The Federal Labor Law (LFT) is once again at the center of conversation at the national level in Mexico. The proposal of reducing weekly working hours from 48 to 40 hours reactivated an old debate that had been mired for years: How will overtime be paid and what will the implications on payment by the hour be in Mexico? This reform, initially promoted by legislators of the Morena party, and proposed during the previous six-year presidential term has gained momentum once again under the Government of Claudia Sheinbaum.
On May 1, 2025, Labor Day, the President announced the start of a gradual process for establishing the 40 hour work week. As part of the road toward this transformation, six public forums were conducted, led by the Department of Labor and Social Welfare (STPS). Employers, unions, academics, and civil society representatives participated in the forum and agreed on the need of moving toward reduced hours, but in a gradual manner and with clear rules in regard to its implementation.
One of the most controversial topics during the forums was the impact that this reform will have on the use of overtime and payment by the hour. The business sector warned that, should the amendment to the LFT be approved, the use of overtime will be inevitable in order to maintain productivity, particularly in the manufacturing, commerce, and service industries.
LFT: what the payment of overtime is in Mexico in 2025.
The current legislation establishes that the first nine hours of overtime per week must be paid at double rate, while subsequent hours must be paid at triple rate. This has positioned Mexico as one of the countries with the highest overtime pay, according to the OECD. In comparison, the global average is 1.3 times the normal wage per overtime hour worked.
In practice, however, only around 3% of the overtime worked is paid, as many companies resort to strategies to avoid this additional expense. Faced with a possible reduction in the number of working hours, employers insist on the need for making the scheme for the payment of overtime more flexible.
Lawyer Ricardo Martínez Rojas, advisor to multiple corporations, proposed that triple overtime hours cease to be taxed for Income Tax (ISR) and that they are not included in the Base Salary for Contribution before the IMSS [Mexican Social Security Institute]. Thus, overtime would cease to represent an additional tax burden for employers.
Another proposal that emerged in the forums is to raise the limit for double overtime from 9 to 12 hours per week, making triple overtime an exception. This proposal seeks to maintain productivity levels without significantly increasing labor costs for companies.
Nevertheless, union leaders such as Reyes Soberanis, from the labor Congress, requested that this discussion not have a negative effect on formal employees and they demanded that the benefits of the reform be also guaranteed for those who have informal jobs.
LFT: Payment by the hour in Mexico for the reduction of the weekly working hours?
Payment by the hour is not a new concept within the Federal Labor Law. Since 2012, with a reform promoted by the President at the time, Felipe Calderón, the law allows workers to be hired by the hour. Its implementation, however, has been almost nonexistent.
The reason? The regulation establishes that, even if a worker works less than eight hours, he must receive the equivalent to the minimum daily wage, as if he had worked a full day. This has been a major disincentive for employers, who consider that it is unfeasible to pay for a full workday when fewer hours are worked.
With the labor reform under discussion, businessmen have revived the idea of allowing hiring based on the actual number of hours that are worked, with proportional payments and contributions. For example, if a worker works five hours a day, he would be paid only for those five hours, and his IMSS contributions would be adjusted accordingly.
Companies like Xcaret proposed pilot programs to evaluate this option. Their proposal includes part-time contracts or contracts by the hour, which could benefit sectors with high turnovers or with variable staffing needs, such as tourism and services.
This proposal, however, has caused concern. Luis Munguía, head of the National Minimum Wage Commission, warned that splitting the minimum wage would cause many employees to fall below the line of welfare, particularly if they only earn half a salary due to their working less than eight hours per day.
The discussion also reached the fiscal aspect. Octavio de la Torre, president of the Concanaco-Servytur [Confederation of National Chambers of Commerce, Services and Tourism], proposed that the fiscal contribution limit be capped at 40 hours, and that overtime does not generate additional tax burdens. His approach seeks a balance between labor efficiency and business competitiveness.
For their part, unions like the CTM [Confederation of Mexican Workers] have requested that the creation of a “Saturday bonus”, similar to the existing Sunday bonus, be considered as an additional incentive for those who work extended hours or on days of rest.
