Termination pay (Finiquito) amounts I can calculate for employees. Mexican labor laws are pro worker. This is why employment contracts are so important identifying hours and days of work, duties, expectations, etc. And when violations of the contract they are noted in writing, they are to be presented to employee and signed. If the employment agreement is not in writing the workers rights will take priority over the business.
Employees who voluntarily resign their jobs, as well as those who are justifiably dismissed with cause, are only entitled to accrued benefits up to date of termination. When an employee is terminated when work is time specified, employment such as a specific building project, or just cause, that is well documented, then no severance is required.
Therefore, there is the need for an employment contract specifying hours and days of work, duties, etc. Changing the terms and conditions of employment, such as reduction of hours / pay requires payment of full severance unless at employee’s request and even though the employee may continue working.
Finiquito (Severance Pay)
Unless termination is voluntary or justified as per list below, termination pay includes 3-month’s salary plus 20 days for each year worked plus prorated vacation and Aguinaldo Christmas pay. Employees with 15 or more years of seniority who are dismissed with or without just cause, or who resign, are also entitled to a seniority premium equivalent to 12 days’ salary for each year of service; however, the daily wage is capped at twice the amount of the minimum daily wage.
To calculate daily wage (salario diario) divide total weekly pay by 7 (even if employee works 6 or less days per week). Example: a person works only 1 day a week making 300 pesos. The wage used in the calculator would be 300/7 = 43 pesos. If that person works 3 days a week making 300 pesos a day that is 900 / 7 = 129 pesos per day. And the wage at time of termination is used to calculate all payouts even if the person in previous years made less or worked less hours.
Severance Pay Calculation
Please include an additional 12 days of payment per year only when a person has 15 or more years of employment regardless of reason for termination. The amount is capped at two times the daily minimum wage. It is not to be calculated when a person has worked less than 15 years and eliminate that amount from the total amount the calculator provides. Here you may calculate finiquito.
Termination pay must be paid at the time of termination or regular salary shall continue until the termination is paid in full. If the compensation is not paid when the employee is dismissed (e.g. when there is a labor lawsuit), then the employer is to pay all salaries that would have been earned during the period in which this delay took place (assuming that the employee won the labor lawsuit), up though the date of the payment. If the employee quits voluntarily, termination pay is not required. It is highly recommended you have employees sign a receipt for the payout, along with a signed and witnessed letter ending the employee-employer relationship.
Federal Labor Law Causes for Termination
- the employee provides false references regarding their abilities, skills and qualifications for the job;
- the employee is found guilty in the course of their employment of a dishonest or dishonorable action,
- violence, threats or ill-treatment towards the employer or any member of the employer’s family or top management or managerial personnel of the work place, except in cases of provocation or self defense.
- the employee is guilty of any acts mentioned in the proceeding items towards any co-workers;
- the employee is guilty, outside of the work place, of any acts mentioned in item b) above towards the employer, any member of the employer’s family or the top management or managerial personnel, in the said acts are of such a serious nature as to render the fulfillment of the labor contract impossible;
- the employee intentionally causes material damage to the buildings, machinery, tools, raw materials or other items in work place;
- the employee causes damage of a serious nature, acting without malicious intent, but with negligence which is the sole cause of the damage;
- the employee negligently or carelessly endangers the safety of the work place or persons therein;
- the employee is guilty of immoral conduct in the work place;
- the employee reveals trade secrets or communicates matters of a private or proprietary nature to the determent of the business;
- the employee is absent for more than three times in a period of thirty days without the employer’s permission or without sufficient excuse;
- the employee refuses to obey the employer or their representatives without sufficient reason in matters connected with the services the employee has agreed to provide;
- the employee refuses to adopt preventive measures to follow the procedures put in force for prevention of accidents or disease;
- the employee attends work intoxicated or under the influence of a narcotic or harmful drug, unless they have a medical prescription, in which case, they must inform the employer of their prescription and submit a certificate signed by a doctor;
- an executory judgment sentencing the employee to a term of imprisonment preventing them from fulfilling their obligations under the labor relationship is issued;
- other grounds similar to those specified in the preceding paragraphs, if such grounds are of equal gravity and entail similar consequences.
Notice of dismissal must be delivered to the employee at the moment of dismissal setting out the precise causes by which the employee is being terminated.
Procedural requirements for dismissal (termination) Under the Federal Labour Law, the employer must give the employee notice in writing of the ground for dismissal, or the Labour Board must issue a termination notice, which must comply with specific requirements (for example, it must include a detailed description of the facts, dates, time and manner in which the employee incurred the ground for dismissal). If the notice is presented directly to the employee, two witnesses must be present.
The employer must dismiss the employee within 30 days from the date of the employee’s misconduct or from the date the employer became aware of it.
If the employee refuses to accept the notice of dismissal, the employer has five days to file it with the Labour Board. Failure to follow this procedure will presume a wrongful dismissal, and the employee will be entitled to full severance payments.