Written for Mexico. This analysis applies to Mexican federal tax law — ISR (income tax), IVA (VAT) and SAT rules — and cites Mexican statutes. Amounts are in Mexican pesos (MXN).
Terminating a worker badly is one of the most expensive decisions a mid-sized company can make — not because of what you pay that day, but because of the lawsuit you bought without knowing it. The golden rule: every exit has a legal cost that can be calculated in advance; the employer who calculates it decides with numbers, and the one who improvises has it decided by a court two years later, with integrated salary, back pay and legal fees on top. Run every scenario with our severance and final-pay calculator before you move a single piece.
The real menu of exits and their cost
Genuine voluntary resignation: finiquito (final pay) only — accrued amounts plus the prima de antigüedad (seniority premium) at 15+ years. It's the cheapest exit and the most often faked — and the fakes are what collapse most in court: resignations on an identical boilerplate form, signed the same day as the "problem," with the worker later collecting "some help," are a labor award waiting for a date.
Dismissal for justified cause (art. 47 of the LFT, the federal labor law): final pay with no indemnity — but it demands a real cause, a written notice with date and cause (omitting it, by itself, presumes unjustified dismissal), contemporaneous administrative records and witnesses. It's the cheapest route on paper and the most expensive when badly executed: the cause you can't prove turns the saving into a full judgment.
Termination by mutual consent (settlement agreement): the professional standard. Final pay + a negotiated indemnity (the market ranges between final pay alone and 3 months + 20 days, depending on the risk of the case), formalized in a settlement agreement ratified before the Conciliation Center (Centro de Conciliación) — which acquires the status of res judicata and truly closes the door to a lawsuit. The paper signed in your office, unratified, is challenged every day.
Dismissal without cause, assumed: 3 months of integrated salary + 20 days per year where applicable + seniority premium + final pay. Expensive, but it's a certain number — against the lottery of a lawsuit, it's sometimes the financially rational decision.
Put a number on each scenario before you decide
Strategium structures exits: scenario calculations with the correct integrated salary, negotiation strategy, a settlement agreement before the Conciliation Center, and the file that backs the decision. A well-executed exit costs a fraction of a labor award — and you sleep better.
The four mistakes that fund lawsuits
- Calculating with nominal salary: indemnities are paid with integrated salary (arts. 84 and 89 LFT). Offering 3 months of base pay and calling it "full severance" is handing the worker's lawyer his first argument.
- The dismissal in the heat of the moment: terminating someone on the day of the conflict, with no record, no article 47 notice and no plan, is the most expensive way to manage anger. Twenty-four hours of strategy change the outcome by years.
- Paying without ratifying: a final-pay receipt signed in private does not extinguish claims. Ratification before the Conciliation Center costs one filing and buys res judicata — there's no professional reason to skip it in exits that carry risk.
- Ignoring the collateral liabilities: the exit is the moment when undocumented overtime, "off-the-books" commissions and under-declared SBC (base contribution salary) come to the surface. A well-drafted agreement also manages those fronts — a badly drafted one leaves them alive.
Frequently asked questions
When is it worth fighting a justified cause instead of negotiating?
When the cause is serious, contemporaneously documented (written records, witnesses, evidence) and the article 47 notice was given properly and on time. Without those three pieces, the statistics are against you — negotiate from the strength of a settlement agreement, not from the weakness of your evidence.
Are the 20 days per year always paid on dismissal?
Strictly, the LFT (Federal Labor Law) provides for them in specific scenarios (termination attributable to the employer, refusal to reinstate). In negotiation practice they're used as closing currency depending on the risk of the case. It's exactly the line item where advice pays for itself.
Can I deduct severance payments for income tax (ISR)?
Yes, indemnities and final pay are deductible if requirements are met (a correct payroll CFDI with the proper supplement and codes, withholding correctly computed under art. 96 LISR). A poorly stamped severance payment loses the deduction — the same old administrative error at the worst possible moment.
Let's talk about your case
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