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Mexico

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  • Mexico
  • Taxes
  • Benefits
  • Employment cost calculator
  • Employee rights
  • Employment conditions
  • Remote work
  • Hours of work
  • Payment
  • Leave
  • End of employment
  • Independent contracting

    • Hire employees in Mexico at a Glance

    CURRENCY
    Mexican peso/MXN
    WORKING HOURS
    40-48 hours/week
    PUBLIC/BANK HOLIDAYS
    8 days per year
    CAPITAL
    Mexico City
    Local LANGUAGE
    Spanish
    REMOTE WORKERS
    8% in 2020
    MINIMUM MONTHLY SALARY
    MXN 566.80 - 853.56
    TAX YEAR
    1st Jan - 31st Dec
    DATE FORMAT
    DD/MM/YYYY
    MISCLASSIFICATION PENALTIES
    MXN 192,440.00 - 4,811,000.00 (approx. EUR 9155.81  - 228 895)
    FUN FACT
    69 different languages are spoken in Mexico

    Employer tax: 

    39.69%-46.72%

    Social Security: 26.54%-33.58%

    Retirement: 5.15%

    National housing fund: 5%

    Payroll: 3%

    Employee tax: 

    4.7%-37.7%

    Social Security: 1.65%

    Retirement: 1.1%

    Income tax: 1.92% - 35%

    Salary Calculations

    Use our handy calculator to understand what are all the employment costs you have to consider in Mexico, including contributions to the social security system.

    Provide us with some extra details and we will send you a full breakdown of the salary costs.

    Employer of Record in Mexico

    Read more
    An Employer of Record is the legal employer of a worker in Mexico. As such, the Employer of Record takes care of all Mexico compliance aspects of employment, including payroll, taxes, statutory benefits, employment contracts and more.

    the employer of Record is responsible for:

    Ensuring their employment is compliant with local employment laws
    Processing local payroll
    Filing employment related taxes and returns
    Issuing payslips to the employee
    Distributing salary payments

    How Employer of Record works

    COMPANY

    Maintains a direct relationship with the employee, allocates them work tasks, and manages their performance.

    BOUNDLESS

    Takes care of payroll, taxes, benefits, ensuring the employee and the company are compliant with all legal regulations.

    EMPLOYEE

    The third party to the agreement, the employee, fulfils all of their obligations as a worker for the company.

    Statutory Benefits in Mexico

    Read more
    Pension
    Holiday entitlement
    Vacation and Christmas bonus
    Occupational accident and risks
    Sickness and maternity
    Old age severance insurance
    Old age insurance
    Day care

    Common Non-mandatory Benefits in Mexico

    Read more
    Opto to WFH 
    Paid relocation
    Life insurance
    Major medical expense insurance
    Private medical insurance

    Employee Rights and Protections

    Read more
    Employment agreement
    Payslip
    Remote work
    Right to disconnect
    Protection from discrimination
    Personal data protection
    Profit sharing
    List of guarantees in case termination
    Intellectual property rights protections

    Paid time off: 6-12 days + 8 bank holidays

    Paternity leave: 5 days

    Paid sick leave: 52 weeks (+26 weeks)

    Parental leave: unpaid upon request

    Maternity leave: 12 weeks

    Probation

    Read more
    The probationary period in Mexico is between 30 and 180 calendar days

    Payment Frequency

    Weekly or biweekly

    End of Employment

    Read more
    Mexican law establishes several causes for termination including by mutual consent, by employer's will for mercantile insolvency or bankruptcy, because of physical or mental incapacity or inability that makes it impossible for the employee to perform the work. If the work risk produces total permanent disability to the employee, the indemnity should be paid.

    Employees can be dismissed during their probation period without liability for the employer. An employee can lodge a complaint concerning unlawful dismissal with courts.

    Frequently Asked Questions

    What are my options if I want to hire a worker in Mexico?

    While there are generally four ways of employing people across borders, not all are legal or sensible. Here is an overview of each way to employ a worker in Mexico, outlining the potential cons.

     

    HQ country employment & payroll

    While the person is in Mexico, they are employed and payrolled directly by the company’s HQ entity.
    Cons: This may appear attractive, but it generally isn't legal in the long term.
    HQ payroll won't be possible if the person is not a tax resident in the HQ country
     
     
    Independent contractor agreements
     
    People are locally registered as sole traders or limited liability company owners in Mexico and invoice for their work. There is no direct employment relationship.
    Cons: In Mexico, this is not a compliant or legal way to engage full-time workers who work solely for your company. There will be challenges in attracting and retaining talent.

     

    Direct local employer setup

    The company sets up as a fully-compliant local employer. This often involves setting up a local entity and local tax registration.
    Cons: Expensive, time-consuming, high-level of complexity. Unknowns around how obligations and costs will evolve over time. There will be a need to stay on top of changes in regulations.

     

    Partnering with an Employer of Record Mexico /full-service Professional Employer Organisation

    Employment is handled by a platform that specialises in employing people on behalf of customer companies. The Employer of Record helps to hire and pay employees.
    Cons: For some countries, the ongoing costs may be higher than direct employment. Some education is needed to inform employees about how the employment relationship will work.

    How long does it take to set up a company in Mexico?

    Setting up a local company in Mexico can be complicated, in particular after the initial setup when payroll needs to be calculated and run every month, taxes filed, benefits extended, change of rules and regulations followed.

    Here is an overview of everything you will find yourself needing to do.

    Can I employ people as independent contractors in Mexico?

    While many employers practice employing remote workers as independent contractors, it's a bad practice. If an individual is giving their full and undivided attention to your company in Mexico, treating them as an independent contractor is a likely breach of Mexican employment laws and of those in your country.
     
    Your company could be liable for fines on owed holiday pay, sick pay, social welfare payments, paternity benefit, maternity benefit, or other legal measures. Since the individuals you are working with do not receive the benefit of local employment laws and protections that are often afforded to people working full-time hours.
     

    What does HR compliance mean in Mexico, and why does it matter?

    When you hire employees in Mexico, you have certain obligations as an employer. HR compliance is about ensuring your policies and procedures respect all applicable laws and regulations regarding employment and work practices. Complying with local employment law in Mexico is fundamental for the correct running of your business - not only because these laws are in place to protect employees and guarantee their rights are safeguarded, but to minimise your risk of liabilities as an employer. Being compliant means respecting and following all local labour laws, sick leave and illness benefits, annual leave, minimum wage, tax credits, working hours regulations.

    How much does it cost to employ someone in Mexico?

    As with every other country, there are certain costs associated with employing a worker in Mexico that come on top of the gross salary you are offering. In Mexico those are social security, retirement, contributions to the National housing fund, and payroll. To view the exact percentages and amounts given the salary you are planning to offer, you can use our handy calculator tool.

    What does Employer of Record mean in Mexico?

    It means that Boundless is the legal employer of the individual, as far as the Mexican government, tax, and employment authorities are concerned. We are responsible for:
    • informing you about any pre-employment requirements
    • ensuring their employment is compliant with Mexican employment law
    • informing you about the length of the maternity leave, paternity leave, public holidays, illness benefits, medical benefits
    • providing a locally compliant employment contract
    • processing local payroll
    • filing employment-related tax returns
    • issuing payslips to the employee
    • distributing salary payments
    • payments to the local tax authorities
    Customers that work with an Employer of Record in Mexico are responsible for:
    • sourcing and recruiting their own workers
    • managing the employee’s day-to-day work load
    • contributing to the personal / professional development of the employee through their work
    • following any guidance we give on employment and HR best practices or legal obligations in Ireland, such as the employment contract, public holidays, annual leave, sick leave, maternity and paternity benefits, probationary periods, overtime pay, statutory redundancy payments, liability insurance and many others
    • ensuring that payroll bills relating to their team are paid to Boundless before the cut-off point in each pay cycle

    Who is responsible for filing and paying employees' taxes and social insurance contributions in Mexico if employing through an Employer of Record?

    Boundless as the Employer of Record Mexico files all pertinent taxes and and contributions to the Mexican Social Security Institute as they relate to the compliant employment of an individual in their home country.

    How does Boundless as an Employer of Record Mexico ensure HR compliance in Mexico?

    We carefully choose employment lawyers or advisories to partner with in each country we operate in, including Mexico. They ensure the Mexico employment contracts, and any other relevant documents required for new employees comply with the local jurisdiction. We have thorough discussions on specific norms such as payroll services, social protection, data protection, notice period or work-from-home regulations. Whenever a potentially sensitive issue arises in Mexico, our internal team contacts the relevant firm to ensure all steps are taken to resolve it promptly.

    What are the legal responsibilities of a company when they use an Employer of Record service like Boundless in Mexico?

    The company remains responsible and informs employees of the day-to-day management of the people and teams that are employed through Boundless, including any disciplinary or performance issues.
    Boundless ensures compliance with Mexico-specific procedures, practices and labour laws while employing people and teams on behalf of the company.

    Do employees get all their rights and benefits when employed through an Employer of Record in Mexico?

    Any new employee that is locally employed through an Employer of Record gets full employment rights and benefits as specified in Mexican employment law. They get a locally compliant employment contract, statutory paid maternity leave, annual leave, illness benefits, relevant tax credit, severance pay, and many more. Health coverage is provided by the national healthcare system but due to long waiting times, employers often offer private insurance to employees.

    What taxes do I need to pay in Mexico?

    In Mexico, both employers and employees have to pay taxes. For employers, these include social security, retirement, contributions to the National housing fund, and payroll and for employees, they include social security, retirement, and income tax. To get a clear overview with both employee and employer taxes, use our salary breakdown calculator, submitting any additional data needed and get a downloadable pdf like this one.

    Choose Boundless as your employment partner in Mexico
    Talk to us
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