How an EOR handles employee termination in Mexico

Ending employment in Mexico requires compliance with the legal and local labor laws. Employers should follow all procedures to ensure compliance, protect employees’ rights, and avoid disputes. Irrespective of whether the termination is voluntary or involuntary, the steps should be clear for both the employee and the employer.

In this blog, we provide a detailed guide on how an Employer of Record (EOR) will end employment and terminate in Mexico. An EOR for employee termination in Mexico ensures that companies comply with local labor laws while handling documentation, severance, and other compliance-related requirements. We have also covered termination types, procedures, notice-related requirements, severance pay, and more.

Employment laws and severance policies in Mexico

The employee termination laws in Mexico are designed to protect employees and regulate key aspects of employment, including contracts, working conditions, and termination procedures. Understanding all these regulations is crucial for employers to stay compliant. Regarding termination, Mexican labor law outlines the severance-related payments and benefits that employers must provide to employees.

1. Notice period

There is no mandatory minimum notice period. However, under federal labor law, if warranted, the employer should provide the employee with a notice within the first 30 days of becoming aware of any misconduct. Employees who are on definite or time-restricted contracts should have their agreements clearly outline the process for early termination.

2. Severance pay

Severance pay depends heavily on the circumstances of the termination. This includes:

• A voluntary resignation: Employees are entitled to payment for days worked, but haven’t received it yet. They can also avail a proportional amount of bonus, vacation pay, and other contract-based benefits.
• Termination with a cause: For a termination with cause, employees will receive payment for all days worked, a bonus, and a seniority premium of 12 days’ salary for every year of their service, capped at twice the minimum daily salary.
• Termination without Cause: Apart from the accumulated benefits, employees can only receive a minimum salary of up to three months, a seniority bonus of up to 12 days for every year of their service which will ideally start after 15 years of employment, any expired wages usually upto 12 months from the termination, and an extra payment of 20 days salary for every year worked in the event that reinstatement is denied.

3. Probation period in Mexico

The probationary period usually lasts for up to 30 days for most positions and around 180 days for managerial and specialised roles. During this period, employers can easily assess the employee’s performance and suitability for the role. During this period, your business can easily evaluate the candidate’s performance and their fit for the role. However, terminating an employee during the probationary period will still require you to put out a valid cause. You should document these reasons for termination to defend against any legal issues that can arise in the future.

Challenges US companies face when terminating employees in Mexico

Labor laws strongly protect employees, and employers should follow legal procedures when terminating an employee in Mexico. Failing to comply with these regulations can result in major disputes, legal claims, or financial penalties.

1. Complicated labor regulations

The Federal Labor Law in Mexico provides strong protection to employees, making termination processes even more regulated than in other countries. You should ensure that the reason for termination complies with the legal requirements.

2. Compensation and severance obligations

In various cases, employers are required to provide severance pay. It can include seniority premiums, salary compensation, and various other accumulated benefits. Calculating these payments accurately will be challenging without any local expertise.

3. Risk of disputes among laborers

If the termination process is not handled properly, employees can file claims with labor authorities. This can result in lengthy legal proceedings and additional costs for your business.

How does an EOR handle employee termination in Mexico

An EOR is a third-party organization that legally employs workers in another country where you do not have an entity. It will handle the onboarding/offboarding, payroll, tax compliance, benefits, and employment contracts. An EOR for employee termination in Mexico will handle the entire process, ensuring compliance with Mexican employment laws and protecting both the employer and the employee.

1. Ensures compliance with the Mexican labor laws

An EOR in Mexico will ensure that the termination process complies with the requirements set out in labor laws. This also includes verifying whether the termination is without cause, with cause, or by mutual agreement. This also ensures that the process is handled in accordance with the legal guidelines.

2. Handles processes and documentations

Proper documentation is important for executing a smooth employee termination process in Mexico. The EOR will handle the necessary paperwork, including termination notices, legal documents, and other settlement agreements.

3. Accurately calculates final payments and severance

Mexican labor law requires employers to make certain payments upon the termination of an employment relationship. The EOR will calculate the final settlement accurately. This includes unpaid salaries, vacation pay, severance compensation, bonuses, and benefits, if applicable.

Why Global Squirrels is the best EOR partner for employee termination across Mexico

Global Squirrels is a SaaS staffing and EOR/payrolling platform that helps US businesses hire skilled talent from Mexico legally and compliantly. It provides comprehensive support, including sourcing talent, vetting profiles, onboarding/offboarding, HR-admin, payroll, and compliance. Our platform eliminates termination complications by handling the entire employee termination process with full compliance, precision, and local expertise.

Through Global Squirrels, you can manage employee termination in Mexico in a structured way. Once a termination request is initiated, the team will review the reason and ensure it aligns with the Mexican labor laws. The platform will create the required documents, calculate the final settlement and severance pay, and handle the offboarding process. Terminating an employee with our EOR platform does not end there. We will also provide a replacement candidate at no additional cost, so that it does not impact your business operations. Global Squirrels will ensure that every termination complies with Mexican labor laws. Hence, there will be no guesswork or assumptions about termination processes, and the risk of fines, legal claims, and termination disputes will be reduced.

Request a demo to see how our platform handles everything from sourcing candidates to terminating them compliantly.

Final words

Terminating an employee in Mexico requires you to adhere to the local labor laws, follow proper documentation, and calculate the severance accurately. For foreign companies, handling this process without local expertise can be challenging and may expose your business to compliance risks. An Employer of record will simplify the employee termination process by ensuring every step is handled correctly and smoothly. By working with an EOR in Mexico, you can easily handle offboarding while reducing legal risks and maintaining fair employment practices.