Mexico Orders End to Overtime, Reshaping Workforce Practices

Mexico’s federal government has ordered the elimination of routine overtime across the country, a move that will alter income structures for millions of workers and force companies to rely strictly on contracted work hours beginning in 2026.

Through a Facebook post, the Ministry of Labor and Social Welfare (STPS) emphasized that the decision aims to curb labor abuses and ensure compliance with standard work schedules, shifting compensation away from extended hours and toward base pay. Federal authorities have framed the measure as part of a broader effort to normalize working time and reduce dependence on extra hours as a source of income.

Overtime has long functioned as an informal income stabilizer in Mexico’s labor market. In sectors such as manufacturing, retail, transportation, and services, additional hours frequently supplemented wages that were insufficient to cover household expenses. While the Federal Labor Law has historically treated overtime as an exception, enforcement gaps allowed it to become routine in many workplaces.

Labor officials argue that this dynamic blurred the boundary between regular and overtime work, often resulting in prolonged shifts, inconsistent rest periods, and pressure on employees to accept extended schedules. According to the government, the new directive seeks to reassert the legal principle that overtime should not substitute for adequate base wages or predictable working conditions.

The elimination of routine overtime is tied to the rollout of a new national labor framework, which includes the gradual reduction of the legal workweek from 48 to 40 hours. The Ministry of Labor has confirmed that the 40-hour standard will enter into force on May 1, 2026, with the first reduction of two weekly hours scheduled for Jan. 1, 2027. Within this structure, companies are expected to organize production and services without relying on extended workdays.

Under the new scheme, employers must adhere strictly to contracted schedules. Work performed beyond those limits will face tighter regulatory oversight, effectively removing overtime as a regular payroll component. While the government has not described the policy as an absolute ban, labor specialists say the practical effect will be the disappearance of overtime pay in most formal employment settings.

The impact is expected to be significant. Analysts estimate that for many workers, overtime represented between 10% and 30% of monthly income. The loss of that revenue stream raises concerns about short-term pressure on household finances, particularly in lower-income segments and industries with historically long shifts.

To offset the change, the government has pointed to recent increases in the minimum wage. As of Jan. 1, 2026, the general minimum wage rose by 13% to MX$315.04 per day (US$17.5), while the Northern Border Free Zone saw a 5% increase to MX$440.87 (US$24.5) daily. Authorities argue that higher base pay reduces the need for supplemental income through overtime and reinforces the principle of fair compensation within regular working hours.

The STPS says that the purchasing power of the minimum wage has increased by 154% since 2018 and that 8.5 million workers are expected to benefit from the latest adjustment. Officials also maintain that minimum wage income now covers the cost of two basic consumption baskets, a benchmark frequently cited in labor policy discussions.

Despite these assurances, labor organizations call for a phased and transparent transition. They urge authorities to clarify enforcement mechanisms and to prevent informal practices that could emerge if employers attempt to maintain output through unpaid extra hours. Business groups, meanwhile, are assessing how the removal of overtime will affect staffing, shift structures, and operational costs.

From a regulatory standpoint, existing labor law provisions remain in force regarding workers who are excluded from overtime, including minors, whose employment is governed by specific protections. The new policy reinforces those limits while expanding oversight across the broader workforce.

For companies, the end of routine overtime will require adjustments in workforce planning and productivity management. HR departments are expected to revise contracts, align compensation structures with standard schedules, and ensure compliance with inspection requirements.