12 September 2017


The great commercial exchange, product of a globalized economic policy, each day encourages an increasing number of companies to intend to expand their market by offering their products or services beyond their borders. Such commercial dynamics, which are taking giant steps forwards, affect the vast majority of companies marketing products and services in the country. Thanks to this, large-scale corporations and even certain modest companies have had the chance to expand their market abroad.

This economic phenomenon has meant, among other aspects, that many of these companies support part of their operations with specialized people with in-depth knowledge of the operational functions of their company; at times, having people they trust in charge of the path taken by the investment or business in a different location is a determining factor for smooth operations. As a result, more and more people are joining in the commercial activities of their company on a foreign market.

However, at times, we have asked ourselves… What happens with the benefits of those employees who leave their country of origin and work abroad?

In Mexico, a person joining a field of work, in any production sector, has rights and obligations mainly protected by the Federal Employment Act, the Social Security Act, the National Fund for Workers' Housing (INFONAVIT) Act and the Income Tax Act. The same happens with a foreign worker with permission to stay in the country in order to work in national territory.

The vast majority of the benefits to which the workers are entitled are settled, if not during their working relationship, then on the conclusion of the employment relationship, through the payment of their end of contract settlement. The same happens with any taxes to be covered.

However, this is not the case with Social Security benefits such as contributions made to Life and Invalidity insurance policies, Retirement, Lay-Off and Old Age, and contributions aimed at obtaining home loans. Their very nature prevents them from being settled or paid before the events for which they were designed have occurred.

If a foreign employee who comes to work in Mexico does not conclude their employment life here and/or does not meet certain requisites in order to receive any of the benefits afforded by Social Security laws, they face a procedure which is not only slow but cumbersome when trying to obtain or recover the funds used for these concepts during their working life in Mexico.

At present, Mexico has 2 bilateral collaboration agreements on matters of social security.

Once of them, which was drafted in April 1995 and came into force in 1996, is the SOCIAL SECURITY AGREEMENT BETWEEN MEXICO AND CANADA which attributes its origin to 2 main functions:

  • Enabling a worker who has contributed in both countries at some point of their working life and who, on processing their pension, does not meet all the periods required for the effects of invalidity, old age, lay-off and life insurance, to add up the periods for which contributions have been made in both countries to as to apply for their pension for the total amounts of such periods.
  • Eliminating double taxation on matters of social security.

The agreement allows companies to move their workers to any of the countries of the agreement for a period of up to 5 years only making social security payments in the country of origin of the company.

The other agreement in place is the so-called SOCIAL SECURITY AGREEMENT BETWEEN MEXICO AND SPAIN, the objective of which is basically the same as the above, with certain specifics. This agreement was signed in April 1994 and came into force on 1 January 1 1995. The purpose of this agreement was to: 

  • Guarantee a worker having contributed to the social security systems of both countries the entire payment periods for the effects of the pensions deriving from employment risk, invalidity, old age, lay-off and life insurance.
  • Eliminate double taxation in matters of social security between the two countries. 

The agreement is applicable at the request of the worker along the following lines:

  • The worker may choose the social security plan applicable to them during the employment period in which they are in the territory of the other country adhering to the agreement.
  • The agreement contemplates a period of no more than 2 years staying in the territory of the counterparty (country) adhering to the agreement, and this period may be extended just once, providing the relevant authorities thus authorise, for a second period of 2 years.

In both cases, the Mexican Social Security Institute is responsible for the procedures related to the matter of the COORDINATION OF INTERNATIONAL MATTERS.

In our opinion, it is important to bear in mind the following considerations for both agreements.

  • Neither of them contemplates medical benefits for the visiting worker, and therefore we recommend they should have a medical expense insurance policy.
  • Neither of them contemplates any aspects relating to the housing fund administered by the INFONAVIT, and therefore the worker must be registered with the latter in order to comply with all regulations in Mexican territory.
  • Guidelines should be given to workers regarding the procedures and offices to be visited in order to carry out the procedures relating to the obtaining and recovery of the resources to be used for the concepts described herein in order to help them receive what corresponds to them by law.

Both agreements are classified as “movement of labour”, i.e. they consider the transfer of a worker from one territory to another, obviously between the countries adhering thereto. Other collaboration agreements exist with other countries. However, these are only to improve processes and good operational practices, but they do not render the effects contemplated in those described herein.

In conclusion, we believe it is beneficial to both the employer and employee to apply these agreements.

Jose Luis Castañeda Bernal, Head of Payroll Services, Auren Mexico

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