Understanding Aguinaldo: How Mexico’s 13th Month Pay Compares Across LATAM
For foreign employers expanding operations into Latin America, understanding end-of-year compensation is critical. One key concept you’ll encounter in Mexico is the “aguinaldo”, often referred to as the 13th month salary. But how does this compare to similar obligations in other LATAM countries? Here’s what you need to know to stay compliant and competitive.
What Is Aguinaldo in Mexico?
In Mexico, the aguinaldo is a mandatory annual bonus paid to all employees. According to Article 87 of the Federal Labor Law (LFT), employers must pay the equivalent of 15 days of salary, at minimum, by December 20th of each year.
This obligation applies regardless of the employee’s contract type or work hours, though part-time and temporary workers are entitled to a prorated amount.
Key legal features:
- It is non-negotiable.
- Applies to both remote and in-office workers.
- Failure to comply may result in fines and labor claims.
📌 Internal Resource: Learn more about Mexico’s Labor Law Compliance
How Does Aguinaldo Compare to Other LATAM Countries?
While the concept of 13th-month pay exists across Latin America, each country has its own rules, calculation methods, and tax implications.
| Country | 13th-Month Rule | Notes
|
|---|---|---|
| Mexico | Mandatory 15 days by Dec 20 | Subject to income tax; non-compliance can lead to fines. |
| Brazil | 13th-month salary split into two payments | Paid in November and December; fully mandatory. |
| Argentina | Called “Sueldo Anual Complementario” | Paid in two installments: June and December. |
| Colombia | Prima de Servicios | Paid in June and December; different from a 13th month bonus. |
| Peru | Full extra salary twice a year | July and December bonuses; highly regulated. |
| Chile | Not mandatory | Common practice in unionized workplaces but not required by law. |
📌 External Resource: ILO Report on 13th Month Pay Systems
Tax and Accounting Considerations
In Mexico, aguinaldo is:
- Subject to income tax (ISR) for the amount exceeding 30 days of the daily minimum wage.
- Deductible for employers if properly recorded.
- Prorated for employees who haven’t worked a full year.
Employers must reflect this obligation in their payroll records and tax declarations, ensuring alignment with SAT (Mexico’s tax authority).
📌 Internal Resource: Payroll and Tax Compliance in Mexico
Why It Matters for Global Teams
Employers managing multi-country operations must adapt to local compensation frameworks. Misunderstanding or overlooking local bonuses can lead to:
- Compliance risks
- Poor employee retention
- Damaged reputation
Having a local payroll expert or Employer of Record (EOR) can help ensure correct payments, especially when managing cross-border or remote teams.
📌 Explore: When to Use an EOR in Mexico for Payroll Compliance
Conclusion
While Mexico’s aguinaldo is similar to 13th-month pay in other LATAM countries, the legal framework, deadlines, and tax rules differ. Staying compliant requires an understanding of local labor laws and a commitment to fair, timely compensation.
Looking to simplify your LATAM payroll strategy? Global Touch helps foreign companies manage compliance, payroll, and benefits in Mexico and beyond