Employer of Record in Mexico

Hire, Onboard and Pay Employees in Mexico Quickly and Efficiently
Yamini Jain

Mexico at a glance

CURRENCY
Mexican Peso (MXN)
public/bank holidays
7
capital
Mexico City
Language
Spanish
date format
DD/MM/YYYY
tax year
Calendar year (January 1 to December 31)
Payroll frequency
Biweekly (every two weeks)
gdp
$1,414.19B (2022)
Working Hours
48 hours, typically spread across six working days

Mexico is one of Latin America’s largest economies and a critical hub for trade, manufacturing, and services. Known for its strong industrial base, growing technology ecosystem, and proximity to the U.S., Mexico offers global companies access to a cost-competitive, skilled workforce. The country has world-class expertise in automotive, aerospace, IT services, finance, and shared services, making it a preferred destination for multinational expansion.

However, Mexico’s employment landscape is complex. Employers must navigate federal labor law (Ley Federal del Trabajo), mandatory benefits under the IMSS (Instituto Mexicano del Seguro Social), and strict payroll tax requirements. Setting up a local subsidiary can be bureaucratic and may take months before companies can legally hire.

By partnering with an Employer of Record (EOR) like Gloroots, businesses can hire in Mexico in days, not months, while ensuring full compliance with local employment, tax, and labor regulations.

What are the key facts about Mexico’s economy and workforce?

Mexico is the second-largest economy in Latin America (GDP ~USD 1.7 trillion, 2025) and a global leader in manufacturing and exports. It is also rapidly growing as a hub for nearshoring, software development, fintech, and business process outsourcing (BPO).

Economic Highlights

  • Major Industries:
    • Automotive: GM, Ford, Toyota, and Volkswagen operate major production hubs.
    • Aerospace: Bombardier, Safran, and Honeywell run R&D and assembly plants.
    • Technology & IT Services: Guadalajara is dubbed the “Silicon Valley of Mexico.”
    • Finance & Shared Services: Monterrey and Mexico City host global SSCs and fintech startups.
    • Energy & Mining: Oil & gas remain important, alongside renewables.
  • Trade Integration: As a member of USMCA (United States–Mexico–Canada Agreement), Mexico benefits from preferential access to North American markets.
  • Startup Ecosystem: Mexico City and Guadalajara are home to growing venture capital networks and unicorns in fintech and logistics.

Workforce Characteristics

  • Workforce Size: ~60 million employed individuals.
  • Median Age: ~30 years, with over 40% of the workforce under 35.
  • Education: Strong graduate output in STEM fields from UNAM, ITESM, and IPN.
  • English Proficiency: Moderate, but higher among urban professionals in IT, finance, and multinational firms.
  • Talent Hubs: Mexico City (finance, professional services), Monterrey (manufacturing, shared services), Guadalajara (IT, R&D), Tijuana & Querétaro (aerospace, electronics).

What is the work culture and talent pool like in Mexico?

Mexico’s work culture blends hierarchical structures with growing emphasis on collaboration and flexibility. Managers are typically expected to provide clear direction, but younger professionals increasingly value innovation, autonomy, and work-life balance.

White-Collar Talent Strengths

  • Engineering & IT: Software developers, engineers, and data scientists.
  • Finance & Shared Services: Strong accounting, compliance, and BPO workforce.
  • Manufacturing Specialists: Skilled labor in automotive and aerospace.
  • Multilingual Capabilities: English and Spanish bilingual professionals are common in global services.

Key Hiring Hubs

  • Mexico City: Finance, fintech, consulting, BPO.
  • Monterrey: Manufacturing, shared services, engineering.
  • Guadalajara: IT, R&D, startups.
  • Querétaro & Tijuana: Aerospace, electronics, nearshoring hubs.
Workforce Size~60 million
Median Age~30 years
% Under 35~40%
English ProficiencyModerate; higher in IT/finance hubs
STEM GraduatesStrong pipeline from UNAM, ITESM, IPN
Top Talent HubsMexico City, Monterrey, Guadalajara, Querétaro, Tijuana
Key IndustriesAutomotive, Aerospace, IT, Finance, BPO

Q: What is the process of setting up an entity in Mexico?

Direct Entity Setup

Setting up a legal entity in Mexico involves:

  1. Choosing entity type: Most foreign companies set up a Sociedad Anónima (SA) or Sociedad de Responsabilidad Limitada (S. de R.L.).
  2. Company name registration with the Ministry of Economy.
  3. Articles of Incorporation signed before a notary public.
  4. RFC Tax Registration with the SAT (Servicio de Administración Tributaria).
  5. Social Security Registration (IMSS).
  6. Local labor authority registration.
  7. Corporate bank account setup.

Timelines: Incorporation can take 2–3 months, with additional time for tax and social security setup.

Using Gloroots EOR Instead

Gloroots eliminates entity setup delays by employing staff on your behalf through its Mexican entity. You get:

  • Faster hiring – onboard in days.
  • Payroll & tax compliance managed seamlessly.
  • Employee benefits & IMSS registration handled correctly.
  • Lower risk – no corporate tax filing obligations.

Direct Entity vs. Gloroots EOR in Mexico

Direct EntityGloroots EOR
Time to Hire2–3 months2–5 days
Setup CostsHigh (legal, HR, compliance)Low, one monthly fee
Tax & Payroll ComplianceEmployer’s responsibilityGloroots manages payroll, IMSS, and taxes
Employee BenefitsEmployer must manage independentlyGloroots ensures statutory & supplemental benefits
FlexibilityEntity must be maintained long termScale workforce up/down easily

Q: What are the key employment laws in Mexico that employers should know?

Mexico’s employment landscape is governed by the Ley Federal del Trabajo (Federal Labor Law). Employers must comply with strict rules around contracts, benefits, and termination.

Key Employment Regulations

  • Employment Contracts
    • Must be in writing (indefinite, fixed-term, or seasonal).
    • Must outline salary, working hours, benefits, and termination clauses.
  • Working Hours
    • Standard: 48 hours per week (6 days, 8 hours/day).
    • Reduced schedules for night shifts.
  • Overtime
    • First 9 hours/week at 200% pay.
    • Beyond 9 hours/week at 300% pay.
  • Minimum Wage (2025)
    • ~MXN 374/day (Zone A, northern border higher).
  • Annual Leave
    • 12 days after 1 year of service.
    • Increases by 2 days each year up to 20 days, then by 2 days every 5 years.
  • Public Holidays
    • 12 national holidays (e.g., Constitution Day, Independence Day).
  • Sick Leave
    • Paid by IMSS at 60% of salary (from the 4th day of illness).
  • Maternity Leave
    • 12 weeks (6 weeks before, 6 weeks after birth). Paid at 100% salary by IMSS.
  • Paternity Leave
    • 5 working days paid.
  • Severance Pay
    • Wrongful dismissal: 3 months’ salary + 20 days per year of service + accrued benefits.
    • Voluntary resignation: Accrued benefits only.

Employment Law Snapshot – Direct Employer vs. Gloroots

Direct EmployerGloroots (EOR)
Employment ContractsMust draft compliant contracts independentlyGloroots provides compliant, bilingual contracts
Working Hours & OvertimeEmployer tracks and calculates overtime premiumsGloroots ensures accurate payroll compliance
Social Security (IMSS)Employer must register and remit contributionsGloroots manages IMSS registration and contributions
Leave & BenefitsEmployer must provide statutory entitlementsGloroots tracks and administers benefits correctly
Severance & TerminationEmployer handles calculations and legal riskGloroots ensures compliant termination handling

Q: What are the risks of misclassification in Mexico?

Q: How does an EOR help you run payroll in Mexico?

Summary Info Section

Payroll in Mexico is highly regulated. Employers must calculate gross-to-net pay correctly, withhold and remit income tax (ISR), register employees with IMSS (Social Security), and administer statutory benefits like vacation, Christmas bonus, and profit-sharing. Non-compliance can result in penalties, audits by SAT (Tax Authority), and employee claims.

For foreign companies without a legal entity, payroll compliance is nearly impossible. Gloroots, as your Employer of Record (EOR), runs compliant payroll on your behalf, ensuring employees are paid accurately, on time, and with full statutory compliance.

Key Payroll Compliance Requirements in Mexico

  • Payroll Cycle: Salaries are typically paid bi-weekly or monthly.
  • Payslips: Employers must issue detailed payslips (in Spanish) via an approved CFDI (Comprobante Fiscal Digital por Internet) e-invoicing system.
  • Income Tax (ISR): Employers must withhold ISR at progressive rates and remit to SAT monthly.
  • Social Security (IMSS): Employers must calculate and remit contributions covering healthcare, pensions, unemployment, and work injury insurance.
  • Profit-Sharing (PTU): 10% of taxable profits must be distributed annually to employees.
  • Aguinaldo (Christmas Bonus): 15 days’ salary minimum, payable by December 20 each year.
  • Vacation Premium: 25% bonus on vacation days taken.

How Gloroots Simplifies Payroll

  • Payroll Processing: Manages salary, overtime, bonuses, and allowances.
  • ISR Withholding: Calculates and remits income tax to SAT.
  • IMSS Contributions: Ensures accurate social security filings.
  • Mandatory Benefits: Automates aguinaldo, vacation premium, and profit-sharing.
  • Payslips: Issues compliant CFDI e-payslips.
  • Reporting: Files monthly and annual compliance reports.

Payroll Management: Direct Employer vs. Gloroots

<table><tr><th></th><th>Direct Employer</th><th>Gloroots (EOR)</th></tr><tr><td>Entity Requirement</td><td>Must establish entity & register with SAT and IMSS</td><td>No entity needed – Gloroots handles compliance</td></tr><tr><td>Payslip Compliance</td><td>Employer must issue CFDI e-payslips</td><td>Gloroots issues bilingual, compliant payslips</td></tr><tr><td>ISR & Tax Filing</td><td>Employer calculates and remits ISR monthly</td><td>Gloroots manages all ISR filings</td></tr><tr><td>Social Security</td><td>Employer registers with IMSS & pays contributions</td><td>Gloroots ensures timely IMSS registration & contributions</td></tr><tr><td>Mandatory Bonuses</td><td>Employer must track aguinaldo, PTU, vacation premium</td><td>Gloroots automates mandatory benefits</td></tr></table>

Q: How does tax compliance work in Mexico?

Summary Info Section

Tax compliance in Mexico requires employers to withhold and remit income tax (ISR) and social security contributions. Employers must also budget for mandatory benefits like profit-sharing (PTU) and Christmas bonuses (aguinaldo).

Gloroots ensures full compliance with tax regulations, reducing exposure to penalties from SAT and IMSS.

Personal Income Tax (ISR) in Mexico – 2025

Mexico applies a progressive tax system for employees:

  • Up to MXN 8,952 → 1.92%
  • MXN 8,953 – 75,984 → 6.40%
  • MXN 75,985 – 133,281 → 10.88%
  • MXN 133,282 – 155,083 → 16.00%
  • MXN 155,084 – 1,249,999 → 21.36%
  • MXN 1,250,000+ → 35.00%

(Additional local/state taxes may apply depending on region.)

Social Security Contributions (IMSS)

  • Employer Contributions: ~15%–25% of salary (healthcare, retirement, unemployment, accident insurance).
  • Employee Contributions: ~3%–5% of salary (withheld via payroll).
  • Unemployment & Work Injury Insurance: Employer-only contribution, rate depends on risk category.

Employer vs. Employee Contributions

<table><tr><th>Contribution Type</th><th>Employer</th><th>Employee</th></tr><tr><td>Healthcare & Pensions</td><td>~10%–12%</td><td>~1%–2%</td></tr><tr><td>Retirement Savings (AFORE)</td><td>6.5%</td><td>1.125%</td></tr><tr><td>Unemployment & Work Injury</td><td>1%–3% (risk-based)</td><td>–</td></tr><tr><td>Total Contributions</td><td>~15%–25%</td><td>~3%–5%</td></tr></table>

Tax Compliance: Direct Employer vs. Gloroots

<table><tr><th></th><th>Direct Employer</th><th>Gloroots (EOR)</th></tr><tr><td>Entity Setup</td><td>Must incorporate and register with SAT & IMSS</td><td>No entity setup needed – Gloroots already registered</td></tr><tr><td>ISR Withholding</td><td>Employer calculates and remits monthly</td><td>Gloroots ensures accurate ISR withholding</td></tr><tr><td>Social Security</td><td>Employer registers with IMSS & manages filings</td><td>Gloroots handles IMSS registration & contributions</td></tr><tr><td>Profit-Sharing (PTU)</td><td>Employer distributes 10% profits annually</td><td>Gloroots ensures PTU compliance within payroll</td></tr><tr><td>Compliance Risk</td><td>High – frequent audits by SAT & IMSS</td><td>Minimal – Gloroots ensures full compliance</td></tr></table>Mexico’s labor law strongly favors employees. If contractors are treated as employees, courts and labor authorities may reclassify them, triggering back pay, IMSS contributions, severance, and penalties.

Common misclassification risk areas include IT, consulting, and creative services, where companies hire “contractors” who in reality work like full-time employees.

Criteria for Employee vs Contractor in Mexico

A worker is likely an employee if:

  • Works under employer control (set schedule, reporting lines).
  • Paid a regular salary instead of project-based fees.
  • Uses company equipment.
  • Provides services exclusively to one client.
  • Work is integral to company’s operations.

A true contractor should:

  • Control how, where, and when they work.
  • Invoice multiple clients.
  • Provide their own equipment.
  • Bear financial risk of their activity.

Penalties for Misclassification

  • Retroactive IMSS contributions (employer + employee share).
  • Back payment of benefits (vacation, profit-sharing, bonuses).
  • Severance liabilities if reclassified as terminated employees.
  • Fines from labor authorities.
  • Legal claims for reinstatement.

Direct Contractor Engagement vs. Gloroots

Direct Contractor EngagementGloroots (EOR)
Compliance RiskHigh – risk of contractor reclassificationZero – Gloroots hires compliantly under labor law
Social Security & TaxRisk of retroactive IMSS contributionsGloroots ensures timely IMSS registration & contributions
ContractsGeneric agreements may fail labor scrutinyBespoke contracts aligned with Mexican labor law
Financial ExposureEmployer liable for fines, back pay, severanceGloroots assumes compliance responsibilities
FlexibilityShort-term savings, long-term riskCompliant flexibility with no misclassification risk

Use our Misclassification Risk Calculator to check your exposure in Mexico.

Q: How does an EOR help you run payroll in Mexico?

Payroll in Mexico is highly regulated. Employers must calculate gross-to-net pay correctly, withhold and remit income tax (ISR), register employees with IMSS (Social Security), and administer statutory benefits like vacation, Christmas bonus, and profit-sharing. Non-compliance can result in penalties, audits by SAT (Tax Authority), and employee claims.

For foreign companies without a legal entity, payroll compliance is nearly impossible. Gloroots, as your Employer of Record (EOR), runs compliant payroll on your behalf, ensuring employees are paid accurately, on time, and with full statutory compliance.

Key Payroll Compliance Requirements in Mexico

  • Payroll Cycle: Salaries are typically paid bi-weekly or monthly.
  • Payslips: Employers must issue detailed payslips (in Spanish) via an approved CFDI (Comprobante Fiscal Digital por Internet) e-invoicing system.
  • Income Tax (ISR): Employers must withhold ISR at progressive rates and remit to SAT monthly.
  • Social Security (IMSS): Employers must calculate and remit contributions covering healthcare, pensions, unemployment, and work injury insurance.
  • Profit-Sharing (PTU): 10% of taxable profits must be distributed annually to employees.
  • Aguinaldo (Christmas Bonus): 15 days’ salary minimum, payable by December 20 each year.
  • Vacation Premium: 25% bonus on vacation days taken.

How Gloroots Simplifies Payroll

  • Payroll Processing: Manages salary, overtime, bonuses, and allowances.
  • ISR Withholding: Calculates and remits income tax to SAT.
  • IMSS Contributions: Ensures accurate social security filings.
  • Mandatory Benefits: Automates aguinaldo, vacation premium, and profit-sharing.
  • Payslips: Issues compliant CFDI e-payslips.
  • Reporting: Files monthly and annual compliance reports.

Payroll Management: Direct Employer vs. Gloroots

Direct EmployerGloroots (EOR)
Entity RequirementMust establish entity & register with SAT and IMSSNo entity needed – Gloroots handles compliance
Payslip ComplianceEmployer must issue CFDI e-payslipsGloroots issues bilingual, compliant payslips
ISR & Tax FilingEmployer calculates and remits ISR monthlyGloroots manages all ISR filings
Social SecurityEmployer registers with IMSS & pays contributionsGloroots ensures timely IMSS registration & contributions
Mandatory BonusesEmployer must track aguinaldo, PTU, vacation premiumGloroots automates mandatory benefits

Q: How does tax compliance work in Mexico?

Tax compliance in Mexico requires employers to withhold and remit income tax (ISR) and social security contributions. Employers must also budget for mandatory benefits like profit-sharing (PTU) and Christmas bonuses (aguinaldo).

Gloroots ensures full compliance with tax regulations, reducing exposure to penalties from SAT and IMSS.

Personal Income Tax (ISR) in Mexico – 2025

Mexico applies a progressive tax system for employees:

  • Up to MXN 8,952 → 1.92%
  • MXN 8,953 – 75,984 → 6.40%
  • MXN 75,985 – 133,281 → 10.88%
  • MXN 133,282 – 155,083 → 16.00%
  • MXN 155,084 – 1,249,999 → 21.36%
  • MXN 1,250,000+ → 35.00%

(Additional local/state taxes may apply depending on region.)

Social Security Contributions (IMSS)

  • Employer Contributions: ~15%–25% of salary (healthcare, retirement, unemployment, accident insurance).
  • Employee Contributions: ~3%–5% of salary (withheld via payroll).
  • Unemployment & Work Injury Insurance: Employer-only contribution, rate depends on risk category.

Employer vs. Employee Contributions

Contribution TypeEmployerEmployee
Healthcare & Pensions~10%–12%~1%–2%
Retirement Savings (AFORE)6.5%1.125%
Unemployment & Work Injury1%–3% (risk-based)
Total Contributions~15%–25%~3%–5%

Tax Compliance: Direct Employer vs. Gloroots

Direct EmployerGloroots (EOR)
Entity SetupMust incorporate and register with SAT & IMSSNo entity setup needed – Gloroots already registered
ISR WithholdingEmployer calculates and remits monthlyGloroots ensures accurate ISR withholding
Social SecurityEmployer registers with IMSS & manages filingsGloroots handles IMSS registration & contributions
Profit-Sharing (PTU)Employer distributes 10% profits annuallyGloroots ensures PTU compliance within payroll
Compliance RiskHigh – frequent audits by SAT & IMSSMinimal – Gloroots ensures full compliance

Q: What benefits and entitlements do employees in Mexico receive?

Mexico’s employment framework mandates a robust set of statutory benefits under the Ley Federal del Trabajo and the IMSS system. These include vacation, annual bonuses, profit-sharing, and severance. Employers that fail to provide these entitlements face fines and legal disputes.

Beyond statutory benefits, many companies in Mexico offer supplemental perks such as private health insurance, meal vouchers, and flexible work arrangements to remain competitive in talent-driven sectors like IT and finance. Gloroots ensures that all statutory benefits are included while helping companies design attractive packages for top talent.

Statutory Benefits in Mexico

  • Annual Leave:
    • 12 days after 1 year of service.
    • Increases by 2 days per year until 20, then 2 days every 5 years.
  • Vacation Premium: 25% of salary during vacation.
  • Public Holidays: 12 national holidays (e.g., Independence Day, Constitution Day).
  • Aguinaldo (Christmas Bonus): 15 days’ salary, payable by December 20.
  • Profit Sharing (PTU): 10% of company’s taxable profits distributed among employees annually.
  • Sick Leave: Paid by IMSS at 60% of salary (from 4th day of illness).
  • Maternity Leave: 12 weeks paid (6 before, 6 after birth), covered by IMSS.
  • Paternity Leave: 5 working days paid.
  • Severance: 3 months’ salary + 20 days per year of service if dismissed without cause.

Common Additional Employer Benefits

  • Private health insurance (to complement IMSS).
  • Meal/transport vouchers (vales de despensa).
  • Performance bonuses.
  • Gym memberships, wellness stipends.
  • Flexible work arrangements, remote options.

Benefits: Direct Employer vs. Gloroots (EOR)

Direct EmployerGloroots (EOR)
Statutory BenefitsEmployer must calculate and administer independentlyGloroots ensures accurate benefit delivery in payroll
IMSS EnrollmentEmployer registers employees manuallyGloroots automatically registers employees with IMSS
Aguinaldo & PTUEmployer must track and pay correctlyGloroots automates bonuses and profit-sharing
Supplemental BenefitsEmployer negotiates separatelyGloroots designs competitive packages
Compliance RiskHigh – fines for miscalculations or delaysMinimal – Gloroots manages compliance end-to-end

Q: What’s involved in hiring and onboarding employees in Mexico?

Hiring in Mexico requires written contracts, IMSS registration, and payroll setup with SAT. Employees must receive mandatory benefits from day one, and onboarding processes must comply with federal labor regulations.

For foreign employers, onboarding without a local entity is complex and time-consuming. With Gloroots as your EOR, you can issue compliant contracts, register employees with authorities, and onboard staff in days instead of months.

Key Steps in Hiring & Onboarding

  1. Employment Contract
    • Must be in writing, in Spanish.
    • Must specify type (indefinite, fixed-term, or seasonal).
    • Include salary, benefits, hours, probation, and termination terms.
  2. Probation Period
    • Allowed: 30 days (extendable to 180 days for managerial/technical roles).
  3. IMSS Registration
    • Employees must be enrolled before their first working day.
  4. Payroll Setup
    • Employer must register employee with SAT (tax authority) for ISR withholding.
  5. Onboarding Compliance
    • Orientation on company policies and labor rights.
    • Delivery of equipment (laptops, phones).
    • Workplace safety briefings where relevant.

Hiring & Onboarding: Direct Employer vs. Gloroots

Direct EmployerGloroots (EOR)
Entity SetupMust incorporate before hiringNo entity needed – hire via Gloroots’ local entity
ContractsEmployer must draft compliant contracts in SpanishGloroots provides bilingual, compliant contracts
IMSS RegistrationEmployer manually registers employeesGloroots handles automatic IMSS registration
Payroll SetupEmployer must handle SAT enrollment & ISR withholdingGloroots manages payroll & tax compliance
Time to Hire2–3 months (due to entity setup)2–5 days with EOR

Q: How do you successfully manage a workforce in Mexico?

Managing a workforce in Mexico requires balancing strict statutory compliance with local workplace culture. The Ley Federal del Trabajo strongly protects employees, mandating benefits, profit-sharing, and fair dismissal rules. At the same time, workplace culture emphasizes personal relationships, hierarchy, and collaboration.

Employers who combine legal compliance with cultural sensitivity—such as offering training, wellness perks, and career development—can retain talent more effectively in Mexico’s competitive job market.

Key Considerations for Workforce Management

  • Compliance with Labor Law
    • Overtime, vacation, aguinaldo, and PTU must be accurately managed.
    • Payroll records must be maintained in Spanish and submitted digitally.
  • Workplace Culture
    • Hierarchical but shifting toward collaboration in younger generations.
    • Respect for authority and personal trust remain important.
  • Employee Benefits & Retention
    • Statutory benefits are expected; supplemental benefits differentiate employers.
    • Younger workers value flexibility, hybrid models, and professional growth.
  • Performance Management
    • Regular check-ins and career development opportunities are expected.
    • Training, certifications, and upskilling are common retention tools.
  • Unions & Collective Bargaining
    • Unions play a major role in sectors like manufacturing, transport, and energy.
    • Employers must respect collective agreements under labor law reforms (2019).

How Gloroots Supports Workforce Management

  • Ensures compliance with labor law and social security.
  • Manages payroll, benefits, and statutory entitlements seamlessly.
  • Designs competitive global benefits tailored to Mexican expectations.
  • Provides local HR expertise to align policies with cultural norms.
  • Supplies equipment (laptops, phones) to remote and hybrid employees.

Q: What are the key steps and requirements in terminating employees in Mexico?

Termination in Mexico is heavily regulated, with strong protections against unjust dismissal. Employers must have just cause or provide statutory severance. Mishandled terminations often lead to costly disputes before Mexico’s labor courts.

With Gloroots as your EOR, all terminations are managed legally, fairly, and compliantly, reducing risk of litigation.

Termination Process in Mexico

  1. Grounds for Termination
    • With Cause: Allowed for misconduct, dishonesty, or absenteeism. No severance required.
    • Without Cause: Employer must pay severance.
  2. Notice Periods
    • No formal notice is required, but payment obligations apply.
  3. Severance Pay (if dismissed without cause)
    • 3 months’ salary + 20 days per year of service.
    • Accrued benefits (vacation, vacation premium, aguinaldo, PTU).
  4. Probationary Periods
    • 30 days for most roles; up to 180 days for technical/managerial positions.
    • Easier termination during probation, but still requires documentation.
  5. Final Payroll
    • Must include unused vacation, aguinaldo, PTU, and proportional benefits.

Termination: Direct Employer vs. Gloroots

Direct EmployerGloroots (EOR)
Grounds for TerminationEmployer must justify cause and handle disputesGloroots ensures valid grounds and legal compliance
SeveranceEmployer calculates and pays correctlyGloroots manages severance obligations
NoticeEmployer responsible for settlementGloroots ensures timely payout of benefits
ProbationEmployer applies probation rules independentlyGloroots ensures probation terms are compliant
Final PayrollEmployer must include all statutory entitlementsGloroots ensures complete final settlements
Litigation RiskHigh – labor courts favor employeesLow – Gloroots minimizes disputes with compliant handling

Q: What is the offboarding process in Mexico?

Offboarding in Mexico is highly regulated and requires strict compliance with labor law. Employers must ensure that severance, benefits, and social security deregistration are completed accurately. Any mistakes or delays can lead to legal disputes, penalties, or claims for reinstatement.

With Gloroots as your EOR, the offboarding process is handled smoothly and compliantly, giving employees a respectful exit while protecting employers from risk.

Key Steps in Offboarding Employees in Mexico

  1. Formal Termination Documentation
    • Written notice stating grounds for termination.
    • Signed settlement agreement (finiquito) documenting final payments.
  2. Final Payroll Settlement
    • Unpaid wages up to termination date.
    • Proportional aguinaldo, vacation days, and vacation premium.
    • Profit-sharing (PTU) if applicable.
    • Severance (if dismissed without cause).
  3. Social Security Deregistration (IMSS)
    • Employees must be deregistered to stop ongoing contributions.
  4. Tax Reporting
    • Employer must remit final ISR withholdings to SAT.
    • Issue CFDI e-receipt for final payroll.
  5. Company Assets & Knowledge Transfer
    • Collect laptops, phones, ID badges.
    • Ensure secure return of company data.

How Gloroots Simplifies Offboarding

  • Prepares compliant termination agreements and documentation.
  • Calculates and pays all final entitlements (severance, vacation, aguinaldo, PTU).
  • Manages IMSS deregistration and final ISR reporting.
  • Oversees asset collection and data security.
  • Ensures employees exit with respect and compliance.

Q: What costs and financial planning do you need with an Employer of Record in Mexico?

Hiring in Mexico involves more than salary—employers must budget for mandatory benefits, IMSS contributions, profit-sharing (PTU), and severance accruals. The total cost of employment (TCE) is typically 25–40% higher than base salary.

Gloroots makes financial planning predictable by consolidating all employment costs into a single monthly invoice, covering salary, taxes, benefits, and compliance.

Key Employment Cost Components in Mexico

  • Base Salaries (2025 averages, Mexico City):
    • Software Engineer: MXN 700,000 – 1,000,000 annually
    • Finance Analyst: MXN 500,000 – 750,000 annually
    • Marketing Specialist: MXN 450,000 – 650,000 annually
  • Employer Contributions (IMSS): ~15–25% of salary
  • Employee Contributions (withheld): ~3–5% of salary
  • Aguinaldo: 15 days’ salary (minimum, December)
  • Vacation Premium: 25% on vacation days
  • Profit-Sharing (PTU): 10% of company taxable profits
  • Severance Accruals: Required for compliance in case of dismissal

How Gloroots Optimizes Cost Planning

  • Provides transparent monthly invoicing covering salaries, benefits, and taxes.
  • Automates statutory benefit calculations (aguinaldo, PTU, vacation premium).
  • Ensures severance accruals are tracked from day one.
  • Designs cost-competitive benefit packages for talent retention.
  • Eliminates hidden liabilities from miscalculation or non-compliance.

Cost Comparison: Direct Employer vs. Gloroots

Direct EmployerGloroots (EOR)
Entity Setup CostsHigh – legal, HR, tax setupNone – hire without entity
Employer ContributionsEmployer must calculate and remit to IMSSGloroots automates IMSS contributions
Mandatory BenefitsEmployer must track & calculate separatelyGloroots integrates into payroll
Profit Sharing (PTU)Employer responsible for calculations & filingsGloroots manages PTU compliance
Financial PredictabilityVariable, high compliance riskPredictable monthly invoice

Q: What challenges might you face, and how do you solve them using an EOR in Mexico?

Mexico’s workforce offers huge opportunities, but foreign employers often struggle with complex labor laws, high compliance requirements, and cultural nuances. Missteps in payroll, benefits, or terminations can result in costly disputes before Mexico’s pro-employee labor courts.

Gloroots, as your Employer of Record (EOR), helps overcome these challenges by combining local expertise, full compliance management, and fast hiring so you can focus on business growth instead of red tape.

Key Hiring Challenges in Mexico

  1. Strict Labor Law Compliance
    • The Ley Federal del Trabajo enforces mandatory benefits, PTU, and severance.
    • Challenge: Employers face penalties for non-compliance.
  2. High Social Contribution Costs
    • IMSS contributions ~15–25% of salary.
    • Challenge: Miscalculations trigger fines and retroactive payments.
  3. Mandatory Profit Sharing (PTU)
    • 10% of taxable profits must be shared with employees.
    • Challenge: Budgeting and compliance complexities.
  4. Termination Risks
    • Wrongful dismissal can lead to reinstatement or expensive severance.
    • Challenge: Navigating labor courts that favor employees.
  5. Entity Setup Delays
    • Incorporation, SAT, and IMSS registrations take months.
    • Challenge: Market entry slows and hiring opportunities are lost.

How Gloroots Solves These Challenges

  • Full compliance: Ensures adherence to labor law, payroll, and tax obligations.
  • Payroll & benefits: Manages IMSS, PTU, aguinaldo, and severance correctly.
  • Fast hiring: Hire in days without needing to set up a legal entity.
  • Cost predictability: Consolidates all employment costs into one monthly invoice.
  • Cultural alignment: Local HR experts help you adapt policies to Mexican norms.

Challenge vs. Solution: Direct Employer vs. Gloroots

ChallengeDirect EmployerGloroots (EOR)
Labor Law ComplianceMust independently interpret & apply lawGloroots ensures full compliance
Social Security & TaxesEmployer calculates and remits contributionsGloroots manages IMSS & ISR filings
Profit Sharing (PTU)Employer handles filings & payoutsGloroots integrates PTU compliance into payroll
Termination HandlingHigh litigation risk before labor courtsGloroots manages compliant terminations
Entity Setup2–3 months before hiring possibleHire in 2–5 days

Conclusion

Mexico is one of the most attractive destinations for global employers, offering a young, skilled workforce, competitive labor costs, and strong trade ties through USMCA. Yet, compliance with the Federal Labor Law, IMSS requirements, and tax obligations can be challenging without local expertise.

With Gloroots as your Employer of Record in Mexico, you can:

  • Hire employees in days instead of months.
  • Stay compliant with labor law, IMSS, and SAT requirements.
  • Offer both statutory and supplemental benefits.
  • Simplify payroll, tax, and HR administration through a single partner.
  • Focus on scaling operations while Gloroots handles compliance and workforce management.

Gloroots makes hiring in Mexico simple, compliant, and fast.

Hire employees in Mexico with Gloroots

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