Employer of Record in Mexico

Businesses can only operate smoothly in Mexico if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Mexico below, to avoid any compliance issues.

Employment Contract Requirements

Mexico requires employment contracts, and at-will employment is not permitted. Employers should draft detailed contracts, considering factors such as:

• Employee's personal information (name, contact number, etc.)
• Job details and responsibilities
• Contract duration (seasonal, project, or indefinite)
• Salary breakdown and other compensations
• Working Hours and Vacation Days
• Termination clause

Onboarding Process

We can help you get a new employee started in Mexico quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations.

For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Mexico

The maximum daily work hours are eight for daytime, seven for night shifts, and seven and a half for mixed shifts.

Overtime in Mexico

Employees can work up to three extra hours per day, totaling nine hours per week, at double their usual pay. If they exceed nine overtime hours in a week, employers must pay them three times the regular hourly rate for the extra hours.

Probation Period in Mexico

In Mexico, there is a minimum probation period of 30 days. This may be extended for management positions and specialised roles.

Fiscal Year in Mexico

1 January- 31 December is the 12-month accounting period that businesses in Mexico use for financial and tax reporting purposes.

Payroll Cycle in Mexico

The payroll cycle in Mexico is usually bi-monthly, with employees being paid on the 15th and the last day of each month.

Minimum Wage in Mexico

The minimum wage for employees in Mexico is typically 31.12 MXN per hour, amounting to ~ 5,476.46 MXN per month for a typical 40 hour work week.

Bonus Payments in Mexico

In Mexico, a mandatory 13th-month salary payment, known as Aguinaldo, is a standard practice. This bonus payment is required to be disbursed by December 20th. The calculation of Aguinaldo involves 15 working days of salary, along with an additional allowance, taking into account a 365-day year.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 36.1%- 44.73% on top of the employee salary in Mexico.

Employee Payroll Tax Contributions

In Mexico , the typical estimation for employee payroll contributions cost is around 2.78%.

Individual Income Tax Contributions

In Mexico, the individual income tax rates follow a progressive structure, with rates ranging up to 35%.

Pension in Mexico

In Mexico's retirement system, there's a pension for those 65 and older, a mandatory savings plan, and other private options. If someone retires at 65 after contributing for about 24 years but doesn't have enough savings for the minimum pension, they receive the minimum pension for support.

In Mexico, work permits and visas are essential for employers hiring foreign workers. The process involves submitting applications, paying fees, and meeting specific eligibility criteria. The key visa types include the Temporary Resident Visa with Work Permission, Permanent Resident Visa, Intra-Company Transfer Visa, and Business Visitor Visa. Employers must ensure compliance with local labor regulations when sponsoring foreign employees.

Mandatory Leave Entitlement in Mexico

The annual leave entitlement in Mexico is 12 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Mexico

Mexico has at least seven national holidays each year, and in election years, there are eight. There are also significant observances, which are bank holidays

Paid Time Off in Mexico

The allocation of annual leave is determined by the duration of employment. The minimum leave days vary depending on the length of an employee's service, as outlined below:

• One year of service: 12 days
• Two years of service: 14 days
• Three years of service: 16 days
• Four years of service: 18 days
• Five years of service: 20 days
• After completing the sixth year of service, the annual leave entitlement will be augmented by 2 days for every subsequent 5 years of service.

Maternity Leave In Mexico

Maternity leave lasts for 12 weeks, including six weeks before childbirth and six weeks after. During pregnancy and after childbirth, individuals receive a cash subsidy equal to 100% of their last daily salary contribution for 42 days before delivery and 42 days after.

Paternity Leave In Mexico

Employees in Mexico get five days of paid paternity leave, receiving their full average salary, covered by the employer.

Sick Leave In Mexico

While on sick leave in Mexico, employees do not receive payment from their employer. Instead, they are compensated by Social Security, receiving 60% of their regular salary from the fourth day of sickness-related absence from work. If the employee experiences a work-related sickness or injury, the compensation is 100%. Sick leave is limited to a duration of 52 weeks.

Parental Leave In Mexico

Mexico does not have a separate shared parental leave policy.

Termination Process in Mexico

Employers can't end employment without a valid reason. Unlike in some places, there is no "at-will" employment. The Mexican Federal Labor Law lists specific reasons and procedures for terminating an employee without facing legal consequences. These reasons are outlined below:

• Breach of disobedience or honesty principles
• Vandalism
• Revealing company secrets
• Sexual harassment
• Refusing to comply with safety procedures
• False statements about work qualifications
• Four unexcused absences in 30 days

Notice Period in Mexico

In Mexico, there are no mandated minimum notice periods, but according to federal labor law, if a situation warrants, the employer must write a notice to the employee within 30 days of becoming aware of any misconduct.

Severance in Mexico

If an employee is let go without a good reason, they are entitled to severance pay. This pay includes three times their usual monthly salary and an extra 20 days' pay for each year they've worked beyond 15 years.

For voluntary resignations or firings with a valid reason, employees with 15 or more years of service get a bonus called a seniority premium. This bonus equals 12 days' pay for each year they've worked.