Introduction to the 40-Hour Workweek Reduction
Mexico is on the verge of implementing a significant change in labor laws, with the reduction of the standard 40-hour workweek. Although an exact start date has not been confirmed, it is expected that the gradual reduction will commence in 2026. This shift, one of the most substantial labor reforms in the past five decades, is being driven by current working conditions in Mexico that create a fertile ground for labor reforms.
Background and Relevance
Claudia Sheinbaum, the President of Mexico City, announced that the Secretariat of Labor and Social Security (STPS) will send the reform proposal to the Chamber of Deputies in November. The STPS held public forums in June and July to gather proposals and has since August been engaging with industry representatives, unions, experts, and activists to design the project.
Potential Impact on Businesses
While the reduction in weekly working hours may lead to increased productivity, decreased burnout, and enhanced job commitment, EY acknowledges two possible scenarios for businesses:
- Increased Workforce: This scenario involves additional costs related to hiring more personnel, learning curves, and increased social security contributions.
- Maintaining Current Workforce: This situation could result in higher costs for overtime pay, increased social security contributions, and growth in payroll taxes.
Despite these potential challenges, EY emphasizes that the reduction in working hours presents an opportunity to transform organizational culture, promote a healthier work environment, and boost team performance.
Preparing for the 40-Hour Workweek
EY recommends six key actions for businesses to prepare for the 40-hour workweek:
- Diagnosis: Assess readiness for regulatory compliance, identify critical areas needing attention, and pinpoint potential risks.
- Operational Analysis: Focus on critical areas for change to ensure labor reform compliance.
- Implementation of Changes: Introduce role evolution within operations, including adjustments to work schedules, hiring new personnel, and modifying working hours.
- Documentation Update: Revise contracts, guidelines, policies, and other documents to reflect the reduced workweek.
- Platform Update: Adjust compensation schemes, update parameterization of concepts, and adjust tax payments.
- Communication and Change Management: Develop a change management and communication strategy to inform employees about the established modifications, monitor the change process, and assess employee responses.
The proposed labor reform in Mexico, targeting a 40-hour workweek, signifies a substantial shift in how organizations manage employee time. With the goal of implementing this workweek gradually by 2030, it’s crucial for businesses to start preparing for this transition.
Key Questions and Answers
- What is the proposed change? The proposed change is to reduce the standard 40-hour workweek in Mexico gradually, aiming to implement it by 2030.
- When will this reduction begin? Although an exact start date has not been confirmed, it is expected that the gradual reduction will commence in 2026.
- What are the potential impacts on businesses? Businesses may face increased costs due to hiring more personnel, learning curves, and higher social security contributions or may see increased overtime pay, social security contributions, and payroll taxes if they maintain their current workforce.
- How can businesses prepare for this change? EY recommends six key actions, including diagnosing readiness for compliance, analyzing operational areas for change, implementing role adjustments, updating documentation, revising compensation schemes, and developing a communication strategy for managing the transition.
