Author: Fatima Iniestra
Happy new year to everyone! With the fresh news that we now have “more proper” vacations… You have surely read, heard and seen by now in various media the news about “proper vacations” since November of last year, either with good or controversial comments, depending on the perspective. The employers’ side had one point of view, while the workers had a different one. There was much talk about consequences without fully clarifying their nature. In short, after half a century without modifications in regard to vacations, what is the reform about and what will happen now?
The reform to Articles 76 y 78 of the Federal Labor Law on Vacation matters was published in the Official Gazette of the Federation on December 27, 2022 and it entered into force as of January 1 of this year.
It all started with the Senate, where the proposal was unanimously approved in November, and it was thus passed to Congress. The proposal is as follows:
- The number of vacation days is increased to 12 for all workers at the end of the first year of service, and they must be enjoyed in an uninterrupted manner.
- Two days are added each year, until 20 days are reached; that is, when the 5th year of seniority is reached.
- After the 5th year of seniority, 2 vacation days will be added for every 5 years of service.
- The vacation bonus cannot be less than 25%.
- It applies to all employment relationships.
It is worth noting that in this reform we continue to see what we have been seeing in the Right to Disconnection, that workers should enjoy their vacations completely disconnected from their work activities, resting and enjoying their leisure time in order to contribute to the improvement of their mental health.
When the reform reached the Congressmen, the business sector made itself heard. The Confederation of Industrial Chambers (Concamin) announced that it made an analysis regarding the economic impact of the increase to the number of vacation days, and that this impact would be of between 2% and 3% on the cost of the companies’ annual payroll. The proposal was reviewed as a response to some of the demands made by the private sector; the proposal was to have 6 uninterrupted days and that the rest would have to be negotiated between the employee and the employer, because of the impact that 12 continuous days could have on small and medium-sized companies. Congressmen Baldenebro and Prieto intervened on behalf of the workers. An agreement was reached: The 12 days are uninterrupted. The worker has the flexibility of deciding whether he wants to enjoy them in this manner, without the need of negotiating with the employer.
What happened? Article 76 is amended to increase the length of the vacation period and Article 78, which mentions that said vacation days are to be enjoyed in an uninterrupted manner, with the option of distributing the vacation period in the time and manner that the worker requires is also amended, both of them being articles of the Federal Labor Law. The reform that entered into force is practically identical to the proposal that was voted on and approved by the Senate, with the amendment that the worker has the power to unilaterally choose the manner in which he will distribute his vacation days.
The number of vacation days that will be granted is 12 paid vacation days for workers who have been in service for more than one year, and 2 days are added each year, until 20 days are reached; that is, when the 5th year of seniority is reached. After the 5th year of seniority, 2 vacation days will be added for every 5 years of service.
|Years on the job||Number of Vacation Days|
|Year 1||12 days|
|Year 2||14 days|
|Year 3||16 days|
|Year 4||18 days|
|Year 5||20 days|
|From 6 to 10 years||22 days|
|From 11 to 15 years||24 days|
|From 16 to 20 years||26 days|
|From 21 to 25 years||28 days|
|From 26 to 30 years||30 days|
|From 31 to 35 years||32 days|
It is worth noting that the worker has always had the right to demand his vacations if they are not granted by the employer within the first six months after an anniversary, and this does not prevent the worker and the employer from agreeing on the time and manner in which the vacation period is to be enjoyed.
With the new provisions, the employer must take into consideration the economic consequences deriving from the increase of vacation days; some of them, according to the SKATT Firm, our external consultant experts in tax matters, are:
- An increase in the corresponding vacation bonus amount. We must remember that the bonus is of 25% of the salary and is paid in proportion to the number of vacation days that are enjoyed.
- Social security contributions will increase as a result to the increase to the vacation bonus, which is part of the contribution base salary.
- The payment of Payroll Tax will increase at the moment in which the vacation bonus is paid (depending on the State of the Republic in which the worker provides its services).
- The acknowledgment of the increase of the provisions for employee accruals referred to in D-3 Financial Reporting Standards.
The Executive Order includes two transitory provisions, the first one establishes that the reform enters into force as of January 1, 2023, and the second transitory provision establishes that the amendments to the reform will apply to individual and collective agreements, provided that they are more beneficial to the workers.
There is no clear criterion in regard to the Executive Order and its interpretation. The criterion of the Department of Labor and Social Welfare is geared toward providing the greatest benefit to the worker and, therefore, it will probably be the one that will be taken as a parameter by the labor authorities. Let’s hope that we don’t find ourselves flooded with amparo proceedings and that we can all enjoy the new reform and its spirit.