Source: Littler Mendelson PC
December 1, 2023, the National Minimum Wage Commission (“CONASAMI” for its acronym in Spanish) agreed to increase the general minimum wage to $248.93 pesos per day and $374.89 pesos per day in the Free Economic Zone of the Northern Border, effective January 1, 2024. This represents a 20% increase in both zones.
If an employee is paid above the minimum wage, there is no requirement to increase his or her salary. The increase applies only to minimum-wage jobs which could come into play as a reference point in collective bargaining negotiations between employers and labor unions.
The Free Zone of the Northern Border involves 43 municipalities: a) Baja California: Ensenada, Mexicali, Playas de Rosarito, Tecate and Tijuana, b) Sonora: Agua Prieta, Aitar, Caborca, Cananea, General Plutarco Elías Calles, Naco, Nogales, Puerto Peñasco, San Luis Río Colorado, Santa Cruz and Sáric, c) Chihuahua: Ascension, Coyame del Sotol, Guadalupe, Janos, Juárez, Manuel Benavides, Ojinaga and Praxedis G. Guerrero, d) Coahuila: Acuña, Guerrero, Hidalgo, Jiménez, Nava, Ocampo, Piedras Negras and Zaragoza, e) Nuevo León: Anahuac, and f) Tamaulipas: Camargo, Guerrero, Gustavo Díaz Ordaz, Matamoros, Mier, Miguel Aleman, Nuevo Laredo, Reynosa, Río Bravo and Valle Hermoso.
Impact on Collective Bargaining, Benefits, Taxes
Unions take the minimum-wage increase as a reference for collective bargaining, “so we anticipate harsh negotiations for the revisions to collective bargaining agreements.
In addition, the minimum-wage increase will serve as an index affecting certain payments, such as taxes, that employers must pay to authorities, because they’re linked to salaries, once again, only the minimum wage got increased, not all salaries.
The increase shouldn’t affect employee benefits, except for Christmas and vacation bonuses that are linked to workers’ base salaries.
Social Welfare Benefits Not Based on Minimum Wage
Social welfare benefits must now be measured with the Measurement and Update Unit (Spanish acronym UMA), created in 2016 to reduce the inflationary impact of minimum wage increases. Therefore, benefits such as savings funds and grocery vouchers that were originally based on minimum wages now increase according to the UMA.
Companies must review and adjust their payroll practices to comply with this new minimum wage increase, which could also affect benefits such as the savings fund and food coupons depending on how these benefits have been agreed upon with employees and unions.
Positive Implications for Foreign Manufacturing and Maquiladoras
Interestingly, this wage increase also has significant implications for foreign manufacturing companies, especially maquiladoras, in Mexico. Many of these companies already offer wages above the minimum, mitigating the direct financial impact. Moreover, this wage hike can lead to several benefits:
- Enhanced Workforce Productivity: With increased wages, employee satisfaction and morale are likely to improve, potentially leading to higher productivity.
- Attraction of Skilled Labor: Competitive wages can attract more skilled workers, enhancing the overall quality of the workforce.
- Boost to the Local Economy: Higher wages mean increased spending power, which can lead to a more robust local economy, benefiting these companies directly and indirectly.
- Positive Brand Image: Aligning with higher wage standards can improve a company’s reputation, particularly among socially conscious consumers and partners.
Looking Ahead
As Mexico steps into 2024 with this significant wage increase, it sets a progressive example in labour economics. It’s a strategic move that not only uplifts workers but also provides a fertile ground for businesses to thrive, enhancing the overall economic landscape of the country.
Symbiosis focuses its efforts in terms of export promotion, assistance with direct investment, and internationalization of Canadian companies. With deep cultural and business ties with the region and an understanding of the challenges presented to Canadian clients doing business in Mexico. Our team is positioned to timely and efficiently assist clients in providing counsel and the legal tools to assist in their positioning in Mexico. For further information, please contact us or book a call/video conference with a member of our team, it would be our pleasure to meet you and talk about your project.
