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New labor law requires IMSS be paid to domestics

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Congress has approved a new labor law requiring that IMSS and other benefits be paid to cleaners, cooks, live-in maids, babysitters and gardeners. Will we have to pay to the employee or have an account track and pay it? This will result in domestics being laid off or getting reduced hours all over Mexico but especially places like Lakeside where wages are significantly higher than other parts of Mexico

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4 hours ago, FlyFree said:

Will this apply to part time domestic help and gardeners? 

How does one differentiate between part time and full time for this labor force? And does anyone.... or any large percentage of  people....actually HAVE a full time domestic or gardener? 

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I have been posting about this subject for over a year, as my housekeeper told me then she wanted IMSS and other coverage.  I spoke with a Mexican seguro agent who gave me a lot of info about it.  It will make you rethink whether you want a cleaning person at all!   Here is some info:

--Yes, it is a law.

--Yes, part-time AND full-time domestics will have to be covered.

--The employer--YOU--will be responsible for the vast majority of the coverage.

--Under current Mexican law the employer's contribution is approximately 36% ABOVE the salaryWeekly salary 300 pesosYOU will pay another 108 pesos, total 408 pesos.

--The government understands that this new law is onerous and, if not easy to put into practice, the overwhelming majority of domestics will lose their jobs.  So:

 

--A pilot program to facilitate ease of use by employer--YOU--has been implemented in Mexico City.  Some details include:

1)  Making the domestic worker responsible for record-keeping and deposit of contributions.  Very vague details, but it works something like this:  YOU give the domestic the extra money, and she/he deposits it with a deposit slip, a receipt of which is returned to you, the employer, to show that the domestic is not pocketing the money. 

2)  The domestic also keeps track of all payments made on her/his behalf..probably in something like an old-fashioned savings passbook?     (Many don't have internet or computers)

3)  I believe the trial program amount (I read Spanish quite well but there are still some phrases that baffle me) requires the domestic to contribute 15% and the employer to contribute 15%,, which totals less than the employer's typical 36% IMSS contribution

 

Again, this is my interpretation of what I have read and translated in the economics and business journals, so I might be off a bit.  However, the gist of it is that yes, we will be affected.  So will the domestics.   I believe it will adversely affect them, especially in this area, as we are  (based upon what I read in the journals) paying the domestic workers by a great deal more than is paid throughout other areas of Mexico.  There was a range of wages paid to domestic workers throughout the nation, and this area was in the highest 10% of wages paid to domestic help. 

To put it in scale, a full-time barista at a Starbucks in downtown Guadalajara makes approximately 6000 pesos a month.  This is for at least 40 hours a week.  Break it down and that is less than 37.5 pesos an hour.  Of course, Starbucks is also paying IMSS at 13.50 per hour, for a total wage of 50 pesos an hour. Another wage description  someone recently posted that a doctor working full time (consultorio) at Farmacia Simillares makes a monthly salary of 11,900 pesos.  That is less than what my domestic worker--who demands an annual increase every year, because it is a "mandatory law" (it isn't)--makes when she adds all her monthly clients together.  Remember, your domestic is also entitled to bus fare to- and from- your home, as well as annual vacation pay, blah blah blah, regardless of how many hours he/she works for you. 

I don't know how this is going to pan out.  It is reaching the tipping point of an unsubstainable economic policy.  A doctor with a university degree earning less than a domestic worker who may or may not have completed secundaria?

If anyone has any thoughts on this or more information, please post.  Thanks!

 

 

 

 

 

 

 

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My attitude is the same as CanuckBob of TOB, "If my maid and gardener approach me on this I will be telling them to either set themselves up as "independent contractors" or good bye."

Luckily, my cleaning lady's husband has full coverage from his job for his whole family. She is amazed that I pay her according to the labor laws with bonus and vacation. None of her Mexican clients pay her more than her hours.

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On 5/16/2019 at 10:50 AM, geeser said:

Congress has approved a new labor law

Does anyone  know the official (not news or opinion articles) link to this new law?

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First part stating that the patron is required to pay seguro for the employee.   http://sil.gobernacion.gob.mx/Archivos/Documentos/2018/11/asun_3775781_20181113_1541683290.pdf

Edited: to list the particular articles of the (new) law saying the employer is responsible for the seguro payment

https://mexico.justia.com/federales/leyes/ley-federal-del-trabajo/titulo-sexto/capitulo-xiii/

The actual law was passed December 5, 2018 and I am still searching for it. 

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There still needs to be clarification as to what is called NOB, "Causual/randon labor." No fixed schedule.  But, if you have him/her work regularly every week or two weeks, and "regularly" is the operative term, then this may apply to expats.

Knowing Mexico, it could also be a paperwork jungle to do it "right."

The part that might concern some, are the (hearsay) stories of random maids and gardeners "suddenly" deciding they want back pay and benefits and you get a visit from the Ministry of Labor or whatever it's called. I understand this sort of happened a few years ago at a restaurant in the Riberas area and the owner ended up having to close down for the amount of $$ that was assessed.

As was pointed out above, maids/gardeners get very much more than the daily minimum wage here in "Gringoland."

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Thanks for the heads up.  I pay my maid and gardener vacation and Christmas aquinaldo, as dictated by law.  I pay the maid's bus fare, as dictated by law (supposed to be paid, believe it or not). I let them have paid sick days, up to 5 a year.  I have given them raises for the COLA due the first of the year, per my maid.  She is wrong, and either telling a fib or ignorant.  She is a solid worker but not a great worker.  She is asking for too much, and I won't give anymore. I will be happy to pay IMSS if she wants to reduce her hours and pay by the amount I will pay IMSS.     

I don't see how this is going to work.  In a previous post we were all discussing what we forecast to happen, and there will be a rise in 3rd party agencies who hire the maids and farm them out, taking a cut.  So, wages (prices) will go up, because there will be a middleman.

This is a little off-topic, but Mexican law states that every year there is a mandatory wage increase for (non-domestic) employees.  Thus the average Mexican worker's wages go up after the first of the year.  I've also noticed that retail prices go up shortly thereafter.  So then the workers start complaining about higher prices!  I've often wondered why the workers don't put 2 and 2 together. 

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maids get more than minimum wages in Guadalajara as well and in San Cristobal de las Casas.

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3 hours ago, kimanjome said:

Thanks for the heads up.  I pay my maid and gardener vacation and Christmas aquinaldo, as dictated by law.  I pay the maid's bus fare, as dictated by law (supposed to be paid, believe it or not). I let them have paid sick days, up to 5 a year.  I have given them raises for the COLA due the first of the year, per my maid.  She is wrong, and either telling a fib or ignorant.  She is a solid worker but not a great worker.  She is asking for too much, and I won't give anymore. I will be happy to pay IMSS if she wants to reduce her hours and pay by the amount I will pay IMSS.     

I don't see how this is going to work.  In a previous post we were all discussing what we forecast to happen, and there will be a rise in 3rd party agencies who hire the maids and farm them out, taking a cut.  So, wages (prices) will go up, because there will be a middleman.

This is a little off-topic, but Mexican law states that every year there is a mandatory wage increase for (non-domestic) employees.  Thus the average Mexican worker's wages go up after the first of the year.  I've also noticed that retail prices go up shortly thereafter.  So then the workers start complaining about higher prices!  I've often wondered why the workers don't put 2 and 2 together. 

That only applies if you are paying minimum wage or have a contract with a sindicato detailing agreed upon negotiated annual wage increases.

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7 hours ago, slainte39 said:

That only applies if you are paying minimum wage or have a contract with a sindicato detailing agreed upon negotiated annual wage increases.

Thank you for the clarification.  But you will notice that at the beginning of every year, prices of goods increase. CFE has raised its rates--any connection with a increase in employee wages at CFE?    My point is, if wages rise, so, too, will the prices of goods and services.  They must, for businesses to continue to operate at a profit. And that affects those employees, like my maid and gardener, who do not have contracts or are being paid minimum wage.  Consequently, that affects you and me. 

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We increase our maid/gardener wages yearly to compensate for the cost of living plus additional payments outside of what is required by law... We prefer to reward performance and quality work...

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37 minutes ago, rvanparys said:

We increase our maid/gardener wages yearly to compensate for the cost of living plus additional payments outside of what is required by law... We prefer to reward performance and quality work...

All well and good, but the discussion here centers on IMSS, so are you paying that for your help? Whatever you pay your help will come under one Mexican Law or another in the Grand Scheme of thing, whenever they get their lawyer.

 

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What you prefer is irrelevant if your maid makes a demand for something she is entitled to you have to pay for that and not claim you are paying her more by the hour or the day.. If you pay her more ,the benefits you owe her are more as well and so will her severance.. You do understand that part?

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My cleaning lady has about 6 clients.  So, should it be between the 6 of us to contribute?

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4 minutes ago, Sandrita said:

My cleaning lady has about 6 clients.  So, should it be between the 6 of us to contribute?

What a nightmare! So, it still appears to me that many of these folks are going to lose their jobs. For us, it's not worth the increase, plus the added headache of having to make sure that the money is not pocketed, that we receive proof, etc, etc. I'd rather clean myself than to dive into this mess. I think the intention is good, but this isn't going to go well...

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In France they have a very simple system via internet or in person, The employer pays with coupons they get from the government and at the end of the month they send in a form with number of hours  and amount per hour paid.andthe the government deducts it from their account and send them a receipt. . 50% of the amount is tax deductible.

The employee has medical insurrance, insurrance in case of an accident, retirement. vacations and sick days. The cost is 50% of the pay.  .It does not matter how many employers the person has.

It does not have to be a nightmare but considering how Mexico loves paperwork it probably will be a nightmare...

This also mean ( in France) that the employee has to pay taxes . If you pay someone under the table, it cost the employer big time..

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On 5/18/2019 at 11:20 AM, kimanjome said:

I have been posting about this subject for over a year, as my housekeeper told me then she wanted IMSS and other coverage.  I spoke with a Mexican seguro agent who gave me a lot of info about it.  It will make you rethink whether you want a cleaning person at all!   Here is some info:

--Yes, it is a law.

--Yes, part-time AND full-time domestics will have to be covered.

--The employer--YOU--will be responsible for the vast majority of the coverage.

--Under current Mexican law the employer's contribution is approximately 36% ABOVE the salary.  Weekly salary 300 pesos?  YOU will pay another 108 pesos, total 408 pesos.

 

Any way for you to get detail/clarification on this 36% figure?  What is included besides IMSS? 

This is what I found for IMSS rates from here:  https://tradingeconomics.com/mexico/social-security-rate

It appears the rate high of 17+% was prior to a system overhaul in the late 1990's.  The rate has either been 9.25% or 9.23% for over a decade.  

Mexico Social Security Rate

 
Quote

 

In Mexico, the Social Security Rate is a tax related with labor income charged to both companies and employees. Revenues from the Social Security Rate are an important source of income for the government of Mexico because they help to pay for many social programs including welfare, health care and many other benefits. This page provides - Mexico Social Security Rate - actual values, historical data, forecast, chart, statistics, economic calendar and news. Mexico Social Security Rate - actual data, historical chart and calendar of releases - was last updated on May of 2019.

 

  Actual Previous Highest Lowest Dates Unit Frequency  
  9.23 9.23 17.63 0.00 1981 - 2018 percent Yearly

 


 

 

mexico-social-security-rate.png

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Yes, let me find the documents the seguro agent left with me.  I was so astounded by the rate that I asked her multiple times and wrote it down, showed the numbers to her to verify it.  She said that we, the employers, are supposed to pay both our (employer) share as well as the  vast percentage of  the employee contribution...which makes you wonder why they call it an employee contribution in the first place.

About 2 years ago I communicated on this forum with Sondra Diaz, the attorney out of SMA.  When I expressed my astonishment at the high employer contribution, she confirmed it.  

Not only that, but last year I learned that we are supposed to be paying vacation pay--which we do--but vacation pay, which increases every year based on service, is supposed to have a 25% bonus added to it.  So if your maid makes 500 pesos a week, you are to pay 500 + 125 peso bonus to the vacation wages.  And actually that number is low, because you really are supposed to pay them 6 days of pay the first year, which is more than weekly payment.  

-------

Okay, I am on Sondra's page;  It is 20%.  http://www.soniadiaz.mx/-employees.html  (I will go back and correct my earlier numbers).  There is no mention of it, but the employer also has to pay the state income tax (there is a small amount charged to the employee which varies by states, usually 1% to 3% of the salary.

Now, Sondra's page is for full-time employees, which does not apply to our maids and gardeners at the present time.  However, the currently in effect pilot program in Mexico City was developed  as a result of the newly- enacted law.  The problem is that these maids and gardeners may  have full-time working hours, but they have multiple employers.  So as to not make it cumbersome for either employer or employee, the pilot program was devised  to assess each employer fairly.  I believe it is being done on a pro-rata basis.  Meaning, if the maid works for me 10 hours a week, and works for you 15 hours a week, we will both contribute the same percentage of the maid's wages towards IMSS, etc etc.  But II will be contributing only 2/3 of what you are contributing--or you will be contributing 50% more of what I am contributing, depending upon how the numbers are run. In any event, we both will contribute on the maid's behalf. And even if she works only part-time, she will still be entitled to the same benefits as a full-time employee, but the numbers (like the pension amount) will vary based upon contribution amounts.  Unlike in the US, where part-time employees are not entitled to the same benefits as part-time employers, this law is designed to cover all maids, whether they work only 20 hours a week or 45 hours a week.  The goal is to equip all of them with IMSS coverage, and more. 

 

 

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Again, the employer and employee %'s combined is 9.23% (7.58 + 1.65).  I wonder if the agent is factoring in the aguinaldo and vacation pay?  And maybe income tax withheld by the employer (but not paid by the employer, same as for US workers)?  

I found this at a payroll site for Mexico employers.

Employee Social Security

The Social Security Rate levied on employees is 1.65 percent. This comprises of contributions to disability and life insurance and contributions to unemployment and old age.

  • Employer Social Security

The Social Security Rate levied on employers is 7.58 percent. This is composed of retirement pensions, healthy and maternity insurance, occupational risk, day-care, disability and life insurance, and unemployment and old age insurance.

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