The Senate Unanimously Approves Labor Reform of “Dignified Vacation”

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The Senate Unanimously Approves Labor Reform of “Dignified Vacation”

10 November 2022

The Mexican Senate unanimously approved a labor reform that establishes amendments to Articles 76 and 78 of the Federal Labor Law (“LFT”) in order to extend from 6 to 12 days of annual vacation leave for workers who have worked for more than one year. The bill is pending discussion and, if applicable, approval by the Chamber of Deputies. If approved, the bill will enter into effect on January 1, 2023 or the day after its publication in the Oficial Gazette of the Federation (“Diario Oficial de la Federación”), if such publication is made in 2023.

The Chairman of the Labor and Social Welfare Commission (“Comisión de Trabajo y Previsión Social”), Napoleón Gómez Urrutia, stated that the approval of this bill, known as “Dignified Vacations”, will guarantee that workers will have more time for rest and recreation. He also stated that vacations are a necessary element to guarantee and enrich the quality of life of Mexicans.

In addition to the extension of the annual vacation period from 6 to 12 days, this vacation period will increase by two working days, until reaching 20, for each subsequent year of work. Once the 20 days of vacation are reached, in the fifth year of employment, 2 days of vacation will be added upon completion of 5 years of seniority and so on.

In addition to the increase in the vacation period, this bill carries other consequences for both the employer and the employee, one of which is that the increase in vacation leave also implies an increase in the payment of the vacation bonus, which cannot be less than 25% of the total amount of the salary corresponding to the vacation period.

In addition to the above, the vacation bonus is also one of the employee benefits that are integrated to the salary for compensation purposes, for the employees’ base contribution salary and, consequently, for the payment of the employer – employee quotas / contributions. Finally, it is important to note that, since the vacation bonus is a payment that arises from the employment relationship, it will also have an impact on payroll taxes.

Another important element of this reform is the establishment that workers must continuously enjoy their 12 days of vacation, although the obligation of the employer to allow workers to enjoy their vacation in a continuous manner is not a new element provided by this reform, the reality is that on a daily basis it is observed that the practice is that workers enjoy their vacations in an interrupted manner. Therefore, due to this reform, the labor authorities will give greater vigilance to this provision with the purpose of protecting the rest and leisure rights of the workers.

Finally, it is important to point out that the second transitory article of this bill provides that all amendments made to articles 76 and 78 of the LFT will be applicable to individual or collective labor contracts in effect at the date of entry into force of the Decree, provided that they are more favorable to the workers than their current employment contracts.

For any questions, comments or advice on the matter, we are at your service through any of our contact channels.

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