Employers in Mexico are required to contribute to the Instituto Mexicano del Seguro Social (IMSS) for social security, which covers health, disability, and life insurance, as well as the Instituto del Fondo Nacional de la Vivienda para los Trabajadores (INFONAVIT) housing fund and the retirement fund (SAR). Additionally, employers must provide statutory benefits such as the Christmas bonus (Aguinaldo, minimum 15 days' salary), vacation premium (at least 25% of salary during vacation days), and profit sharing (PTU, 10% of pre-tax profits). These mandatory contributions and benefits significantly increase the total cost of employment.

Payroll taxes in Mexico consist of federal and state-level components, with the employer contributing approximately 24–38% of gross salary to social security, retirement, and housing funds. In addition, employers pay a state payroll tax (Impuesto Sobre Nóminas), which generally ranges from 1.8% to 3% depending on the state. Employers are responsible for withholding and remitting both their own and employees' social security and income tax contributions to the relevant authorities.

Hidden costs in Mexico include mandatory severance payments in cases of unjustified dismissal, equivalent to at least three months' salary plus accrued benefits, and the 13th month salary (Aguinaldo) paid annually. Employers must also budget for onboarding, training, and compliance costs, as well as administrative fees for payroll processing and labor reporting. Additionally, profit sharing (PTU) and vacation premium are statutory and often overlooked in initial cost planning.

The Federal Labor Law (Ley Federal del Trabajo) sets minimum wage standards, working hour limits (maximum 48 hours per week), and mandates overtime pay for hours exceeding the legal maximum. Employment contracts must be in writing and specify terms such as position, salary, and working conditions. Termination rules are strict; unjustified dismissal triggers mandatory severance, and collective bargaining agreements can add further obligations.

Full-time, indefinite contracts (contrato por tiempo indeterminado) are the norm, but fixed-term and probationary contracts (contrato a prueba, up to 30 days) are also used, especially for new hires. Probation periods must be clearly documented, and customary benefits often include meal vouchers, private health insurance, and transportation allowances in addition to statutory requirements. Providing these additional benefits is a common practice to remain competitive in talent attraction and retention.