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Social Security / Healthcare / Other Required Benefits in Mexico

1. Legal framework

The social security system in Mexico is governed by the Social Security Law (LSS) of 1995, which went into effect on July 1st, 1997. The Mexican Social Security Institute (IMSS) is responsible for administering social security programs. The IMSS is a quasi-official entity, under tripartite (government-worker-employer) management, whose executive director is appointed by the President of the Republic.

A. Coverage

In general, social security coverage is compulsory for all workers, including members of production cooperatives, worker-run and joint worker-management-run companies, traditional agrarian communities of common ownership (ejidatarios), joint property communities (comuneros), small farmers (colonos), small property owners organized in groups, and local societies or credit unions covered by the Agricultural Credit Law.

2. Required Contributions

The social security system is financed from contributions by workers, employers, and the government. The contributions are based on salary levels. However, workers do not make contributions if they earn the monthly minimum wage in their geographic area. The maximum salary amount used to calculate social security contributions is 25 times the monthly minimum wage in Mexico City.

Within this minimum/maximum range, employee contributions are 2.00 per cent of earnings for retirement benefits, plus 3.15 per cent of earnings for disability and survivor benefits. For employers, the contribution rate is 5.15 per cent of covered payroll for retirement benefits. Government contributions amount to 7.43 per cent of covered earnings, plus an average flat rate of MXN$4.07 (depending on salary range) for each day a worker contributes for retirement benefits, and .125 per cent of covered earnings for disability and survivor benefits.

Contributions for day-care benefits are paid entirely by the employer and are equal to 1 per cent of covered payroll, subject to the minimum and maximum earnings limits.

3. Insurances

The social security system protects workers in the following matters:

  • occupational accidents and illnesses;
  • old-age, retirement, and survivor pensions;
  • disability;
  • sickness;
  • medical benefits;
  • maternity;
  • day care for children of insured workers; and
  • social services

4. Required Maternity/Sickness/Disability/Annual Leaves

A. Pregnancy Leave

Working mothers are entitled to forty-two days prior to childbirth as pregnancy leave, and the IMSS pays them 100% of their registered salary during such leave. Moreover, working mothers may request the employer transfer up to four weeks of pregnancy leave in order to enjoy them after childbirth.

B. Maternity Leave

Working mothers are entitled to forty-two days after childbirth as maternity leave, with the IMSS paying them 100% of their registered salary.

When returning from maternity leave, the employee is entitled to reinstatement, provided that not more than one year has passed since the date of delivery. Maternity leave is included in the length of service.

C. Medical or Sick Leave

An employee is entitled to sick leave depending on the type of illness and degree of disability. In case of illness or injury, an employee must obtain a doctor’s order from the IMSS. The IMSS determines the employee’s entitlement to sick leave as well as the amount paid to the employee during the illness or injury. The IMSS, not the employer, pays the employee’s income during the leave.

D. Injury at Work

The FLL provides leave due to:

(1) Occupational Injuries: defined as any accident or disease to which the employees are exposed in the course of their employment, or any consequences thereof;

(2) Industrial Accident: defined as any organic injury, functional disturbance (whether immediate or subsequent) or death, occurring suddenly in the course of the employment or as a result thereof (i.e., the place where or the time when the accident occurs is related to the employment); or

(3) Occupational Diseases: defined as any pathological condition arising out of the continued action of a cause that has its origin or motive in the employment or in the environment in which the employee is obliged to render his or her services.

E. Annual Leave

Workers are entitled to 6 vacation days after being employed for one year, and to 2 additional days for each subsequent year, up to a maximum of 12 days. As of the fifth year, the worker is entitled to 14 workdays’ vacation; for each additional group of five years, two more vacation days are added.

Employers must pay workers a vacation premium equivalent to 25 per cent of the salary earned during the vacation days.

Vacations must be taken on the date indicated by the employer, within 6 months following the worker’s anniversary with the employer.

5. Mandatory and Typically Provided Pensions

A. Disability Benefits

For disability benefits, the IMSS retains responsibility for the management and collection of contributions, but private insurance companies provide benefits.

Workers who were first covered by the social security system prior to July 1st, 1997 are eligible for a disability pension if they are assessed with a permanent 50 per cent reduction in normal earning capacity and have at least 150 weeks of contributions. Other workers are eligible for a disability pension if they are assessed with a permanent loss of at least 75 per cent of normal earning capacity and have at least 150 weeks of social security contributions, or if they are assessed with a loss of 50–74 per cent of normal earning capacity and have a least 250 weeks of contributions. The IMSS assesses the level of reduced earning capacity.

B. Retirement Benefits

Effective July 1st, 1997, the Mexican pension system was reformed from a defined benefit system, without any change for workers who were pensioned before that date. The current pension system in Mexico is a fully funded defined contribution system based on three pillars:

  • a minimum guaranteed pension for low-income workers;
  • mandatory individual savings accounts with competitive mutual fund management;
  • voluntary savings.

Normal retirement benefits are available to both men and women who have reached age 65 and who have at least 1,250 weeks of social security contributions. An early retirement benefit is available at age 60.

C. Survivor Benefits

Survivor benefits are payable provided that the deceased worker was a pensioner and made at least 150 weeks of contributions at the time of death.

For more information on these articles or any other issues involving labour and employment matters in Mexico, please contact Oscar De La Vega, Partner at De La Vega & Martinez Rojas S.C. (www.dlvmr.com.mx) at ODelaVega@dlvmr.com.mx
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