On July 22, 2020, the Mexican government announced that it would send to Congress an initiative to reform the Social Security Law [in Spanish: la Ley del Seguro Social], seeking to strengthen the workers’ retirement pension system.

The goal of this reform is to increase the guaranteed minimum amount of the retirement pension, as well as to make the right to it more accessible for workers; this would be achieved by taking into consideration the following changes:

1.- Increase in the contributions to the worker’s retirement fund.

Currently, tripartite contributions allocated for retirement pensions amount to 6.5% of the workers’ wages, broken down as follows:

5.15% – contributed by the employer

1.125% – contributed by the worker

0.225% – contributed by the government

The reform initiative seeks to increase the percentages contributed by the employer and the contribution of the government will be segmented according to the workers’ income level, as follows:

5.15% to 13.875% – contributed by the employer (income from 1 minimum wage to 25 UMA´s)

1.125% – contributed by the worker

8.724% to 1.798% – contributed by the government (income from 1 minimum wage to 4 UMA’s)

Workers’ contributions are not modified, and the percentages will gradually increase over an eight-year period.  It is important to point out that the government’s contribution will be higher when the worker’s income is lower.

2.- Reduction in the number of quoted weeks to qualify for a retirement pension.

Currently, for a worker to be entitled to a retirement pension, he/she must, among other requisites, have a total of 1,250 quoted weeks. The modification to this requirement would reduce the number of quoted weeks to 750 and, in a ten-year period, would gradually increase to 1,000 quoted weeks.

With this, the government seeks to give more people access to a retirement pension.

3.- Increase the amount of the guaranteed minimum retirement pension.

Today, the minimum guaranteed retirement pension is MXN 3,289.00 per month on average. The reform initiative proposes an increase based on age, the number of quoted weeks, and the base salary of the workers that, on average, is MXN 4,345.00 per month.

These are the three key items of the reform. It is important to emphasize that this is part of an initiative that must be approved before its implementation. At Payroll Plus MX, we will keep you updated on this initiative, which we consider will have a significant impact on both employers and workers in Mexico.