By Brooke Gazer
The minimum wage in Mexico is $102.68 MXN (pesos) per day (it is higher along the U.S. border, and it differs by degree of urbanization in an area and employment status of individuals, e.g., apprentices). The term “minimum wage”, however, is a bit of a misnomer. Very few people actually work for $102.68 MXN per day (roughly $5.40 US).
Most commonly, the minimum wage is used for administrative purposes; for example, employer contributions to social security are currently capped at 24 times the minimum wage. The minimum wage is used to calculate fines for a wide variety of offences, whether or not they are employment related. Rather than specify an amount in pesos, the government levies fines as a multiple of the minimum wage; for example, someone charged with an offence might be told to pay 730 minimum wage days. Which would be $74,956.40 MXN (± $3986 US). With inflation, the minimum wage might increase but the base rate for every fine does not need to be recalculated each year.
In addition to salaries, employers have additional costs related to their pay role. Most jobs include some form of health care and retirement benefits. The Instituto Mexicano del Segura Social (IMMS) and Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado (ISSSTE), which cover private and public workers, respectively, are the most common programs in Huatulco. This is a benefit that is not calculated as part of an employee’s earnings, but it can add up to 30% to the employer’s fiscal obligation.
Every employee in Mexico is entitled to 10 statutory holidays each year, plus it is mandatory for employers to give 6 days’ paid vacation in the first year. Workers earn an additional 2 days for each subsequent year of employment, so after 6 years, an employee gets 3 weeks’ paid vacation. In addition to holidays, everyone receives an aguinaldo on or before December 20. This is an annual bonus of at least two weeks salary.
When an employee leaves a job, an employer is obligated to provide a finiquito, a document that “ratifies” the end of the employee-employer relationship. The finiquito is accompanied by a payment comparable to severance pay; the amount may be negotiated, but it is generally 3 months’ salary. After someone has put in 3 years, he or she is entitled to an additional 12 days of severance per year. So, if an employee leaves after 6 years, they should receive about 5½ months’ salary. It doesn’t matter whether the person quits or is terminated, the requirement is the same. If someone is terminated with just cause (theft or missing multiple days without reason), they might not receive their finiquito payment, but it takes a lot of documentation on the part of an employer to avoid paying. Mexican law almost always sides with labor.
Like most of the developed world, Mexico has an income tax system, collected by the Servicio de Administración Tributaria (SAT). The tax is called the Impuesto sobre la Renta (ISR), and it ranges from 2% up to a maximum of 35% for individuals. For an average wage earner, after deductions, ISR takes between 10% and 22%. Most corporate employers calculate and deduct income tax from their employees, paying it directly to ISR.
Tax laws in Mexico are incredibly complex and this is where a good accountant comes in. There is a joke in Mexico:
How do you find a good accountant?
You ask them what is 2+2 and the answer is not 4, it’s “What would you like it to be?”
We have a great accountant and although she can’t perform the magic implied by this riddle, Norma Cortez is indispensable – she provided me with the following salary ranges. In all cases, the amounts referred to are monthly salaries before tax deductions.
As one would imagine, at the bottom of the totem pole are those with less education. These would include maids in hotels, unskilled laborers who sweep the streets and carry cement on a construction site, and typists or low-level office workers. These people exist on roughly $5,000 MXN (± $262 US) per month, and may work their way up to $8,000 MXN (± $420 US).
- Electricians and skilled albaniles (stonemasons) are generally paid by the contract, but the salary ranges between $8,000 to $10,000 MXN (± $420 – $524 US) per month, although it could be more depending on the complexity of the job. The maestro in charge might earn up to $18,000 MXN (± $945 US).
- Drivers for the ADO bus line earn between $11,000 and $17,000 MXN (± $577 – $892 US); panga captains fall into a similar category. Including benefits and bonuses, local policemen earn between $13,000 and $23,000 MXN (± $682 – $1,207 US). Based on seniority, a nurse at IMMS gets between $9,000 and $23,000 MXN ($472 – $1,207 US).
- Public school teachers in their first few years are paid in the rage of $6,000 to $8,000 MXN ($305 – $420 US) but with more seniority, they might reach $15,000 MXN ($787 US). Depending on the school, a principal could earn anywhere from $20,000 to $56,000 MXN ($1,050 – $2,939 US). Private school teachers tend to be paid by the hour; working a six-hour day would provide an income between $1,700 to $2,900 MXN ($89 – $152 US), depending on the school and their experience.
- A bank manager in a branch like Huatulco might only earn about $9,000 MXN ($472 US) but with bonuses this could be stretched up to $19,000 MXN ($997 US). Hotel managers earn as little as $20,000 MXN ($1,050 US) in small hotels, but five-star hotel manager could make as much as $80,000 MXN ($4,198 US).
- An experienced secretary with a large company, a front desk clerk at a hotel, or an office worker who deals with the public would make between $7,000 – $10,000 MXN ($367 – $525 US). This could include some of the people you deal with at Tel Mex or CFE. Like teachers, with years of seniority, they could work their way up to $15,000 MXN ($787 US). In offices like FONATUR, a low-level administrator might earn between $8,000 and $20,000 MXN ($420 – $1,050 US), but directors’ salaries could reach a whopping $120,000 MXN ($6,298 US)
- Professionals like doctors, accountants and lawyers are more difficult to pin down. Doctors at IMMS earn between $12,000 and $30,000 MXN ($630 – $1,574 US), depending on their specialty, but they usually have a private practice in addition to their salaried day job. For lawyers and accountants, it really depends on their account list. If they are working within a corporation, they might earn between $8,000 and $20,000 MXN ($420 – $1,050 US), but some lawyers and accountants have several clients. These might pay up to $30,000 MXN ($1,574 US) each per month. Of course, these professionals have additional expenses like rent and employees.
Obviously working for yourself offers more flexibility and the possibility of putting more hard-earned pesos in your pocket. Mexico has an entrepreneurial spirt and some business owners do exceptionally well. All too often, however, small business close before they are able to establish themselves. Sometimes this is due to inexperience, but it can also result from insufficient capital.
Credit in Mexico is both difficult and expensive and startup costs always exceed one’s highest expectation. The hard truth is that some aspiring new business owners may not even reach that misunderstood minimum wage number in their effort to be independent. This especially applies to those trying to balance the high and low seasons in a tourist town like Huatulco.
Brooke Gazer operates Agua Azul la Villa, an ocean-view bed-and-breakfast in Huatulco (www.bbaguaazul.com.)