Severance pay in Mexico: how finiquito and liquidación are calculated
In Mexico the finiquito is the pay an employer already owes when employment ends. The liquidación adds severance for unjustified dismissal. This guide calculates both in pesos and shows how to provision the liability for a company earning in dollars.
A badly calculated exit can cost a Mexican SME several months of salary. Employers often confuse paying what is already earned with paying severance for dismissal, and budget one when they owe the other. A dollar revenue line against a peso liability adds a second source of error.
At Soulbit Academy we treat this guide as the Mexican counterpart of our Colombian severance and termination guide. It explains what the finiquito is, how to calculate it, when a liquidación applies and how to provision for it. It does not replace your labor lawyer or accountant.
Severance pay in Mexico: what the finiquito and the liquidación include
The finiquito is the payment of everything an employee has already earned when employment ends, and it is owed whether the employee resigns or is dismissed. The liquidación, in common usage, is the finiquito plus the severance the law imposes when the employer cannot prove the cause of dismissal. The Federal Labor Law (LFT) does not define "finiquito" as a separate legal item: it is built from benefits in several articles.
The finiquito includes unpaid salary, proportional year-end bonus (article 87), proportional vacation (article 79) and a vacation premium of at least 25% (article 80). The liquidación adds three months of salary (articles 48 and 50), 20 days per year of service in the cases listed in article 50, and the seniority premium of article 162. The reference text is the Federal Labor Law, last amended on May 14, 2026.
| Item | Legal basis | Resignation | Unjustified dismissal |
|---|---|---|---|
| Unpaid salary | Art. 33 | Yes | Yes |
| Proportional year-end bonus (at least 15 days a year) | Art. 87 | Yes | Yes |
| Proportional vacation | Art. 79 | Yes | Yes |
| Vacation premium (at least 25%) | Art. 80 | Yes | Yes |
| Three months of salary | Arts. 48 and 50 | No | Yes |
| 20 days of salary per year of service | Art. 50 | No | Only in the cases of art. 49 |
| Seniority premium (12 days per year) | Art. 162 | Only with 15 years of service | Yes, at any seniority |
| Back pay (up to 12 months) | Art. 48 | No | Only if the employer loses the case |
How to calculate the finiquito step by step
To calculate a finiquito you add four items: unpaid salary, proportional year-end bonus, proportional vacation and the vacation premium. Each uses the employee's daily salary and the days elapsed since the item was last paid or enjoyed. The steps are the same whatever the reason for leaving.
The first is unpaid salary: days worked and not yet paid, at the daily rate. The second is the proportional year-end bonus. Article 87 sets 15 days of salary as the yearly minimum, and an employee who did not complete the year receives the proportion of time worked, however short. The third is vacation.
Under article 76 of the LFT, after the 2022 reform, an employee with one year of service has 12 working days, rising by two a year to 20 in the fifth year. From the sixth year it rises by two days for every five years of service. If employment ends before the first year, article 79 gives a proportional payment, and unused vacation is not lost. The fourth is the vacation premium, at least 25% of the salary for those days.
Which salary is used to calculate each finiquito item?
The daily salary the employee earns when employment ends. For unpaid salary, the year-end bonus and vacation, the daily rate is enough. For severance, article 89 adds the proportional share of the benefits listed in article 84, such as the year-end bonus and vacation premium, and requires averaging the last 30 days worked if pay is variable.
What the liquidación for unjustified dismissal is and how it is calculated
The liquidación for unjustified dismissal adds up to three items to the finiquito: three months of salary, 20 days per year of service in the cases the law sets, and the seniority premium. Article 48 of the LFT lets a dismissed employee ask for reinstatement or for three months of salary, plus back pay if the employer cannot prove the cause of dismissal.
The 20 days per year are not automatic. Article 50 applies them when the employer is released from reinstating under article 49: seniority under one year, confidence employees, domestic work, direct and permanent contact with the employer, or temporary workers. Paying the full package in a settlement is a negotiation choice, not a general rule.
Back pay runs from dismissal for up to 12 months, and if the case goes on, article 48 adds interest of 2% a month on 15 months of salary. That is why dismissal without proven cause can be the costliest payroll scenario. The example below leaves both out.
How is the seniority premium calculated?
The seniority premium is 12 days of salary per year of service, under article 162 of the LFT. Article 486 caps the salary base at twice the minimum wage of the geographic area. In 2026 the general minimum is 315.04 pesos a day and the Northern Border Free Zone minimum is 440.87 pesos, according to CONASAMI. The cap is 630.08 pesos a day in the general zone and 881.74 on the border.
Example: finiquito on resignation versus liquidación on dismissal
An employee earning 30,000 pesos a month with 5 years and 4 months of service receives a finiquito of 35,410.96 pesos on resignation, and 283,474.60 pesos if dismissed without cause and the company pays the full package. All data are calculation assumptions, not figures from a real company or Soulbit prices.
The assumptions are:
- Start date June 1, 2021 and exit on September 30, 2026.
- Salary of 30,000 pesos a month, a 30-day month and a daily salary of 1,000 pesos.
- 15 days of salary unpaid.
- Year-end bonus of 15 days and a vacation premium of 25%. The integration factor is (365 + 15 + 5.5) / 365 = 1.0562, where 5.5 is the premium on 22 vacation days. The integrated daily salary is 1,056.16 pesos.
- Vacation of 22 days a year (sixth year of service, article 76), with earlier periods already taken.
- For the 20 days per year, an article 49 case is assumed.
- No back pay and no interest.
The proportional year-end bonus is 15 × 273 / 365 = 11.22 days. Proportional vacation since June 1 is 22 × 122 / 365 = 7.35 days, with a 25% premium. Severance uses the integrated salary, except the seniority premium, which is capped at 630.08 pesos a day because 1,000 exceeds twice the minimum.
| Item | Calculation | Resignation (pesos) | Unjustified dismissal (pesos) |
|---|---|---|---|
| Unpaid salary | 15 × 1,000 | 15,000.00 | 15,000.00 |
| Proportional year-end bonus | 15 × 273 / 365 × 1,000 | 11,219.18 | 11,219.18 |
| Proportional vacation | 22 × 122 / 365 × 1,000 | 7,353.42 | 7,353.42 |
| Vacation premium | 25% of 7,353.42 | 1,838.36 | 1,838.36 |
| Finiquito subtotal | 35,410.96 | 35,410.96 | |
| Three months of salary | 90 × 1,056.16 | 0 | 95,054.79 |
| 20 days per year of service | 106.68 days × 1,056.16 | 0 | 112,676.83 |
| Seniority premium | 12 × 5.33 years × 630.08 | 0 | 40,332.02 |
| Total payable | 35,410.96 | 283,474.60 |
The difference is 248,063.64 pesos, about eight months of base salary. The severance items, not the finiquito, hold the financial risk. The same employee with under a year of service would produce a much lower liquidación, because article 50 is calculated by years of service.
Income tax, signed receipt and payroll CFDI for the finiquito
The finiquito and the liquidación are subject to income tax (ISR) on the part above the exemptions in article 93 of the Income Tax Law. Section XIII exempts seniority premiums, retirement pay and severance up to 90 times the general minimum wage per year of service. Section XIV exempts the year-end bonus up to 30 days and the vacation premium up to 15 days.
The statute says general minimum wage. In SAT practice those caps are expressed in UMA, which is 117.31 pesos a day since February 1, 2026, according to INEGI. Since the 2016 constitutional de-indexation reform, those references are read as UMA, which is the applicable base. In the example, the exempt year-end bonus would be 3,519.30 pesos and the 1,838.36 pesos vacation premium exceeds the 1,759.65 exempt limit by 78.71 pesos.
For the severance items, the exemption for 5 years of service would be 90 × 117.31 × 5 = 52,789.50 pesos. A fraction of more than six months counts as a full year, and here it is four months. The remaining 195,274.14 pesos are taxed under the calculation the Income Tax Law sets for these payments, which the accountant must perform.
The employer must document the exit. Article 33 of the LFT requires any settlement or liquidación to be in writing, with a detailed account of the facts and of the rights included, and to be ratified before the Conciliation Center or the Tribunal. The signed receipt and the payroll CFDI showing the separation payments support the payment and its deduction. Remote hires are no exception, as payroll for remote workers in Mexico and the CFDI explains.
Deadlines matter to both sides. Article 518 gives a dismissed employee two months to sue, suspended once the conciliation request is filed. Other labor claims lapse after one year under article 516.
How to provision the labor liability if your revenue is in dollars
A company with dollar revenue that pays the finiquito in pesos carries exchange-rate risk on a liability that grows every month. Article 101 of the LFT requires salary to be paid in legal tender, so the finiquito and the liquidación are paid in pesos even if the budget is kept in dollars. A stablecoin is not legal tender in Mexico and cannot be used for this payment.
The monthly provision for the recurring finiquito is predictable. With 15 days of year-end bonus and 22 days of vacation with a 25% premium, it equals 15/365 + 22/365 × 1.25 = 11.64% of salary. That is the example's calculation; each company must use its own benefits. Year-end bonus detail is in premium and year-end bonus provisioning, and profit sharing in PTU in Mexico.
Should the company provision severance for dismissal?
Not as a recurring expense, because it depends on an event the company controls and that may never happen. But it should treat it as a contingency: the example liquidación, at an assumed rate of 18 pesos per dollar, is about 15,749 dollars, against about 1,967 for the finiquito. The exchange rate is a calculation assumption, not a quote. Accounting treatment follows the company's reporting framework.
The employer contribution accompanies each salary and follows the rules in IMSS employer contributions in Mexico. If an exit follows a cut in hours, review the effect of the 40-hour workweek in Mexico.
What Soulbit does in a Mexican finiquito and what it does not
Soulbit Salaries disperses batch payroll in stablecoin from a USDC or USDT balance under institutional custody, and the company keeps the calculation and the labor obligations. Soulbit does not calculate finiquitos or liquidaciones, does not determine ISR, does not issue the payroll CFDI and does not handle settlements before the Conciliation Center.
It also has no local bank rail in Mexico today: the only local rail in the product is Colombia. A Mexican finiquito is therefore paid in pesos through the employer's own channels. Soulbit's mobile apps are not available yet. Responsibility toward the employee, the tax authority and the labor authorities does not transfer to any payment method.
Frequently asked questions
What is a finiquito in Mexico?
A finiquito is the payment of benefits an employee has already earned when employment ends, whatever the reason. It covers unpaid salary, proportional year-end bonus, proportional vacation and the vacation premium. It is owed on resignation and on dismissal alike.
What is the difference between a finiquito and a liquidación?
The finiquito covers what the employee has already earned and is always paid. In common usage the liquidación is the finiquito plus severance for unjustified dismissal: three months of salary, 20 days per year of service in the cases the law sets, and the seniority premium.
How is the finiquito for a resignation calculated?
You add unpaid salary days, the proportional year-end bonus (at least 15 days a year, article 87), proportional vacation (article 79) and a premium of at least 25% on that vacation (article 80). In this article's hypothetical example, with a monthly salary of 30,000 pesos, the total is 35,410.96 pesos.
Is the seniority premium paid when an employee resigns?
Only if the employee has at least 15 years of service. If the employer dismisses the employee, it is paid regardless of seniority and whether or not the dismissal was justified. It equals 12 days of salary per year, with a salary cap of twice the minimum wage of the area.
Does Soulbit calculate the finiquito or pay in Mexican pesos?
No. Soulbit Salaries disperses batch payroll in stablecoin, but it does not calculate finiquitos, does not issue the payroll CFDI and has no local bank rail in Mexico today. The calculation, the receipt and the peso payment remain the employer's responsibility.
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