Manufacturing using the services of a Mexican shelter company in the Bajio

There an abundance reasons that global manufacturers choose to initiate production operations through a Mexican shelter company in the Bajio.

In a world that is becoming increasingly specialized, it is a good option for small to mid-sized operations to focus on what they are in business to do.   They should concentrate on producing product, instead of investing in industrial buildings, paying international attorneys’ fees for services, dealing with accountants and creating their own Mexican human resources infrastructure.  Using a Mexican shelter company in the Bajio is a practical way for medium-sized companies to enter a growing market.

Reasons abound for opting to choose a Mexico shelter program to set up production in the Bajio, and elsewhere in Mexico. Beyond offering a complete set of services, shelter companies in Mexico ensure foreign companies’ adherence to labor law in Mexico.

Mexican Labor rules are defined by the Ley Federal de Trabajo and is supported by other laws.  Although in some cases it is not flexible, it hasn´t prevented many foreign companies, and thousands of non-Mexican sole proprietors, from establishing profitable operations in Mexico. Many manufacturers enter into partnerships with a Mexican shelter company in the Bajio, or in another part of Mexico, to help them do so.  It is worth noting that any company entering Mexico to do business should understand both the immediate and historical implications of the Ley Federal and other important, if lesser-known, laws.

First, a summary:

The revolution in Mexico that commenced in 1910 led to the establishment of Article 123 of the Constitution of 1917. That section of the Constitution gave workers the right to unionize and strike. It also provided for the safeguarding of children and women, the establishment of an eight-hour workday and the payment of a living wage. It was not until 1931, however, that the Ley Federal was put into effect. The law provided for the formation of Boards of Conciliation and Arbitration (Juntas de Conciliación y Arbitraje) made up of employers, representatives of the government, and unions. Those boards have not changed much since their initial formation.

Among features of the Ley Federal and the more recent Social Security law that are that are considered are:

The Dismissal of an Employee:

Letting an employee go can be costly for Mexican shelter company in the Bajio, as well as for companies located elsewhere. In some instances, having a presence in Mexico under through an association with a service provider can lessen this exposure to a certain degree.

If an employee is dismissed without cause, he or she is eligible to collect three months” pay. If that sum is not paid at the time of dismissal, then an employer may be liable for the original sum, plus all wages that would have accumulated had the worker been present in the meantime. If the worker has been on staff for less than a year, the employee is to compensated with one half of the salary of the period he received from the company. If this period is greater than one year, then the compensation is to be equivalent to a sum that is equal to six months’ salary of the first year and twenty days per year for each of the additional year of service. The compensation is based on the base salary of the employee during this period. Because a shelter company in the Bajio and the rest of Mexico is, for the purpose of Mexican labor law, the employer of record, the shelter company can, when possible, reallocate workers from companies from those that are laying off employees to other client companies that have an added demand for manufacturing workers.

The Work Day in Mexico

For every 6 days worked (Monday through Saturday), employees are entitled to one off with full payment.

The Payment of Overtime in Mexico

If an employee works on a holiday, he is to be paid at three times the established hourly wage. Any hours worked over eight for 1 day are compensated at double time.

If an employee leaves a shelter company in the Bajio, or elsewhere in Mexico, the company must compensate him or her with the proportionate part of vacation pay and profit sharing for the year-end. If an employee has labored for more than fifteen consecutive years, the worker shall receive an additional sum equal to twelve days salary (calculated on the last salary received prior to resigning) for each year that he or she has been with the company.

Vacation Pay

Mexican employees of a shelter company in the Bajio, and elsewhere, have a vacation each year, which is not less than six working days. For every year an employee labors, he or she is to receive an additional two days of vacation time.  At the end of four years, he or she is the recipient of two working days for every additional 5 years’ experience. In addition, the employee will be paid no less than a 25% vacation premium calculation on his or her salary during the period in question.

The Sharing of Profits

Employees are to be compensated with ten percent of the employers’ profits each year. Included in the payment are works who worked 60 days or more during the applicable period. The distribution is to be made within 60 days of the date workers are required to make their income tax payments. These profit sharing monies do not count for taxation purposes when it comes to determining annual salary amounts.

Union Representation

A labor union is permitted in the workplace provided that at least twenty percent of company employees are members. Even so, the registry process is slow and complex.

Mexican Social Security Law

The Mexican Federal Social Security system, which is made up of nationwide medical personnel and facilities, is funded by a mandatory charge to the company. In addition, employers are required to contribute to the Instituto Nacional para el Fomento a la Vivienda para Trabajadores.  This organization manages the national housing fund. Together, these charges account for about 29 percent of an employee’s base. As such, salary is considered to be 129 percent of base salary.

Manufacturing companies that establish wholly-owned entities rather than through a Mexican shelter company in the Bajio, or elsewhere in Mexico, must have staff that is very well versed in Mexico’s labor law in their organization, as well as have access to persons that have a knowledge of Mexican law. Shelter companies in Mexico provide firms that produce goods in the country through their turnkey services with the guidance that they need to navigate these issues, as well as a wide class of others.