Employer of Record Guide in Mexico
Mexico's vibrant economy and skilled workforce make it an attractive destination for global expansion, but navigating local employment laws requires expertise. Our comprehensive guide helps you hire compliantly and unlock the potential of Mexico's diverse talent pool.
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Mexico offers compelling opportunities with its growing tech sector, competitive costs, and strategic location bridging North and South America. Understanding the market fundamentals—from economic hubs to in-demand skills—sets the foundation for successful expansion.
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Your EOR guide in Mexico
Getting payroll, taxes, and compliance right in Mexico requires attention to detail across multiple regulations and requirements. This guide breaks down the essential employment mechanics you need to manage your Mexican workforce effectively.
Minimum Wage
Mexico has both federal and regional minimum wage rates. The federal minimum wage is set annually by the National Minimum Wage Commission (CONASAMI).
| Zone | Daily Minimum Wage (MXN) | Monthly Equivalent (MXN) | Effective Date |
|---|---|---|---|
| Free Border Zone | $374.89 | $11,246.70 | January 1, 2025 |
| General Zone | $248.93 | $7,467.90 | January 1, 2025 |
Note: The Free Border Zone includes municipalities along the northern and southern borders of Mexico. Professional minimum wages may apply to specific occupations.
Payroll Cycle
- Bi-weekly: Most common, with 26 pay periods per year
- Weekly: Common in manufacturing and hourly positions
- Monthly: Typical for salaried professionals and executives
Note: Employers must pay wages no later than the day following the end of the pay period.
Individual Income Tax
Mexico operates a progressive tax system with rates ranging from 1.92% to 35% for residents.
| Annual Income (MXN) | Tax Rate |
|---|---|
| Up to $125,900 | 1.92% |
| $125,901 to $1,000,000 | 6.4% to 21.36% |
| $1,000,001 to $1,500,000 | 21.36% |
| $1,500,001 to $3,000,000 | 23.52% |
| Over $3,000,000 | 35% |
Tax Residency Criteria
Individuals are considered Mexican tax residents if they:
- Have their centre of vital interests in Mexico
- Reside in Mexico for more than 183 days in a calendar year
- Are Mexican nationals with primary residence in Mexico
Employer Payroll Contributions
Mexican employers must contribute to several mandatory social security programs administered by IMSS (Mexican Social Security Institute) and other agencies.
| Contribution Type | Employer Rate | Employee Rate | Total |
|---|---|---|---|
| IMSS (Social Security) | 20.4% - 25.75% | 2.375% - 3.625% | ~23% - 29% |
| INFONAVIT (Housing) | 5% | 0% | 5% |
| SAR (Retirement) | 2% | 0% | 2% |
| Payroll Tax (varies by state) | 2% - 3% | 0% | 2% - 3% |
| Estimated Total Cost | ~29% - 36% | ~2% - 4% | ~31% - 40% |
Note: IMSS rates vary based on salary level and risk classification of the workplace. Additional contributions may apply for specific industries.
Working Hours
The standard work schedule in Mexico is 8 hours per day, 48 hours per week, Monday through Saturday. However, many companies operate Monday through Friday schedules.
Day Shift: Maximum 8 hours between 6:00 AM and 8:00 PM Night Shift: Maximum 7 hours between 8:00 PM and 6:00 AM Mixed Shift: Maximum 7.5 hours combining day and night hours
Overtime Pay
- Daily Overtime: Hours 9-11 are paid at 200% of regular wage
- Excessive Overtime: Hours beyond 11 per day are paid at 300% of regular wage
- Weekly Limit: Maximum 3 hours of overtime per day, 3 times per week
- Sunday Premium: Work on Sundays requires 25% premium pay plus a compensatory day off
Bonus Payments
Aguinaldo (Christmas Bonus): Mandatory annual bonus equal to at least 15 days of salary, paid before December 20th.
Profit Sharing (PTU): Companies with profits must distribute 10% among employees, paid by May 30th.
Full-Time vs. Part-Time
- Full-time: Standard 48-hour work week
- Part-time: Fewer than 48 hours per week, with proportional benefits
- Temporary: Fixed-term contracts allowed for specific circumstances
Vacation Leave
- First Year: 6 days of paid vacation after completing one year of service
- Subsequent Years: Increases by 2 days every year until reaching 12 days, then by 2 days every 5 years
- Vacation Premium: Additional 25% of regular salary during vacation period
- Payout Rules: Unused vacation must be paid out upon termination
Sick Leave
- IMSS Coverage: Employees receive 60% of their salary from the 4th day of illness through IMSS
- Employer Obligation: Must pay 100% of salary for the first 3 days
- Duration: Up to 52 weeks for the same illness, extendable to 104 weeks
- Medical Certification: Required from IMSS-certified doctors
Maternity Leave
- Duration: 12 weeks total (6 weeks before and 6 weeks after birth)
- Payment: 100% of salary paid by IMSS
- Job Protection: Guaranteed return to same position
- Nursing Breaks: Two 30-minute breaks daily for nursing during first 6 months
Paternity Leave
- Duration: 5 working days
- Payment: 100% of salary paid by employer
- Timing: Must be taken within the first month after birth
- Adoption: Same benefits apply for adoption of children under 6 months
Other Statutory Leave
- Bereavement: 1 day for death of spouse, parents, children, or siblings
- Marriage: 3 days for employee's wedding
- Medical Appointments: Time off for medical appointments covered by IMSS
- Civic Duties: Time off for voting and jury duty
Summary
| Leave Type | Duration | Paid? | Funding |
|---|---|---|---|
| Vacation | 6+ days/year | Yes + 25% premium | Employer |
| Sick Leave | Up to 52 weeks | 60% (after 3 days) | IMSS |
| Maternity | 12 weeks | 100% | IMSS |
| Paternity | 5 days | 100% | Employer |
| Bereavement | 1 day | Yes | Employer |
Termination Types
Termination With Cause (Rescisión):
- No severance required
- Must be based on specific grounds listed in Federal Labour Law
- Requires formal notification within 30 days of discovering the cause
Termination Without Cause (Despido Injustificado):
- Considered wrongful dismissal
- Requires full severance payment
- Employee may choose reinstatement or compensation
Notice Period Requirements
Mexico does not require advance notice for termination. However, employers must provide immediate payment of all wages and benefits owed.
Severance Pay
Constitutional Severance: Required for all terminations without cause
- 3 months of salary
- Plus 20 days of salary per year of service
- Plus proportional aguinaldo and vacation pay
Seniority Premium: Additional payment for employees with 15+ years of service
- 12 days of salary per year of service
- Capped at twice the minimum wage
Resignation
Employees may resign with or without notice. If resigning due to employer fault, they may claim constructive dismissal and receive full severance.
Final Pay Requirements
All final payments must be made immediately upon termination, including:
- Outstanding wages
- Proportional aguinaldo
- Unused vacation pay plus 25% premium
- Severance (if applicable)
National Holidays
Mexico observes both fixed and moveable holidays throughout the year.
| Holiday | Date | Type |
|---|---|---|
| New Year's Day | January 1 | Fixed |
| Constitution Day | First Monday in February | Moveable |
| Benito Juárez's Birthday | Third Monday in March | Moveable |
| Easter Thursday | Varies | Religious |
| Easter Friday | Varies | Religious |
| Labour Day | May 1 | Fixed |
| Independence Day | September 16 | Fixed |
| Revolution Day | Third Monday in November | Moveable |
| Christmas Day | December 25 | Fixed |
Holiday Pay Rules
- Mandatory Holidays: Employees must receive full pay even if not working
- Working on Holidays: Employees receive double pay (200% of regular wage)
- Religious Holidays: Easter Thursday and Friday are optional but commonly observed
Regional Variations
Some states and municipalities may observe additional local holidays, but these are not federally mandated.
Required Documents for Employment
- Employment Contract: Must be in writing and include all mandatory terms
- RFC (Tax ID): Federal taxpayer registry number
- CURP: Unique Population Registry Code
- NSS: Social Security Number
- Proof of Address: Recent utility bill or bank statement
- Educational Certificates: Copies of relevant degrees or certifications
- Medical Certificate: Required for certain positions
Work Authorization
- Mexican Citizens: No restrictions
- Foreign Workers: Must obtain work visa and permits before starting employment
- Temporary Residents: May work with proper documentation
- Permanent Residents: Full work authorization
Background Checks
- Criminal Background: Permitted with employee consent
- Employment Verification: Standard practice
- Educational Verification: Required for professional positions
- Credit Checks: Limited to financial positions only
Data Protection & Privacy
- Federal Law on Protection of Personal Data: Governs collection and use of employee data
- Consent Requirements: Explicit consent needed for sensitive data
- Cross-Border Transfers: Restricted without adequate protection measures
Probationary Periods
- Maximum Duration: 30 days for most positions, up to 180 days for management roles
- Training Period: Additional 3-6 months allowed for skill development
- Termination Rights: Easier termination during probation, but severance may still apply
Onboarding Timeline
| Step | Timeline |
|---|---|
| Job offer accepted | Day 0 |
| Work authorization verified | Day 1-3 |
| Employment contract signed | Day 3-5 |
| IMSS registration completed | Day 5-7 |
| Tax registration (RFC) obtained | Day 7-10 |
| Payroll setup completed | Day 10-14 |
Worker Classification
Mexican labour law strictly defines the employment relationship. Misclassification can result in significant penalties and retroactive payments.
- Employees: Subject to Federal Labour Law protections and benefits
- Independent Contractors: Must demonstrate true independence and cannot perform core business functions
- Subordination Test: Key factor in determining employment status
Union Relations
- Right to Organize: Constitutionally protected
- Collective Bargaining: Common in manufacturing and public sectors
- Strike Rights: Legal with proper procedures
- Union Dues: May be mandatory in unionized workplaces
Cultural Considerations
- Hierarchy: Respect for authority and seniority is important
- Personal Relationships: Building trust and rapport is crucial
- Communication Style: Generally indirect and diplomatic
- Work-Life Balance: Family obligations often take precedence
Remote Work Framework
- Legal Recognition: Remote work (home office) is legally recognized
- Equipment Provision: Employers must provide necessary tools and equipment
- Health and Safety: Employers remain responsible for workplace safety
- Right to Disconnect: Employees have the right to disconnect outside working hours
Special Economic Zones
- Maquiladora Program: Special manufacturing zones with tax benefits
- Free Trade Zones: Reduced customs duties and simplified procedures
- IMMEX Program: Temporary import program for export manufacturing
What We Handle
Borderless AI manages all aspects of Mexican employment compliance:
- Employment contract drafting and execution
- IMSS and tax registration
- Payroll processing and statutory payments
- Compliance monitoring and reporting
- Local legal representation and support
Built-in benefits packages for Mexico
When the world is your competition, it pays to incentivize new hires and existing alike. Borderless AI benefits packages typically inlucde:
Medical Insurance
Dental Insurance
Retirement Contribution
Life Insurance
Vision Insurance
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