The last day you can pay the legally mandated Christmas bonus (aguinaldo) to your employees is quickly approaching and we have received quite a few inquiries about this end-of-year payment; what it is, who it applies to, and how it is calculated. This article should tell you everything you need to know to make sure you are on the right side of the law and your employees’ hearts this holiday season.
What does aguinaldo mean?
The term aguinaldo (pronounced a-gee-NAL-doe) refers to an annual payment distributed before Christmas that businesses in Mexico (and various other Latin American countries) are required by law to give their employees. According to Mexican Labor Law, the aguinaldo, equivalent to 15 times an employee’s daily rate of pay, must be made by December 20 of each year in anticipation of the holidays.
This end-of-year payment is sometimes referred to as the “13th month”, as many companies opt to increase their aguinaldo payouts to a full month’s pay (30 days). This has been proven to build goodwill and contribute to increased employee satisfaction and higher retention rates.
Because no exact translation exists in English for aguinaldo, most people casually refer to this payment as the Christmas bonus. However, this is a misnomer which we will explain later in the article.
The history of the aguinaldo in Mexico
“El aguinaldo” arose in 1970 as a mandatory provision in the Federal Labor Law of Mexico. Previously, some employers voluntarily gave a certain amount of money to their workers in December for Christmas but there was no legal requirement. As you can imagine, this financial uncertainty at the end of the year when expenses are high caused a good deal of stress in working families.
The aguinaldo payment developed out of a reform of the Federal Work Law (Ley Federal del Trabajo). Originally established in 1930, the Federal Work Law was established to improve and protect workers’ rights, benefits, payroll services, and social security.
This important law was updated in 1970, with the addition of Article 87. This revision specified that workers would be entitled to an additional payment to be paid annually in December, before the holidays…a time when a family anticipates extraordinary expenses.
The Federal Attorney for the Defense of Labor (PROFEDET) provides advice and representation in cases of non-compliance by an employer who fails to pay the aguinaldo in whole or in part. Companies and individuals that fail to make the correct aguinaldo payment to their employees may be levied with fines totaling 5,000 times the legal daily minimum wage.
It is important to remember that the aguinaldo is not a “Christmas bonus”. It is a fundamental right protected by Mexican Law. This distinction is important because unlike bonuses, which can be subjective based on job performance, longevity with a company or the benevolence of the employer) payment of the aguinaldo, and who receives it, is governed by Federal Labor Law.
The Christmas Bonus in Mexico
The obvious question that needs to be answered is, “What is the difference between the aguinaldo and a Christmas bonus?”
A Christmas bonus is a completely voluntary gift given by an employer to an employee or by any upper-level member of an organization to a subordinate member. This would be a sum paid out above and beyond the legally required aguinaldo. In no way should a Christmas bonus be meant to replace an employee’s aguinaldo.
A Christmas bonus might be offered in the form of cash but could just as easily be a physical gift such as wine, tequila, food or a gift certificate. The aguinaldo is based on an employee’s daily rate of pay and MUST be paid in cash or via bank deposit or transfer.
While the aguinaldo is a legal requirement, an employer’s failure to provide a Christmas bonus to its employees is not subject to any legal action unless it is a part of the signed contract of the employee. This is supported by Mexican labor law.
All this being said, with little exception, when you hear someone refer to a “Christmas bonus” in Mexico, they are actually referring to the aguinaldo. It’s not the correct term but it is the closest translation we can relate to… and easier for most of us to remember and pronounce.
What kinds of employees are eligible to receive an aguinaldo?
From casual house staff to upper-level executives, type of employment has no bearing on whether or not an employee will receive an aguinaldo. The law draws no distinction between a paralegal with a signed employment contract and a maid who come to clean your home once a week with no contract.
Regardless of status, every person who works in Mexico has the right to this benefit by law. There are however some possible exceptions to the rule which we will address later in this post.
All regular employees, regardless of whether they are employed full-time or part-time are entitled to an aguinaldo. This applies to all Mexican nationals as well as Permanent Residents with the right to work in Mexico who are working legally within the bounds of their immigration status.
Likewise, as the employer, your citizenship or immigration status does not change your legal requirement. Regardless of whether you are a Mexican national or a foreigner, if you employ any sort of regular help, you are required to pay this end-of-year sum.
In the event of the death of an employee at any point in the calendar year, the aguinaldo payment, prorated according to the number of days worked in that calendar year, must be paid to the employee’s family.
Who might you NOT owe an aguinaldo to?
Generally speaking, independent contractors and freelance workers you employ to do one specific job with a defined beginning, middle and end, are not entitled to the aguinaldo.
Here are some situations that may apply to you.
The contractor and the men he employs to retile your roof will not be expecting an aguinaldo from you. If you hire someone to refinish the floors in your condo, paint your bathroom or replace your sliding doors, he will not qualify to receive an aguinaldo for these independently contracted jobs.
The man you hire to design and build your website will not be expecting to receive an end-of-year bonus payment from you. However, if you retain his services to provide maintenance and updates on an ongoing basis, he will and the monies you pay him for those services alone will apply in the calculation of the legal aguinaldo.
If you are a property manager and you hire a photographer to shoot the properties you represent you MAY owe that person an aguinaldo. If you hire her job by job and pay her for each job separately, she is acting as a freelance service provider and no end-of-year payment is required. If you pay her a fixed salary weekly or monthly to provide photographic services on an ongoing basis, she is owed an aguinaldo.
If you retain the services of a property manager and you pay her a fixed amount every month to pay your bills, air out your condo, turn the ACs on and off, etc. but she does NOT earn any income in the form of commission, this is a service provider who should receive an extra end-of-year payment.
If you retain the services of a property manager who is compensated with commissions earned from rentals of your villa or condo, this person is not entitled to an aguinaldo but you SHOULD consider giving her a nice Christmas bonus if you want to continue to retain her services.
How is an aguinaldo calculated?
By Mexican Labor Law, every employee is entitled to an aguinaldo equivalent to 15 times his or her daily pay rate. It matters not whether this person works full-time or part-time.
The formula to calculate the correct amount for the aguinaldo is actually very straightforward.
First determine the employee’s daily rate of pay by multiplying their total weekly pay, multiplying this amount by 52 and then dividing that number by 365.
Multiply the result by 15 to determine your legal aguinaldo responsibility as an employer.
Let’s look at some examples that may be relevant to you and the people in your employ.
Full-Time Employee Aguinaldo Example
You have a cook who works for you full time, 6 days a week for at least a year. Her weekly compensation is 1800 pesos per week.
1800 MXN x 52 (weeks) = 93,600 MXN
This is what you pay your cook annually.
93,600 MXN / 365 (days) = 256.44 MXN
This is your cook’s daily rate.
256.44 MXN x 15 = 3981.60 MXN
This is what your cook is owed for her aguinaldo.
Part-Time Employee Aguinaldo Example
You have a maid who works for you 1 day every week. She has worked for you for at least a year. You pay her 500 pesos each time she comes. Her weekly compensation is then 500 MNX per week.
500 MXN x 52 (weeks) = 26,000 MXN
This is what you pay your maid annually.
26,000 MXN / 365 (days) = 71.23 MXN
This is your maid’s daily rate.
71.23 MXN x 15 = 1068.45 MXN
This is what your maid is owed for her aguinaldo.
Hourly Employee Aguinaldo Example
You employ a student who works 10 hours a week for you, managing your social media accounts. You pay him 100 pesos per hour. He has worked for you for at least a year.
100 MXN x 10 (hours) = 1000 MXN
This is your admin’s weekly pay
1000 MXN x 52 (weeks) = 52,000 MXN
This is what you pay your admin annually.
52,000 MXN / 365 (days) = 142.47 MXN
This is your admin’s daily rate.
142.47 MXN x 15 = 2137.05 MXN
This is what your admin is owed for his aguinaldo.
How do you pro rata an aguinaldo?
If an employee has been with you less than a year, the end-of-year payment can be prorated to reflect the amount of time he/she has been in your employ.
You have employed the services of a new gardener who comes twice weekly and is paid 200 pesos each time he comes. He started working for you at the beginning of June.
200 MXN x 2 (days) = 400 MXN
This is your gardener’s weekly pay
400 MXN x 52 = 20,800 MXN
This is what you will pay your gardener annually
20,800 MXN / 365 (days) = 56.99 MXN
This is your gardener’s daily pay rate
56.99 MXN x 15 = 854.85 MXN
This is what your gardener would be due if he worked for you for a full year.
Now, calculate the number of days since your gardener started working for you.
365 – 150 (January – May, approx 5 months) = 215 days
Calculate the prorated daily rate as follows
854.85 MXN x 215 (days) = 183,793 MXN / 365 (days) = 503.54 MXN
This is the prorated amount you would owe your new gardener for aguinaldo.
If an employee starts with you anywhere within the first quarter of the year, it is generally thought to be good practice to pay a full-year aguinaldo.
Similarly, if you have an employee whose rate of compensation has changed over the course of the year, the aguinaldo can be adjusted to each rate for the time period it was received.
The aguinaldo is your legal responsibility to pay. The amount is not subjective. It is not based on performance or longevity. Also note, the calculation of total days worked is not to exclude national holidays nor any IMSS-documented approved sick days. Paid maternity and paternity leave is also included in the payment calculation in accordance with the 2015 update to Article 87.
Anything you choose to give on top of this, whether it is offered in cash or in gifts is considered a “Christmas bonus”.
Paying aguinaldos for condominium staff
If you live in a condominium complex it’s likely that you have staff that maintains the gardens, common areas, pool etc. You may also have a security guard who is compensated by your HOA rather than paid by a security company.
These employees are all legally owed aguinaldo and this must be paid out of the HOA funds by your administrator. The amounts paid out should be itemized on the monthly accounting provided by your administrator. As a responsible homeowner, you should make sure that this is being done properly. If not, your HOA may face legal action and fines.
In addition to the end-of-year bonus pay, you as a condo owner may elect to give the staff an additional gift of cash, food, or something for their children. This is completely optional but certainly helps to build goodwill and shows the employee that they are appreciated.
Depending on the situation, your may owe your condo administrator an end-of-year bonus. If you live in a building that is administrated by an individual, working independently and paid a salary monthly this person is eligible to receive an aguinaldo. If your building or complex is managed and administrated by an established management company, that organization will not receive an additional payment at the end of the year.
Have you paid your employee’s aguinaldo yet?
Remember, by law, you have until December 20 to make the aguinaldo disbursement. If you have casual employees who you only see once a week or a few times a month, you may err on the side of caution and get it paid out early. Likewise, if you are traveling for the holidays, you will want to make sure this is done before your leave.
The aguinaldo payment is one of the most important rights that workers have in Mexico. Aside from its legal standing, the aguinaldo is important for employee satisfaction and retention. Casual employees sometimes lack the opportunity for subjective bonuses and other benefits. The end-of-year aguinaldo is something all workers should look forward to receiving.
The aguinaldo provides additional income to employees during a time of the year when money can seem short. Many workers count on the annual aguinaldo to make home improvements, make needed repairs to a vehicle, provide a nice holiday meal for their family, buy Christmas presents for their children or even pay down a debt.
At the end of the day, this payment is not only essential, but it also makes the employee feel that their hard work is appreciated. Be generous. Round up when making your calculations. Consider an additional “bonus” on top of what is legally required or offer a thoughtful gift for your employee and his/her family. Keep the holiday spirit in your heart and share it with those who depend on you.