The growing interest of nearshoring

Country news: Mexico

March 2024

The unique opportunities and challenges presented by nearshoring to Mexico

In today's globalized economy, businesses are constantly seeking ways to optimize their operations while minimizing costs. One strategy that has gained significant traction in recent years is nearshoring. Nearshoring refers to the practice of transferring a business operation to a nearby country, especially in preference to a more distant one, to capitalize on cost advantages, proximity, and cultural alignment. This concept has become increasingly important for multinational companies, particularly in the context of Latin America and Mexico.

The proximity of Mexico to the United States offers several benefits for US multinationals, including access to a skilled workforce, favorable geographical proximity, closer alignment in time zones, cultural similarities, and easier travel for business purposes - leading to more efficient and cohesive operations and reduced operational expenses. 

Opportunities and challenges from an HR perspective

From an HR perspective, it's crucial for multinationals to understand and be prepared for the unique opportunities and challenges presented by nearshoring to Mexico.

  • Firstly, there is a rich pool of skilled labor in Mexico, with many professionals fluent in both Spanish and English. This bilingual workforce can be a huge asset for companies looking to maintain strong communication with their headquarters in the United States. However, HR departments must be adept at navigating the local labor laws and cultural nuances to effectively recruit and retain top talent.
  • Moreover, understanding the regional economic and political climate is vital for long-term success. This includes being aware of any trade agreements, economic policies, and political relations that may affect business operations.
  • HR professionals must also be prepared to address the differences in workplace culture. This includes understanding local work ethics, management styles, and employee expectations. Tailoring HR policies to fit these cultural nuances can enhance employee satisfaction and productivity.
  • Finally, investing in local communities and building strong relationships with local governments and businesses can be beneficial. It not only aids in smoother operations but also helps in building a positive brand image in the region.

Customary employee benefits in Mexico

Death benefits:

Most employers in Mexico provide group life insurance for their employees, providing a multiple of the monthly salary (most often 12, 24 or 36) as a lump sum death benefit or a fixed sum expressed in Mexican pesos. Approximately two-thirds of the group life insurance plans in Mexico include either a companion accidental death & dismemberment benefit or a provision for payment of the death benefit to the insured if they become permanently and totally disabled.

Disability benefits:

This benefit is becoming more popular, as a rider to the group life insurance plan

Medical benefits:

Group health insurance is usually provided for salaried employees. In some cases, dependents may be included. The plan structure follows a design that most employers in the United States are familiar with e.g., a deductible, coinsurance, and a maximum benefit (sum insured) per event or illness per participant.

Retirement benefits:

Although an old-age benefit is provided by Social Security, employers must still decide whether to implement a retirement fund. If the employer does so, the employer must fund the corresponding liability. It is also very common to provide supplemental pensions for higher paid employees whose Social Security old-age pension will not compensate them adequately.

How can IGP help

Nearshoring to Mexico offers numerous opportunities for multinationals, but it requires a well-prepared HR strategy that respects and leverages local practices, laws, and cultures. Partnering with a reliable and experienced local partner such as Seguros Monterrey New York Life S.A. de C.V., the IGP Network Partner in Mexico, may make all the difference. 

Seguros Monterrey New York Life S.A. de C.V. offers tailored solutions and valuable support to companies navigating the complexities of establishing a presence in the country. Here's how our partner can assist:

  • Range of products - Seguros Monterrey offers a broad range of products and services that includes life, accident, and medical coverage for individuals and groups. It also offers pension products and savings insurance.
  • Extensive network - Seguros Monterrey has a large network of offices throughout Mexico and an extensive network of over 9,600 suppliers that includes hospitals and clinics, physicians, and providers of auxiliary services. Seguros Monterrey offers direct payment medical plans through its medical provider with a network of doctors, medical suppliers, and major hospitals available in many of Mexico’s cities, as well as some abroad.
  • Solvency - Seguros Monterrey has a solvency margin of 289%, (2022) allowing it to provide service to customers, even in difficult or challenging circumstances.
  • MiSeguroMty - Seguros Monterrey’s mobile app gives customers access to information related to their coverage, including consultation for health services within the SMNYL medical network.
  • Ethical - Seguros Monterrey is ranked as one of the most ethical insurers in Mexico, according to the Empresas+Eticas 2022 ranking of AMITAI. The Ranking of Most Ethical Companies is an AMITAI® initiative to identify and recognize companies in Mexico that promote ethical cultures within the company beyond regulatory compliance.

In conclusion, nearshoring to Mexico presents unique challenges and opportunities for businesses. By partnering with the IGP Network Partner in Mexico, companies can navigate the intricacies of setting up new operations with confidence and efficiency, unlocking the full potential of nearshoring in one of the world's most dynamic economies.

Why partner with Seguros Monterrey New York Life S.A. de C.V.?

Learn more about the advantages of partnering with Seguros Monterrey New York Life S.A. de C.V., view their key figures, recent awards and recognitions and get in touch with the local IGP contact.

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