Mexico Labor Rates Offer Huge Cost Savings

For years, Mexico has attracted foreign businesses mainly because of its competitive labor rates. For example, the average hourly wage for production operators in Mexico is about $4.90 (USD) per hour fully burdened. Even skilled laborers, such as production engineers, have salaries that are more competitive compared to those in the U.S. IVEMSA has found that, on average, businesses see a 30 – 40% savings in labor costs in Mexico.

What Makes Mexico's Labor Rates Competitive

Mexico has long offered competitive labor costs, especially compared to the U.S., but what’s remarkable is that labor rates in Mexico have stayed relatively low while the quality and complexity of the products manufactured there has increased. Plus, because Mexico has a 48-hour work week (before requiring overtime pay), productivity is generally higher than in the U.S.

Average Wage in Mexico

The average base salary for an entry-level, basic skill operator in manufacturing in Mexico is approximately $4.90 (USD) per hour fully burdened, well below the equivalent U.S. salary of $17 (USD) per hour. Additionally, for skilled workers like machinists and welders, Mexico is approximately $7 – 8(USD) per hour fully burdened, compared to an average of $20 – 22 (USD) per hour for similar positions in the U.S. Because Mexico’s average cost of living is lower than the U.S., it’s a win-win all around.

Mexico Offers Lower Operating Expenses

The cost savings keep adding up when you figure in the lower expenses for rent and utilities. Undeveloped sites are available throughout Mexico, but because manufacturing has been such a major part of the economy for so long, there’s more than enough industrial facilities to go around. Most of these are Class A facilities that are in gated industrial parks or secured, stand-alone buildings.

Leasing rates range from $0.64 USD per square foot to $0.82 USD per square foot per month, depending on the class of the building (Class A, B, and C are available) and its location.

How Are Rates Calculated in Mexico?

Calculating wage rates in Mexico is different from the U.S. For example, in Mexico, wages are typically expressed as daily rates rather than hourly, as is the common practice in the U.S. for similar roles.


Also, Mexico recognizes a standard 48-hour work week versus 40 hours in the U.S., with anything additional counted as overtime pay. These differences, in addition to addressing payroll taxes and employee contributions, affect total calculations.


While the hourly rate of pay in Mexico remains significantly less than base rates in the U.S., there are several other factors to consider when calculating fully burdened costs for multiple positions.

Fully Burdened Labor Rates for Factory Workers in Mexico

Each role starts with a different base salary determined by the level of skill and experience. Manufacturers must keep in mind that the costs associated with a non-skilled operator are going to be much different than those of a production manager with 10+ years of experience.

A fully burdened salary matrix includes base pay for each position, plus market and mandatory benefits to consider to stay competitive and in compliance with the employment requirements in Mexico.

This is only an example of the benefits a company may offer. Each scenario varies based on the number of workers and types of roles needed. Knowing when and how to apply these benefits makes a difference in recruiting and retaining top-tier employees as well as maintaining an overall manufacturing budget.

Mandatory Benefits

Mandatory benefits are what’s required when employing workers in Mexico, such as:

  • Vacation days
  • Holiday pay
  • Christmas bonuses
  • Housing credit
  • Maternity and paternity leave
  • Social security
  • Retirement pension

Market Benefits

Market benefits are applied as a competitive measure to recruit the best workers. These include:

  • Additional vacation days and paid time off
  • Food coupons
  • Punctuality bonus
  • Attendance bonus
  • Savings fund
  • Medical insurance
  • Life insurance
  • Cafeteria subsidy

How Can You Calculate Your Own Payroll Costs In Mexico

Calculating payroll goes well beyond simply understanding salaries. Therefore, it’s challenging to self-calculate costs without understanding the full scope of what’s involved in a fully burdened salary and industry expectations. Also, salaries vary by region and worker demand, which can cause base rates and market benefits to fluctuate.

Though manufacturers may guess a general idea of how much hiring employees will cost to fulfill their production needs, it’s best to work with the expertise of a shelter services company that understands the details involved in creating a thorough assessment and avoiding any unseen costs.

IVEMSA calculates payroll costs without any hidden fees based on specific project needs while also helping manufacturers with contracts, labor laws, and severance pay expectations. These also differ from what is required in the U.S. and can be challenging to navigate alone.

Go in with a clear look at your payroll when recruiting workers in Mexico so you can feel confident moving to the next step of the manufacturing process.

Connect with IVEMSA for a cost analysis

What Is a Mexico “Shelter”?

The shelter program in Mexico is designed to reduce risk and liability for foreign companies. Instead of setting up your own legal entity in Mexico, you can run your manufacturing under one owned by IVEMSA. We’ll handle all the permits and licenses, lease your facility, and take care of administrative responsibilities like HR and accounting. You get to focus solely on manufacturing and will maintain complete control over your processes and production.

 

Learn more about IVEMSA’s shelter program >

DID YOU KNOW?

Businesses can save up to 30% on labor costs by manufacturing in Mexico?

Download our free Mexican Manufacturing Cost Fact Sheet to learn how much you can save on labor, real estate, utilities and more.

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Reduce costs.
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Gain peace of mind.

Contact us today and see how we can help you take advantage of all the benefits of manufacturing in Mexico - without the hassle.

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