Landmark Labor Contract Sets Precedent for Future Negotiations in Mexico

A major automaker reached a deal with its newly installed independent union at its Silao plant in Mexico this week. The 50-day negotiation ended with an intermediate salary increase exceeding the current inflation rate and other bonuses that previous contracts lacked. Additionally, neither strike activities nor a complaint under Rapid Response Labor Mechanism was activated during the process. The new contract, the first major raise since the start of USMCA, will likely to be benchmarked by other employers and unions in the future.  

The new contract includes an 8.5 percent pay raise to approximately 65 Pesos an hour. Additionally, the two parties agreed to increase workers’ productivity bonus, social security bonus, and food allowance, and included a mandatory paid day off on Christmas Eve. Furthermore, they agreed to form dedicated working groups to analyze working hours and schedule as well as harassment at workplace.  

Even though the result fell short of the 19.2 percent increase the union originally asked for, it’s still higher than other major automakers’ deals, ranging from 4.5% - 6%, with different starting points. It remains to be seen if the raise will be easily duplicated in other areas, especially in Raysona or Matamoros, where salaries are much higher at Maquiladoras with a more aggressive independent union. However, salary aside, the other components included in the contract are quite significant and weren’t common in previous Mexican labor contracts. The willingness of having conversations on challenging issues has demonstrated the improvement from traditional protection unions.  

Outlook: Workers will need to vote on the new contract in next few weeks. Once it’s approved, the contract will last for two years, but salaries will be reviewed every year according to the new law.