September 27, 2023

Reduction of Workweek in Mexico

Holland & Knight Alert
Humberto Morales | Francisco García

Currently under discussion in Congress in Mexico is the reform that reduces the workweek from 48 to 40 hours, which would have a significant impact on workplaces, among which the most significant are the following:

  • the need to hire a greater number of employees
  • the need to work overtime
  • the distribution of hours in each type of work shift (day, night and mixed)
  • possible impact on weekend premiums

It is important to mention that this brings with it an impact on labor, since from the perspective of social security and taxes, it has certain implications, such as:

  • integration of the contribution base salary, once the limits established in the Federal Labor Law are exceeded (more than three hours and more than three times per week)
  • positive economic impact on employees, since a greater portion of their earnings could be exempt from income tax (Impuesto Sobre la Renta or ISR), pursuant to Article 93, Section I of the Income Tax Law
  • necessary analysis of the possible impact on income tax rates applicable to employees, by increasing the amount of taxable remuneration payments
  • negative economic impact for the employer, since it represents the possibility of making a greater number of double or triple overtime payments, or opting for the need to hire a greater number of employees

Since this is a constitutional amendment (i.e., it amends Article 123 of the Constitution), in order to be approved, it must be voted on favorably by a two-thirds majority, both in the Chamber of Deputies and in the Senate.

In addition, this would imply modifications to individual labor agreements and internal regulations, among others.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.

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