end of year pay

It is that time of year again.

If you are living in Mexico and hire people (the Doras, Antonios, and Lupes who tend your gardeners, drive your cars, cook your meals, and clean your homes), it is time to remember them with their annual aguinaldo and vacation pay -- amounts that must be paid no later than 20 December.

There are several myths that surround these payments. And I know, no matter what I say, people who believe something else will go on thinking what they want to think. There is, of course, a very high probability that I am perpetuating a whole set of other myths. But, let's try to clear the air of a couple of things.

First, the two payments are not gifts or Christmas bonuses. They are required payments under the law. And the formulae clearly state how to calculate the required payments. They are not optional.

Second, the two payments must be made in cash. Your home-made fudge and that cashmere sweater you bought on your last trip to Nordstrom will undoubtedly be received with great gratitude. But those are gifts. And they do not count toward your legal obligation. Give the gifts out of love. Just be aware they have nothing to do with the required cash payments.

Third, just because something is a legal obligation does not mean it cannot be given in a spirit of joy. It should be. Because it certainly will be received in that spirit. Mexican workers know what they should be receiving. Failure to pay the appropriate amount can lead to some rather nasty legal wrangling.

So, what is your legal obligation?

The quick answer is that the aguinaldo is the cash equivalent of 15 days of the worker's daily pay. The formula is simple  algebra: multiply the number of days the worker worked per week by the number of weeks worked times the worker's daily pay times 15 days and divide all of that by 365 days. The product is the amount you pay as an aguinaldo to meet your legal obligation.

Every December, a quite uncivil war breaks out amongst expatriates who advocate just paying two weeks of wages and being done with it. Their opposite numbers, who demand strict compliance with the formula, call that cheating. Unless you are paying a huge sum of money, the difference between the two methods is minuscule.

I avoid the fight by using the two week rule and then rounding up the amount. In other words, I top off the aguinaldo with a little Christmas cash gift. I know that offends some people. But that is what I do. For both the woman who helps clean my house and the pool guy.

Everybody I know seems to comply with the aguinaldo -- even though their compliance with the formula may be a bit lax. However, a lot of employers pay nothing for vacation pay. But we must.

The calculation for vacation pay is extremely simple. It is based solely on one consideration -- the length of service. Once you determine the length of service, the chart will reveal the number of days of salary you must pay. Multiply that number by the daily wage.

This is what the law requires:   

1 year -- 6 days
2 years -- 8 days
3 years -- 10 days
4 years -- 12 days
5-9 years -- 14 days
10-14 years -- 16 days
15-19 years -- 18 days
20-24 years -- 20 days
25-29 years -- 22 days
30-34 years -- 24 days
35-39 years -- 26 days

Here is an example. Dora, the woman who helps clean my house, works two days a week at a wage of $200 (Mx) each day. Using the formula, her aguinaldo will be $855 (Mx). 2x52x$200x15/365.

She has worked for me for 7 years. The formula is 14 days x $200. I am legally obligated to pay her $2,800 (Mx) for vacation pay.

For those of you who have not been paying either of these two payments or who have only been paying the aguinaldo, I have a suggestion. This Christmas would be a good time to set yourself right with your workers by paying them what has not been paid in the past.
I have no idea if the authorities would consider that to be full satisfaction if they became involved in a wage dispute hearing. But you would at least enter the new year with a clear conscience.

Here ends the lesson.

Well, not really. I want to wish all of you a very Happy Christmas. May you find contentment in your lives.