If you're thinking about growing your business in Mexico, teaming up with an Employer of Record (EOR) is a smart move. An EOR in Mexico handles all the employment responsibilities and risks for your company, making sure you can hire and expand with compliance. This includes taking care of payroll, taxes, and following local labor rules. With an EOR, you still run the day-to-day tasks with your employees, but the EOR becomes their official employer.

Mexico’s labor laws are heavily influenced by various factors such as its constitution and collective bargaining agreements. Due to Mexico's participation with international regulatory bodies, labor laws are also revised based on the International Labor Organization. 

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Moreover, foreign employers also need to establish a legal entity to hire in Mexico. For example, a U.S. tech company, to hire in Mexico, would need to register with the National Registry of Foreign Investments and follow specific procedures. Employers incur a lot of monetary and opportunity costs because of this.

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Opting for a Mexico EOR/PEO provides a streamlined and compliant approach to hiring without the need for a formal corporation setup. Gloroots' PEO services enable efficient recruitment, legally licensing personnel through our Mexico affiliate. This eliminates legal complexities, allowing personnel to start working within days. EORs/PEOs are a responsive solution for hiring, market research, and adjusting to Mexico's dynamic business demands. 

PEOs often offer fixed or variable pricing models. Fixed pricing involves charges per employee annually, while variable pricing is based on a percentage of yearly payroll.

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At Gloroots, we adopt an employee-based pricing approach. Our transparent PEO cost for full-time employees starts at a monthly rate. This fee may vary based on the employee's location and role. It covers global payroll, leave management, and additional benefits. For freelancers, there's a separate monthly fee covering onboarding and global payment.

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Our streamlined Mexico EOR solutions simplify payroll and benefits for your global team. Gloroots provides advanced PEO technology for seamless global HR management.

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Key Metrics For Foreign Employer 

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The table below depicts key indicators from the Global Talent Competitiveness Report for employers wishing to hire from Mexico.

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Source: The Global Talent Competitiveness Index 2023

"Misclassification of employees" pertains to the incorrect categorization of workers by their employers. It occurs when a worker is wrongly labelled as an independent contractor or is exempted from specific employment laws and benefits, despite deserving employee status with legal safeguards, benefits, and rights.

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Engaging a PEO/EOR in Mexico aids in reducing misclassification risks. This is achieved through labor law adherence, accurate employee classification, precise payroll handling, and comprehensive benefits. This way, businesses can prioritize core operations while entrusting employment matters to seasoned professionals.

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‍Employment contract

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Mexican labour law mandates employment contracts to be in writing. Every employment agreement should contain at least the following information:

• Identification of both parties
• Type of employment, i.e. permanent, fixed-term etc.
• Probation period
• Workplace
• Job description, duties and responsibilities
• Basic salary as well as other compensation or benefits and payment details
• Working hours
• Total number of holidays
• Information on provided training

Unless specified otherwise, employment contracts in Mexico are considered to be permanent. It is mandatory to compose the contract in the local language.

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Working time

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The regular work schedule in Mexico is 48 hours per week or 8 hours each day. Mexico's federal labor law defines three types of work shifts:

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1. Day Shifts: These involve 48 hours a week, between 6 am to 8 pm.

2. Night Shifts: These cover 42 hours a week, from 8 pm to 6 am.

3. Mixed Shifts: These entail 45 hours a week.

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However, the highest weekly and daily working hours can change based on employment contracts or collective bargaining agreements.

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Overtime

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Public Holidays

The country observes 7 public holidays.

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Minimum Wage

The standard national minimum wage in Mexico stands at 207.44 MXN per day, However, figures may vary based on location, job roles and categories. For example, in the Northern Border Zone, the minimum wage differs, amounting to 312.41 MXN per day. This specific zone encompasses certain municipalities along the Mexican states bordering the USA.

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Annual Leave

Employees who have completed a year of service begin with 12 days of yearly leave. Each subsequent year adds two more days until the total reaches 20 days.

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Starting from the sixth year, leave increases by two days every five years. Employers must grant an annual holiday bonus amounting to 25% of an employee's earnings during their vacation days.

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Moreover, the nation observes a minimum of seven national holidays annually. In years with a presidential election, this number becomes eight, and additional religious celebrations might bring more closed days for most businesses. For employees working on these days, a remuneration rate of 200% of their regular wages is required.

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Paid Sick Leaves

Funded through Social Security (IMSS), eligible employees can receive a maximum of 52 weeks of paid sick leave. This amounts to 60% of their regular salary, as confirmed by medical authorities linked to IMSS. If the reason for leave is a workplace injury, the employee is entitled to their full regular salary.

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Maternity leaves

Every female employee is granted 12 weeks of paid maternity leave, to be taken in two parts: six weeks before childbirth and six weeks after. During this time, maternity pay is calculated at full salary, with 60% covered by IMSS and 40% by the employer. To avail this leave, a medical certificate from an approved IMSS clinic or private medical institution is required.

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In addition, female employees are also eligible for six weeks of paid adoption leave once they receive custody of a minor child.

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Paternity leaves

Male employees are granted compulsory paid paternity leave lasting for 5 days.

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Employee Income tax

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Several Mexican states impose modest taxes on employee salaries and other earnings, typically paid by the employer. As an instance, in Mexico City, there is a 3% payroll tax.

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Tax and Social Security contribution

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Employer Payroll Contributions

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Employee Payroll Contributions

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Mexico doesn't practice at-will employment, and clauses allowing termination at-will apply only to employees. This means employers can't end employment without valid reasons. The Mexican Federal Labor Law outlines specific reasons and steps for terminating employees without facing legal repercussions. Below are the reasons specified:

1. Providing false qualifications for work.

2. Violating principles of obedience or honesty.

3. Engaging in vandalism.

4. Committing sexual harassment.

5. Demonstrating alcoholism at the workplace.

6. Disclosing company secrets.

7. Refusing safety procedures.

8. Accumulating four unexcused absences in 30 days.

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Severance Pay

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In Mexico, letting go of an employee without valid reasons necessitates providing severance. This severance package should include three times the regular monthly salary, along with an extra 20 days' pay for every year of service beyond 15 years.

Regarding voluntary resignation and termination with proper cause: Employees with more than 15 years of service are entitled to a seniority premium of 12 days' pay for each year worked.

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Notice Period

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Mexico doesn't set specific minimum notice periods by law. However, according to federal labor law, if the situation demands, the employer must provide written notice to the employee within 30 days of becoming aware of any misconduct. This notice should detail the reasons for termination, or the labor board will issue a termination notice. It's a common practice to offer a two-week notice as a courtesy in cases of 'termination without cause' or resignation.

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Probation period

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In Mexico, the probationary period for permanent employees is not mandatory and typically lasts for 90 days.

When expanding your workforce globally, ensuring compliance can be a real challenge. You have to make sure that every step of hiring and onboarding follows employment laws, payroll procedures, DE&I compliance, GDPR, and data protection regulations. If setting up local entities and hiring is complex, staying on top of a dynamic compliance landscape is even tougher.

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Gloroots simplifies everything by offering a central platform to manage these tasks. Our internal experts protect you from risks related to cross-border employment and payroll compliance. We handle tasks like creating employment contracts, ensuring timely payments, providing compliant benefits, so you can focus solely on talent screening.

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Our commitment is to give you and your employees a hassle-free global employment experience. Reach out to our experts today to kickstart your global hiring journey.

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Expanding your team involves strategically recruiting suitable talents at the right juncture and for the relevant roles. In Mexico, managing compliance, payroll, taxes, and benefits requires a local entity. To start a business in Mexico, begin by selecting the suitable business structure among three popular choices:

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1. Stock Corporation: Widely preferred, divides value into shares. Minimum capital is MXN50,000 or $2,700.

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2. Limited Liability Company (LLC): Ideal for small-medium businesses. Minimum capital is MXN3,000 or $160. Individual tax shares for members.

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3. Simplified Shares Company: Quick and cost-effective. Suited for simple corporate setups, especially SMEs.

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The intricacies of Mexican employment regulations can be challenging. Gloroots offers a comprehensive global Employer of Record (EoR) service, allowing you to offload the complexities of payroll, taxes, benefits, and compliance to Gloroots. This empowers you to focus on your employees and propel your company's growth without being weighed down by administrative burdens.

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