General Notes on Mexican Holiday Bonus (Aguinaldo) Pay

December 24, 2007
General Notes on Mexican Holiday Bonus (Aguinaldo) Pay

Article 87 of the Federal Labor Law (Ley Federal del Trabajo or LFT) establishes that employees have a right to an annual holiday bonus, whichmust be paid on or before December 20th of each year, and is at least equivalent to 15 days of salary. For employees who have not completed a fullyear of service, or those who leave the company prior to the holiday bonus year end period, they also have a right to receive a proportional part ofthe holiday bonus in conformity with the time they worked, however short such time may be. With this in mind, one may interpret that the spirit ofthe LFT regarding holiday bonus payments is to grant employees an additional payment in order to allow them to enjoy the year end holidays andpay corresponding expenses. Holiday bonus pay can be considered as a “blind” benefit, in that it is paid based on the time an employee has workedat the company during the year, not based on an employee’s qualifications or position, with the employer being obligated to make the payment toall employees under identical conditions according to the number of days they worked during the year. One important aspect of the holiday bonusis the fact that from the time an employee leaves his or her employment with the company, regardless of the time of year, the employee has the rightto receive a proportion of holiday bonus pay based on the time worked for the employer during the year. It is also worth noting that someemployers pay holiday bonus in greater amounts than the legal minimum, in some cases 30 or up to 60 days or more, in which case the employeeautomatically enjoys an acquired labor right that may not be reduced in any way in the future. (Note: Under Mexican law, once a benefit has beengranted, it may not be reduced or taken away.) The holiday bonus concept plays an important role in Mexican collective bargaining agreements andtheir periodic renewals given that many labor unions attempt to renegotiate such contracts every two years, requesting an increase in the number ofdays of holiday pay employees are entitled to receive. Given that the holiday bonus is a direct cost borne by employers, it is necessary to negotiate the holiday bonus pay carefully and evaluate payroll costs for making the holiday bonus payment. Finally, it is especially important to note thatholiday bonus pay, in addition to being paid in the established term and customary form, must also be considered for purposes of paying employeeseverance indemnification, which includes three months’ wages and 20 days’ salary per year worked and that, in conformity with Article 84 of theLFT, holiday bonus pay forms a part, together with all of the other payments received by the employee, of the total daily salary used to computeseverance payments.

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