Paying Vacation Time Accurately in Mexico: Legal Requirements for Employers
Foreign companies operating in or employing talent from Mexico must be aware that vacation pay is not just a benefit—it’s a legal obligation regulated by the Mexican Federal Labor Law (Ley Federal del Trabajo, LFT). Failing to comply with these requirements can lead to serious fines, lawsuits, or labor disputes.
In this article, we break down the vacation pay rules in Mexico, how they differ from other countries, and how global companies can stay compliant when managing remote, hybrid, or on-site teams.
Understanding Vacation Entitlements in Mexico
Under Article 76 of the Federal Labor Law, employees in Mexico are entitled to paid vacation days based on their length of service:
| Years of Service | Minimum Vacation Days |
|---|---|
| 1 year | 12 days |
| 2 years | 14 days |
| 3 years | 16 days |
| 4 years | 18 days |
| 5–9 years | 20 days |
| 10+ years | +2 days every 5 years |
These vacation days must be taken within six months after completing the work year, unless otherwise agreed in writing.
🔗 Internal Link: For more on employment milestones and benefits in Mexico, see our guide: Employee Lifecycle Compliance in Mexico
How Vacation Pay Is Calculated
Mexican law mandates that employees not only receive their regular salary during vacation, but also a mandatory vacation bonus called the “prima vacacional.”
Legal Requirements:
- Full daily wage during vacation
- Vacation premium (prima vacacional): At least 25% of the vacation wage
Example: If an employee earns MXN $1,000 per day and takes 12 days of vacation:
- Base vacation pay: 12 x $1,000 = $12,000
- Vacation bonus (25%): $3,000
- Total due: $15,000
📘 Pro Tip: Companies can offer more than 25% as part of competitive benefits, but not less.
Recordkeeping and Payment Timing
Vacation pay must be:
- Paid in advance or during the vacation period
- Reflected in payroll receipts
- Recorded in employee files for audit and inspection purposes
🔗 External Source: Review vacation compliance standards from Mexico’s Labor Ministry (STPS)
Non-Compliance Penalties
Failing to meet vacation pay obligations may result in:
- Labor lawsuits from employees
- Fines imposed by the STPS or IMSS
- Tax audits questioning payroll practices
According to Article 992 of the LFT, non-compliance can carry fines up to 5,000 times the UMA, or around MXN $540,000 (approx. USD $31,000) in 2025.
🔗 Internal Link: Learn about Common Payroll Mistakes in Mexico and How to Avoid Them
Remote and International Teams: Special Considerations
Companies hiring Mexican employees remotely from abroad must still comply with Mexico’s vacation pay laws. It is not sufficient to apply vacation policies from the employer’s country.
If you’re using a foreign payroll provider, ensure they:
- Respect Mexican labor entitlements
- Calculate the prima vacacional
- Localize payroll slips per SAT and IMSS requirements
🔗 Read: Can Foreign Companies Pay Mexican Workers via U.S. Payroll Providers?
Final Tips for Employers
- 📅 Use automated tracking to calculate vacation accrual
- 🧾 Issue clear payroll receipts with vacation breakdown
- 📜 Include vacation policies in employment contracts
- 🛡 Consider partnering with an Employer of Record (EOR) for better compliance
Need Help Staying Compliant?
Understanding Mexico’s vacation rules is just one piece of the larger compliance puzzle. At Global Touch, we help foreign companies navigate Mexican payroll, HR, and legal compliance with confidence.
🔗 Contact us to learn how we can help you build and manage your team in Mexico—without legal headaches.