Minimum Wage: The statutory minimum wage in Mexico is 278.80 Pesos per day.
Working Hours: Overtime compensation in Mexico follows a structured system to discourage excessive work hours.
Payroll Taxes: In Mexico, employers contribute about 1.92% in payroll taxes, which typically cover social security, health care, and other statutory benefits.
Average Salary: The average salary in Mexico is approximately MXN 17,300 (around USD 1,020).
Hiring independent contractors has boomed in popularity because of the cost savings and flexibility they offer. It can be a great option if you require niche skills or short-term project support. Contractors allow businesses to access specialized skills quickly, without the time and cost of setting up a local entity.
However, it’s important to know the limits of this model: contractors are not a substitute for full-time employees. Relying on them for ongoing, long-term roles can create serious compliance risks, including employee misclassification, which can lead to fines, back taxes, and reputational damage.
Playroll’s contractor management solutions make it simple to compliantly engage, onboard, and pay contractors around the world. We provide clear visibility into agreements, streamline payments, and reduce compliance risks – so you can focus on getting the work done. And when you’re ready to take the next step, we can help seamlessly convert contractors into full-time employees through our global Employer of Record service.
From compliant contracts to competitive benefits, Playroll’s EOR services keep you aligned with local labor laws and regulations, safeguarding your business, so you can focus on growth.
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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.
The average monthly salary in Mexico in 2025 is approximately MXN 17,300 (around USD 1,020). Salaries vary based on experience, industry, and location - urban centers like Mexico City typically offer higher wages than rural areas, and sectors like tech, finance, and healthcare tend to pay more than agriculture or manufacturing. Entry-level positions earn substantially less than senior roles, and advanced degrees or certifications can lead to higher compensation. Mexico’s economy in 2025 remains relatively stable, with low unemployment (~2.5%), moderate inflation (~3.6%), and steady GDP growth, all contributing to a gradually improving salary landscape.
In Mexico, the standard working hours are defined by the type of shift:
- Day Shift: An employee aged 16 or older is allowed to work up to 8 hours per day, totaling 48 hours per week.
- Night Shift: An employee aged 16 or older can work up to 7 hours per day, totaling 42 hours per week.
- Mixed Shift: Combining day and night periods, an employee can work up to 7.5 hours per day, totaling 45 hours per week.
Overtime compensation in Mexico follows a structured system to discourage excessive work hours. Employers must pay double the regular hourly wage for the first nine overtime hours in a week and triple the rate for any additional overtime. Employers who fail to comply may face criminal penalties under Mexico’s labor-exploitation statutes, including imprisonment of three to twelve years and fines ranging from 50 to 5,000 times the UMA (Unidad de Medida y Actualización).
As of January 1, 2025, the minimum wage rate in Mexico is:
- General minimum wage: 278.80 pesos per day. This represents a 12% increase compared to the previous year, reflecting an effort to improve workers' purchasing power and address inflation.
- The monthly equivalent, based on a typical 40-hour workweek, is approximately 12,596 pesos.
- The Northern Border Free Zone rate: 419.88 pesos per day. Certain professions have professional minimum wages that exceed the general rate, particularly in specialized industries.
The National Minimum Wage Commission (CONASAMI) reviews and adjusts minimum wages annually, considering inflation and purchasing power. Employers can face legal risks if they fail to comply with these updated minimum wage rates.
Employment laws in Mexico can be intricate, and even unintentional mistakes in contracts, benefits, or termination processes can carry legal and reputational consequences. With an Employer of Record, you gain a local partner that ensures every hire is compliant. The EOR takes care of drafting compliant contracts, processing accurate payroll, managing contributions to statutory benefits, and handling lawful terminations if needed, all according to local employment standards.
This level of protection is especially valuable when expanding into new or unfamiliar regions. Instead of using time and resources to build in-house legal knowledge, you gain immediate access to local expertise. The EOR keeps you ahead of regulatory updates and shields your company from potential compliance gaps, so you can confidently hire and manage employees while minimizing risk. For hiring managers and founders, it's the difference between hiring with uncertainty and building your team on a legally sound foundation.
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
As of January 1, 2025, the minimum wage rate in Mexico is:
- General minimum wage: 278.80 pesos per day. This represents a 12% increase compared to the previous year, reflecting an effort to improve workers' purchasing power and address inflation.
- The monthly equivalent, based on a typical 40-hour workweek, is approximately 12,596 pesos.
- The Northern Border Free Zone rate: 419.88 pesos per day. Certain professions have professional minimum wages that exceed the general rate, particularly in specialized industries.
The National Minimum Wage Commission (CONASAMI) reviews and adjusts minimum wages annually, considering inflation and purchasing power. Employers face legal risks if they fail to comply with these updated minimum wage rates.
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.
Employers in Mexico must manage critical payroll obligations, including income tax withholding, social security contributions, and state payroll taxes. Income tax is based on progressive rates ranging from 1.92% to 35%, while social security contributions involve employer and employee payments to fund benefits such as healthcare and pensions. Additionally, state-level payroll taxes, typically ranging from 1% to 3%, add another layer of complexity.
Accurate calculations, timely submissions, and adherence to state-specific regulations are essential to avoid penalties and maintain positive employee relations. Leveraging payroll management software can streamline these processes, ensuring compliance and reducing administrative burdens in Mexico.
When you’re scaling quickly, setting up local payroll systems in each new country slows you down. In Mexico, the administrative load can include government registration, benefits management, and accurate, on-time payment delivery. An EOR gives you a plug-and-play solution that handles all of this while your internal team stays focused on growth, not red tape.
Key Ways an EOR Supports Payroll in Mexico:
- Rapid Payroll Setup: Onboards employees quickly with ready-to-go infrastructure.
- End Administration: Handles salary, tax, and benefits with no extra internal resources.
- Vendor Simplicity: Consolidates payroll across countries for centralized oversight.
- No Entity Required: Operates legally, saving your business the time and resources needed for local incorporation.
Make better business decisions by consolidating global payroll data, while seamlessly syncing your existing payroll operations.
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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.
In Mexico, leave policies are regulated by the Federal Labor Law, which ensures employees have access to annual leave, sick leave, maternity and paternity leave, adoption leave, and public holidays. Employers are legally required to comply with these rules, and many also offer additional benefits beyond the law.
Annual Leave
- Full-time employees receive 12 days of paid annual leave after completing one year of service.
- This entitlement increases by 2 days per year up to a maximum of 20 days.
- After six years of service, vacation days increase by 2 days every five years.
- Employees must also receive a vacation premium of at least 25% of their regular salary during their leave.
Sick Leave
Sick leave is supported through the Mexican Social Security Institute (IMSS) rather than the employer directly.
- Employees receive 60% of their salary starting from the 4th day of illness.
- Coverage lasts for up to 52 weeks, with a possible extension of another 52 weeks.
Maternity and Paternity Leave
- Maternity leave provides 12 weeks of paid leave, typically divided as 6 weeks before and 6 weeks after birth.
- Up to 4 weeks can be shifted from prenatal to postnatal leave.
- If a child is born with a disability or requires additional care, mothers can receive an extra 2 weeks.
- Paternity leave grants fathers 5 days of paid leave.
Adoption Leave
Employees adopting a child are also entitled to leave, ensuring that adoptive parents have time to bond and care for the child in line with Federal Labor Law.
Public Holidays
Mexico observes 7 national holidays annually, with an additional holiday in 2025 for Judicial Election Day (June 1).
Employer Obligations and Optional Policies
Employers must respect these legal requirements to avoid penalties and foster a supportive workplace. While not mandatory, many companies also offer bereavement leave, sabbaticals, or other forms of extended leave as part of internal policies, which can enhance employee satisfaction.
In Mexico, mandatory employee benefits include social security contributions, Christmas bonuses, paid vacations, profit-sharing, retirement savings, maternity and paternity leave, and severance pay. These benefits ensure worker protection and financial stability.
Many companies offer supplemental benefits such as private health insurance, life insurance, meal vouchers, stock options, gym memberships, flexible work arrangements, and tuition reimbursement to attract and retain top talent. Employers must comply with labor laws while strategically leveraging additional perks to enhance employee satisfaction and company reputation.
For startups and small teams, managing global employee benefits isn’t just complex, it’s a full-time job. In Mexico, understanding what benefits are required, how to deliver them, and how to stay compliant can be overwhelming, especially without local HR expertise. An Employer of Record removes that pressure by taking complete ownership of benefits administration, so you don't have to become an expert in local employment law.
Whether it’s healthcare contributions, pension enrollment, or statutory leave, the EOR ensures everything is delivered accurately and on time. They navigate any country-specific nuances, keep up with legal changes, and ensure each benefit is properly tracked and documented. For founders, that means fewer distractions and more time to focus on growth. Your employees get the security and support they expect from a local employer, and you get to scale your team in Mexico without building complex infrastructure or worrying about compliance missteps.
Mexico’s labor laws provide strong protections for employees, requiring employers to follow strict procedures for termination. Dismissals are only allowed for just cause and must be documented with a written notice.
- If dismissed without cause, employees are entitled to severance: 3 months’ salary, 20 days per year worked, plus accrued benefits.
- Disputes go first through conciliation, then to Labor Courts, where reinstatement or extra compensation may be ordered.
- Employers must issue a termination letter, final payslip, tax documents, and settle all outstanding payments promptly.
- Collective redundancies need Labor Board approval and must follow severance rules.
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, capped at twice the minimum daily salary in force.
Disclaimer
THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). Playroll does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect Playroll’s product delivery in any given jurisdiction. Playroll makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.