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Hiring in Mexico

Hiring employees compliantly in Mexico means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Mexico so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Mexico; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Need assistance hiring in Mexico? Contact us about our International EOR Service

Labor Laws in Mexico

Employee Probation Period

  • Where the employment contract is to last for more than 180 days or for an indefinite period, the employer may put in place a probationary period of up to 30 days. 
  • This period can be extended by up to 180 days for managerial, technical or professional positions.

Annual Leave in Mexico

  • Employees in Mexico are entitled to an annual vacation entitlement of 6 days after the first full year of employment.  
  • For every year the employee continues to work for the employer, he/she will receive an additional 2 vacation days.  
  • After 4 years, employees’ vacation period will increase only 2 days for each additional five years he/she works for the employer.

Holidays in Mexico

New Year’s Day 1st January
Constitution Day 3rd February
Benito Juarez’s birthday 16th March
Labor Day/May Day 1st May
Grito de Dolores (Independence Day) 16th September
Revolution Day 16th November
Election Day (every 6 six years for election of the President)  
Christmas Day 25th December

 

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Maternity Leave Mexico

  • Female employees have a right to maternity leave consisting of six weeks’ paid leave before the estimated due date, and six week’s paid leave after birth.
  • Maternity leave is paid for by Social Security, not the employer.  The payment is capped at 25 times the minimum wage.

Paternity Leave Mexico

  • Fathers are entitled to 5 paid days of paternity leave.

Sick Leave in Mexico

  • In general, the employer may grant permission for sick leave to employees provided there is a reason that justifies the absence, which can be with or without pay and will be approved at the discretion of the immediate Manager or General Manager.
  • Medical certificates should be provided by the employee who is eligible to claim a government subsidy in the amount of 60% of their salary when suffering from an illness not related to work.  
  • This increases to 100% when the illness is work-related.
  • For those employees with higher salaries than capped by Law, some companies pay the difference of the income not received by the employee by Social Security Payment.

Working Hours in Mexico

  • The work week comprises six working days, but the distribution of hours can be agreed so that employees have all, or part of, Saturday and Sunday as regular days off.
  • In general, most office job hours run from 8:00 a.m. to 6:00 p.m., although working hours are now becoming longer and often go until 7:00 p.m. or later.

Overtime in Mexico

  • If work time limits are passed, compensation of overtime is compulsory. 
  • Overtime is paid at 150% of the normal payment.  
  • Employers must pay 200% for overtime on Sundays or Bank Holidays.  
  • Work time is limited to 11 hours per day and 50 hours per week.

Termination of Employment in Mexico

Employment agreements can be terminated for the following reasons:

  • By mutual agreement (including resignation)
  • Death of the employee
  • Employee’s physical or mental incapacity or disability which makes working impossible
  • For cause
  • Where the parties reach an agreement to terminate the employment relationship through mutual consent, there is no requirement to file a notice of the termination with the Labor Board (although the parties can opt to execute an employment termination and release agreement and ratify it before the Labor Board).
  • Where the employer terminates the employment relationship with just cause (as defined under the FLL), the employer must notify the employee of the termination and reasons for it (either directly to the employee or through the Labor Board by means of an employment termination notice).
  • There is no obligation under the law for either employers or employees to notify the other party in advance of a dismissal or resignation. 
  • Notice obligations for employees are not recognizable or enforceable under local law.
  • Employees hired for an indefinite term who are dismissed without a just cause (as defined in the FLL) are entitled to claim reinstatement or the payment of mandatory severance

Notice Period in Mexico

  • There is no obligation under the law for either employers or employees to notify the other party in advance of a dismissal or resignation. 
  • Notice obligations for employees are not recognizable or enforceable under local law. 
  • Only notice obligations for employers can be enforced if they have been agreed to; however, it is not common for employers in Mexico to agree to notify employees in advance of their employment termination.

Severance in Mexico

  • Employees hired for an indefinite term who are dismissed without a just cause (as defined in the FLL) are entitled to claim reinstatement or the payment of mandatory severance comprised of the amounts described below (note that "daily total compensation" is equal to the employee's daily base salary, plus the daily proportion of any employment benefits ordinarily paid to the employee):
    • 90 days of daily total compensation.
    • 20 days of daily total compensation for each year of service that the employee has worked.
    • 12 days of daily base salary for each year of service that the employee has worked (for purposes of calculating this, employees' salary is capped at twice the amount of the daily minimum wage).
    • Any accrued salaries and benefits (including paid vacation, vacation premium, Christmas bonus and any other accrued benefit).

Mexico Salary and Wages

Accurately estimate your costs when employing in Mexico in 2023. Includes base salary, dependents, benefits, taxes, social contributions, and payroll costs. Monthly or yearly calculation period.

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13th / 14th Month Salary in Mexico

  • Yes (Mandatory)
  • There is a statutory requirement to pay for the 13th month salary.
  • This is called Aguinaldo and is paid in December and it equates to 15 days salary.

Income Tax in Mexico

  • Resident individuals are subject to Mexican income tax on their worldwide income, regardless of their nationality. 
  • Non-residents, including Mexican citizens who can prove residence for tax purposes in a foreign country, are taxed only on their Mexican-source income.
  • Taxable employment income includes salaries, wages, directors’ fees, bonuses, gratuities, allowances, certain fringe benefits, benefits in kind and statutory employee profit-sharing distributions.
  • Education allowances provided by employers to their expatriate or local employees are taxable for income tax and social security purposes if the allowances are not generally provided to all the employees under the applicable rules for fringe benefits.

Taxable income (MXN)

Basic tax

Over

Not over

Tax on column 1 (MXN)

Tax on excess (%)

0.01

6,942.35

0

1.92

6,942.36

58,922.27

133.28

6.40

58,922.28

103,550.51

3,460.01

10.88

103,550.52

120,372.95

8,315.57

16.00

120,372.96

144,119.39

11,007.14

17.92

144,119.40

290,667.83

15,262.49

21.36

290,667.84

458,132.39

46,565.26

23.52

458,132.40

874,650.11

85,952.92

30.00

874,650.11

1,166,200.07

210,908.23

32.00

1,166,200.08

3,498,600.11

304,204.21

34.00

3,498,600.12

and above

1,097,220.21

35.00

  • If the employee is considered a non-resident for Mexican tax purposes, the tax rate applicable to compensation will vary from 15% to 30%. 
  • The first MXN 125,900 of employment income received in a 12-month floating period will be tax exempt.
  • The following tax table is applicable to income tax with respect to income earned by non-residents for the calendar year 2020:

Taxable income (MXN)

Tax rate (%)

Over

Not over

0

125,900

Exempt

125,900

1,000,000

15

1,000,000

and above

30

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Social Security in Mexico

  • The social security system in Mexico provides the following benefits:
    • Medical assistance in cases of illness, maternity care and accidents
    • Indemnities in cases of temporary disability 
    • Pensions for disability, old age and death
  • Medical-assistance benefits extend to the members of an employee’s family, including the spouse, parents and children.
  • The maximum rate of the social security contribution payable by employees is approximately 2.775% of the integrated salary. 
  • The contribution is withheld by the employer from wages. 
  • The maximum rate of the social security contribution payable by employers can reach 36.69% (including the percentages for job hazard and the Federal Retirement and Housing Funds). 
  • The maximum amount of salary that may be used to compute the social security contribution equals 25 times the UMA. 
  • These contributions are all subject to caps that are determined based on a multiple of the UMA.
  • For 2019, the maximum annual social contributions per employee are approximately MXN130,892 for the employer portion (this figure includes Housing Fund and mandatory pension costs) and MXN21,024 for the employee portion.
  • Employers must contribute 5% of salaries (limited to 25 times the UMA) to the Housing Fund, which provides funds for the construction of housing for workers.
  • Employers’ contributions to a pension plan that is managed by a bank in the employee’s name equal 2% of an employee’s compensation. 
  • The maximum amount of salary that may be used to compute the pension plan contribution equals 25 times the UMA.

Social Security Contributions

Contribution

Group 1083

Social Security Contribution

Employee Group 1083 2.775%
Employer Group 1083 36.69%

Immigration Mexico

  • Foreign nationals entering Mexico are classified under the following immigration categories:
    • Visitor
    • Temporary resident
    • Permanent resident
  • The visitor category has two subcategories, which are visitor without authorization to perform remunerated activities in Mexico and visitor with authorization to perform activities remunerated in Mexico.
  • A visa for a visitor with authorization to perform activities remunerated in Mexico allows foreigners to stay in Mexico up to 180 days, with permission to be remunerated in Mexico for activities carried out in the country. 
  • The application for this type of visa must be submitted through the National Immigration Institute (Instituto Nacional de Migración, or INM) in Mexico.
  • The temporary resident category applies to foreigners who intend to stay in Mexico more than 180 days, but less than four years. If the activity that the person will perform will not be remunerated in Mexico, the application can be processed at a Mexican consulate or embassy. 
  • Otherwise, it must be approved directly by the INM in Mexico. 
  • After temporary resident status is granted, it is renewable for an additional three years.
  • Temporary residents are eligible to apply for the same status for family members. 
  • This application may be processed either at a consulate abroad or at the INM in Mexico.
  • The permanent resident category applies to foreigners staying in Mexico for an indefinite time period. 
  • Permanent residents may work and receive remuneration in Mexico. 
  • Permanent residents are also eligible for family reunification status if they meet the requisites established in the applicable regulations and rules
Need assistance hiring in Mexico? Contact us about our International EOR Service

Type of Visa/Permit

Documentation

Validity

Eligibility

Visitor Visa with authorization to work
  • Valid Passport
  • Copy of passport
  • Visa application form
  • 1 recent photograph
180 days

  • Individuals seeking to work on a short term basis
Temporary Residence
  • A Mexico Visa Application Form, printed and signed
  • A passport or other travel document
  • A photocopy of the passport
  • Recent passport-size pictures
  • Visa fee payment
  • Proof you have obtained a Mexico Work Permit and a copy of your work contract if applying for a Mexico Work Visa
1 year (can be renewed for 1 to 3 years)    
  • Temporary Resident Visa is intended for people who wish to reside in Mexico for more than 180 days but not longer than four years.
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Value Added Tax (VAT) in Mexico

  • Mexico introduced a Value Added Tax regime in 1980. 
  • Locally, it is known as Impuesto al valor agregado (IVA). 
  • It is administered by the Ministry of Public Finance and Credit.
  • The current Mexico VAT (Value Added Tax) is 16.00%. 
  • The VAT is a sales tax that applies to the purchase of most goods and services.

VAT

Standard Rate

Group 1083

16%

Zero Rate Group 1083 0%

Mandatory Benefits in Mexico

  • These are mandatory benefits as postulated by law
  • These benefits include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, severance pay and 13th month pay.
  • Statutory benefits also include social security benefits
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Mandatory Benefits overview

  • Probationary period

  • Annual Leave

  • Public Holidays

  • Sick Leave

  • Maternity Leave

  • Paternity Leave

  • Overtime Pay

  • Severance Pay

  • 13th Month Pay

  • Social Security Benefits

Payments And Invoicing

  • For individuals, the fiscal year in Mexico is the calendar year. 
  • Annual tax returns must be filed during April, but no later than 30 April of the following year.
  • Filing extensions are not granted. 
  • Taxpayers who receive income from salaries and interest not exceeding MXN400,000 are not required to file annual tax returns. 
  • However, if real interest exceeded MXN100,000 and if taxes were withheld on such interest, the individual must file an annual return. 
  • Personal income taxes of employed residents and nonresidents are withheld at source. 
  • A resident individual taxpayer may elect to pay the remaining tax due either when the annual return is filed or in installments with interest over a six-month period.
  • Self-employed individuals must make monthly tax payments on account of their annual tax.
  • Individuals filing monthly tax returns must open a Mexican bank account and make their advance tax payments through electronic transfers via the Internet.
  • Resident employees of foreign resident companies who work in Mexico must make monthly estimated payments on account of their annual tax if their companies do not have permanent establishments in Mexico or if their compensation is not reflected on a Mexican company’s payroll. 
  • For such purpose, they must open a Mexican bank account and make their advance income tax payments through electronic transfers via the Internet. 
  • Married persons are taxed separately, not jointly, on all types of income.

Payroll Accrual in Mexico

Country Accruals Additional Information

Employer’s maximum contribution to Social security in MXN 138,479.00

Maternity 12 weeks
Christmas Bonus 8.33%
Vacations 3.56%
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Description

Employee contributions to the Mexican Social Security Institute are withheld at source. The employer also makes contributions. Both contributions are calculated at varying rates and subject to various limits based on multiples of the UMA. The maximum annual contribution for employees is MXN 22,243. The employer’s maximum annual contribution is MXN 138,479. The employer limit could be higher, considering that the employer's portion includes the occupational risk premium, which varies depending on the activity of the employer. These maximum contributions apply to employees earning more than MXN 817,782 per year (or MXN 68,149 per month). Employee contributions to the Mexican Social Security Institute are withheld at source. The employer also makes contributions. Both contributions are calculated at varying rates and subject to various limits based on multiples of the UMA. The maximum annual contribution for employees is MXN 22,243. The employer’s maximum annual contribution is MXN 138,479. The employer limit could be higher, considering that the employer's portion includes the occupational risk premium, which varies depending on the activity of the employer. These maximum contributions apply to employees earning more than MXN 817,782 per year (or MXN 68,149 per month).

Payroll Accruals Additional Information

 

 

Employment Accruals

Annual Leave Employees in Mexico are entitled to an annual vacation entitlement of 6 days after the first full year of employment. This equals 1.64% (6/365 days) of annual income

Maternity Leave Female employees have a right to maternity leave consisting of six weeks’ paid leave before the estimated due date, and six week’s paid leave after birth.
Maternity leave is paid for by Social Security, not the employer. The payment is capped at 25 times the minimum wage.
Paid by the Social Security

Paternity Leave Fathers are entitled to 5 paid days of paternity leave. This equals 1.36% (5/365 days) of annual income

Overtime Overtime is paid at 150% of the normal payment.
Employers must pay 200% for overtime on Sundays or Bank Holidays.
Work time is limited to 11 hours per day and 50 hours per week.
Normal hourly rate is around 207 MXN. Overtime is paid at an additional 103.5 MXN
Severance Employees hired for an indefinite term who are dismissed without a just cause (as defined in the FLL) are entitled to claim reinstatement or the payment of mandatory severance comprised of the amounts described below (note that "daily total compensation" is equal to the employee's daily base salary, plus the daily proportion of any employment benefits ordinarily paid to the employee):

  • 90 days of daily total compensation
  • 20 days of daily total compensation for each year of service that the employee has worked.
  • 12 days of daily base salary for each year of service that the employee has worked (for purposes of calculating this, employees' salary is capped at twice the amount of the daily minimum wage).
  • Any accrued salaries and benefits (including paid vacation, vacation premium, Christmas bonus and any other accrued benefit).
This equals 24.65% (90/365 days) of annual income. Plus 8.76% (32/365 days) of annual income
13th Month Pay Mexican law also mandates that employees receive a 13th month bonus (Aquinaldo bonus) at the end of the year, which must be paid by December 20.
Some employers also pay a 14th month bonus, in which they share profits of the previous year; these payments must be made by May 31
This equals 8.33% (1/12 months) of annual income
Social Security The social security system in Mexico provides the following benefits:
  • Medical assistance in cases of illness, maternity care and accidents
  • Indemnities in cases of temporary disability
  • Pensions for disability, old age and death. The maximum rate of the social security contribution payable by employers can reach 36.69% (including the percentages for job hazard and the Federal Retirement and Housing Funds).
This equals 36.7% of annual income

Accrued Benefits in Mexico

Christmas Bonus %

Based on 15 days bonus by December the 20th

4.12%
Christmas Bonus Over Vacations % 0%
Severance per Year%

Employees are entitled to severance pay that equals 12 days of pay after one year of service (3.29% of annual salary)

3.29% of annual salary
Vacations %

Employees are entitled to 6 days of annual leave (1.64% of annual salary)

1.64%
Of annual
salary
Notice %

No minimum notice period and employers may refuse to notify employees although they are obliged to do so.

-
Christmas Bonus Over Notifications % 0%
Vacations Plus %

Based on 25% bonus for vacations

2.08%

Total percentage of Salary (yearly)

The total employment accruals as a percentage of salary per anum are equal to 11.13%

11.13%

Why use Global Expansion to hire in Mexico

Establishing a branch office or subsidiary in Mexico can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Mexico labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Mexico law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Mexico. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Mexico Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.

 

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