d) Employees who have rendered services to two or more employers simultaneously.
If you need further information in this regard, please contact us and we will be pleased to assist you with any concern or any other labor-related issue.