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Mexico Severance Pay Calculator

Basic salary only (excluding allowances)

Mexico mandatory severance for unjustified dismissal. Federal Labor Law (LFT) Articles 47–51.

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What is Severance Pay (Indemnización) in Mexico?

Mexico has mandatory severance pay (indemnización por despido) when an employer terminates an employee without justified cause. Unlike at-will employment, Mexico requires employers to prove legal grounds for dismissal or pay severance under the Federal Labor Law (LFT).

Mandatory severance applies only to unjustified termination—not resignation or termination for just cause under Article 47. It includes: 90 days of Daily Integrated Salary (SDI), 20 days per year of service (in applicable cases), seniority premium (12 days/year, capped), plus finiquito (accrued benefits).

Finiquito is separate and owed in all terminations: unpaid wages, unused vacation, vacation premium, proportional Christmas bonus (aguinaldo). Severance is the additional payment required only when dismissal is unjustified.

Mexico Severance Pay Formula (LFT Articles 47–51)

Formula

90 days SDI + (20 days × years) + seniority premium + finiquito

  • 90 days of Daily Integrated Salary (SDI)—always required in unjustified dismissal
  • 20 days of salary per year of service—when employee disputes or employer refuses reinstatement
  • Seniority premium: 12 days per year, capped at 2× daily minimum wage
  • Finiquito: Unpaid wages, unused vacation, vacation premium, proportional aguinaldo
  • SDI = Daily Integrated Salary (base + benefits + recurring allowances)
  • Does NOT apply to voluntary resignation or justified termination under Article 47

Minimum service: 0 year

Gratuity Calculation Examples

Example: Mexico Severance – 3 Years (Unjustified Dismissal)

Basic Salary: MXN 25,000/month

Years of Service: 3 years

Calculation:

SDI ≈ 900 MXN/day. 90 days: 900 × 90 = 81,000. 20 days/year: 900 × 20 × 3 = 54,000. Seniority (capped): ~22,700. Total severance (excl. finiquito): ~157,700 MXN

Example: Finiquito vs Severance

Basic Salary: MXN 20,000/month

Years of Service: 1 years

Calculation:

Resignation: only finiquito (vacation, aguinaldo, unpaid wages). Unjustified dismissal: 90 days + 20 days/year + seniority + finiquito. The 90-day indemnity is the core mandatory component.

Tips & Best Practices

📋 Unjustified vs Justified

Severance applies only when the employer cannot prove a valid cause under Article 47. Missing documentation or weak evidence usually results in severance being owed.

💰 SDI vs Base Salary

Calculations use Daily Integrated Salary (SDI), which includes base pay, benefits, and recurring allowances—not just basic salary. Ensure all components are included.

⏰ Finiquito Always Due

Finiquito (accrued vacation, aguinaldo, unpaid wages) is owed in every termination. Severance is the additional 90 days + 20 days/year when dismissal is unjustified.

Frequently Asked Questions

For unjustified dismissal: (1) 90 days of Daily Integrated Salary; (2) 20 days per year of service (when applicable); (3) Seniority premium: 12 days per year, capped at 2× minimum wage; (4) Finiquito (unpaid wages, vacation, aguinaldo). SDI includes base salary plus integrated benefits. See Federal Labor Law Articles 48, 50.
Yes, when the employer terminates without justified cause. Mexico does not allow at-will employment. If the employer cannot prove a valid cause under Article 47, full severance is mandatory. Severance does not apply to voluntary resignation or proven just cause.
Severance (indemnización) is paid only in unjustified dismissal and includes 90 days SDI, 20 days/year, and seniority premium. Finiquito is the final settlement owed in all terminations: unpaid wages, unused vacation, vacation premium, proportional Christmas bonus (aguinaldo). They are separate payments.
The 20 days per year applies when a labor authority orders reinstatement and the employer refuses, or when the employee disputes the termination and reaches a settlement under standard labor-court criteria. In many unjustified dismissals, both 90 days and 20 days/year are owed.