Employer of Record (EOR) Mexico: Hire, Manage, and Pay Talent Seamlessly

Tarmack is a global EOR and PEO with its own entity in Mexico, backed by deep knowledge of local labor laws. You can hire, onboard, pay, and manage employees and contractors through the platform without creating an entity, with Tarmack acting as your legal employer in Mexico.

Employer of Record (EOR) Solutions in Mexico

Tarmack’s Employer of Record solutions in Mexico give global HR teams a single, trusted partner to hire, manage, and pay talent compliantly without setting up a legal entity.

This is a process that can otherwise take 6 to 12 months and cost tens of thousands of dollars in legal and administrative fees, according to leading global expansion providers such as Deloitte and PwC.

As nearshoring accelerates, a 2025 Deloitte analysis on Mexico notes that manufacturers alone are planning billions of dollars in new investments tied to supply chain relocation, increasing the demand for fast, compliant hiring models like EOR.

Through Tarmack’s end-to-end EOR services, companies can issue locally compliant employment contracts, manage tax and social security registrations, and centralize HR administration for employees and contractors in Mexico from a single platform.

This matters because Mexico’s total tax wedge on labor can exceed 30 percent once income tax and social security contributions are included, making local compliance non-negotiable for cost control and risk management, according to OECD employment data for Mexico.

Global Hiring and Onboarding

Expand into Mexico without dealing with IMSS registration or entity setup. We help you hire quickly while staying aligned with the Federal Labor Law.

Hire in Mexico without creating a local entity
Apply onboarding tailored to Mexican labor norms
Issue compliant employment contracts and required documentation

Payroll Management

Process payroll in Mexico with accuracy and full tax compliance. We handle every statutory deduction so payments stay consistent and error-free.

Run peso payroll with automated statutory deductions
Comply with ISR, IMSS, INFONAVIT, and other tax rules
Access clear, transparent payroll reports each cycle

Compliance Assurance

Stay compliant with Mexico’s evolving labor and social security regulations. We handle the complexity so your team stays protected.

Adhere to updates in labor and social security laws
Prevent contractor misclassification issues
Maintain audit-ready records for authorities

Benefits Administration

Provide benefits that meet Mexico’s legal standards and employee expectations. We manage everything from statutory perks to optional add-ons.

Deliver mandatory benefits such as Aguinaldo, vacation premium, profit sharing, and social security
Add region-specific perks like meal cards or private health insurance
Integrate benefits administration with payroll and HR workflows

With Tarmack acting as the legal employer, global HR leaders can scale nearshore teams in Mexico quickly. Book a demo now to learn more.

Benefits of Employer of Record (EOR) in Mexico

Tarmack becomes the legal employer for your Mexico-based team and handles compliance, payroll, and HR administration, so your internal HR and finance teams can focus on strategy instead of local red tape.

According to Deloitte’s 2025 nearshoring analysis, companies that leverage asset-light market entry models such as EOR can cut their initial expansion timelines by several months compared to setting up their own entities.

This is particularly valuable in Mexico, where incorporation, tax registration, and social security setup can be lengthy and resource-intensive.

Enter Mexico faster with lower risk. You can enter the market without creating a local entity, which cuts hiring timelines and upfront costs. Tarmack lets you test or scale teams without incorporation or long term commitments.
Stay compliant with Mexican labor laws. Mexico has strict rules on contracts, social security, benefits, and severance. Tarmack keeps every agreement, registration, and payroll workflow aligned with local law so you avoid fines or disputes.
Simplify payroll and benefits management. Payroll in Mexico involves layered taxes and mandatory social security contributions. Tarmack centralizes payroll, ensures accurate payments and withholdings, and helps you offer competitive, compliant benefits.
Reduce HR and legal workloads. — Global teams often lose time to admin and compliance tasks. Tarmack handles contracts, onboarding, benefits setup, and terminations, giving your HR team more space for performance and workforce strategy.
Scale your Mexico team with control and clarity. Nearshoring often requires fast team adjustments. Tarmack lets you scale up or down without restructurings and keeps costs predictable since you avoid incorporation, payroll systems, and local legal overhead.

Employer of Record Mexico Pricing Structure

1. Employee Services

EOR — from $199/employee/month
Full-time hiring without a local entity. Includes compliant payroll, contracts, benefits, HR/legal support, and IP protection.
Recruiting — from 10% of annual salary
Global talent search with shortlisting, interviews, optional background checks, and country-specific hiring guidance.
Payroll — from $15/employee per cycle
Payroll in 150+ countries, payslips, reimbursements, attendance, and compliant payment processing.
Enterprise — custom
For teams of 10+, with tailored pricing, global mobility support, and market advice.

2. Contractor Services

Contractor Recruiting — from 10% of annual salary
Fast global contractor hiring with AI-based matching, interviews, and optional background checks.
Contractor Management — from $39/contractor/month
Local contracts, compliant payouts, expense tracking, automated invoicing, and the option to convert to full-time later.

3. Corporate & Regulatory Services

Company Formation — contact for pricing
Incorporation and documentation support in 150+ countries, with optional payroll or immigration add-ons.
Immigration — from $999 per visa
End-to-end visa and work permit processing with compliance monitoring.
HR Software — from $2/employee/month
Lightweight global HR system for payroll, expenses, attendance, reporting, and ERP integrations.

Employment Norms in Mexico

The United Mexican States, commonly known as Mexico, is situated in the southern region of North America. The primary business sectors of the country include services, manufacturing, and commercial energy production. The country has a good number of workers skilled in various sectors making it a good destination for expanding business. EOR services help potential employers with employment management and ensure legal compliance.

General Information:

The Mexican currency is Mexican Peso (MXN).
Mexico City is the capital of Mexico.
Spanish is the official language of Mexico. Documentation should be in Spanish to be considered legally valid.
As of 2021, the of Mexico was reported to be USD 1.27 trillion.

The Federal Labor Law and the Social Security Law primarily formulate the employment laws in Mexico.

Table of Contents

Select Section

Employment Contracts
Employee Onboarding
Visa
Work Permits in Mexico
Minimum Wages in Mexico
Payroll Cycle
Annual Bonus
Health Benefits
Working Hours and Overtime
Leaves
Social Security Contributions
Personal Income Tax Rates
Mexico Payroll Compliance
Top Skills in Demand
Probation
Termination
Severance Pay
Employees vs Contractors
Global PEO
Start Hiring Today
Frequently Asked Questions

Employment Contracts Employee Onboarding Visa Work Permits in Mexico Minimum Wages in Mexico Payroll Cycle Annual Bonus Health Benefits Working Hours and Overtime Leaves Social Security Contributions Personal Income Tax Rates Mexico Payroll Compliance Top Skills in Demand Probation Termination Severance Pay Employees vs Contractors Global PEO Start Hiring Today Frequently Asked Questions

Employment Contracts in Mexico

In Mexico, employment contracts are governed by the Federal Labor Law (Ley Federal del Trabajo), which defines the relationship between employer and employee and sets out the legal framework for all work arrangements.

According to Article 20 of the Federal Labor Law, a “relationship of work” is understood as the provision of personal work subordinated to another person, in exchange for a salary, regardless of the act that originated it.

The law further establishes that both the relationship of work and the individual employment contract produce the same legal effects, meaning that written contracts are not always required for a valid employment relationship to exist under Mexican law.

Labor authorities play a central role in regulating these relationships and resolving disputes. Several institutions may intervene, including:

Ministry of Labor and Social Welfare
Labor authorities of the federative entities and their labor directorates or departments
Office of the Attorney for the Defense of Labor
National Employment Service
Labor Inspection
National Minimum Wage Commission
National Commission for the Participation of Workers in the Profits of Companies
Federal Center for Conciliation and Labor Registration and its state counterparts
Federal Labor Courts
Local Labor Courts
Ministry of Finance and Public Credit

These bodies oversee compliance and handle conflicts that arise between employers and workers.

Key elements of employment contracts

Mexican labor law requires that employment contracts include several essential elements:

The names, nationality, age, sex, marital status, population registry number, tax ID, and address of both employer and employee.
The duration of the employment (for a specific project, fixed term, indefinite, seasonal, or subject to training or probation).
A detailed description of the work to be performed, including job title and specific duties.
The workplace or places where the work will be performed.
The working hours, rest days, and overtime rules.
The salary amount, payment method (cash, bank transfer, etc.), payment frequency, and payment location.
Conditions for rest days and vacations.
Any other agreed-upon terms, such as confidentiality, exclusivity, or use of company property.

Types of employment contracts

Mexican law recognizes several types of employment contracts:

Indefinite-term contracts (contrato por tiempo indeterminado): No fixed end date, but may include a probation or initial training period.
Fixed-term contracts (contrato por tiempo determinado): Used for temporary needs or seasonal work.
Contracts for a specific project (contrato para obra determinada): For work with a clear end, such as construction.
Seasonal contracts (contrato de temporada): For recurring but discontinuous work, such as agricultural harvests.
Training contracts (contrato para capacitación inicial): For employees learning new skills, lasting up to 3–6 months.
Probationary contracts (contrato con periodo de prueba): Used to evaluate employee suitability, lasting up to 30 days (or 180 days for managerial roles).

Digital Platform Reform

A recent reform to the Federal Labor Law introduced new rules for digital platform workers (such as those in gig economy apps).

The reform requires platforms to register their workers, provide written contracts, and ensure compliance with core labor rights, including minimum wage, social security, and severance pay. Employers who violate these new rules may face fines of up to 1,000 times the daily minimum wage per worker, as per the latest labor reform guidelines.

As your Employer of Record in Mexico, Tarmack takes care of employment contracts in Mexico compliantly as per the local labor laws, making sure every agreement meets the requirements of the Federal Labor Law and protects both your business and your employees.

From drafting and managing contracts to handling renewals, amendments, and terminations, Tarmack’s platform and legal experts keep your team in full compliance while you focus on growing your business in Mexico.

Get in touch with Tarmack today to simplify your hiring and contract management process in Mexico. Keep in mind that non-compliance with the updated Ley Federal del Trabajo carries substantial penalties.

For example, failing to register contracts or report required changes under the 2025 reforms can trigger fines ranging from 2,000 to 25,000 times the Unidad de Medida y Actualización (UMA).

Tarmack helps you stay ahead of these rules. It keeps your employment documentation compliant and saves you from such costly fines that can pile up fast.

Employee Onboarding in Mexico

Onboarding new employees in Mexico is a legal, administrative, and cultural process that sets the foundation for a compliant, productive workforce.

Mexican labor law, particularly the Federal Labor Law (Ley Federal del Trabajo) and regulations from IMSS (Mexican Social Security Institute), impose strict requirements on employers, both local and foreign.

Failing to meet these requirements can result in fines, legal disputes, or even operational shutdowns.

Legal requirements (before day 1)

Before an employee’s first day, several mandatory steps must be completed to ensure compliance with Mexican labor regulations. The process is designed to protect both the employer and the employee, and it is essential for foreign companies to understand these steps thoroughly.

Provide a written employment contract: Required under Article 25 of the Ley Federal del Trabajo. It must outline the job title, duties, salary, work schedule, workplace location, contract type, and all mandatory benefits. The employee must receive and sign it before their first day.
Register the employee with IMSS: Employers must complete the registration within the first five business days of employment. This activates healthcare, maternity, disability, workplace-risk insurance, and retirement coverage. If the employee does not have an NSS, IMSS issues one as part of the process.
Set up payroll and tax registration with SAT: The employee needs to be registered for payroll withholdings through their RFC. Employers must complete this before the first payroll run to ensure correct tax reporting and compliance with SAT rules.
Activate INFONAVIT obligations: Once IMSS registration is complete, INFONAVIT contributions apply automatically. Employers must ensure the worker is recognized in the system so housing fund deductions and employer contributions are calculated correctly.
Confirm or initiate AFORE registration: Employees must have an AFORE retirement account. If they already have one, the employer verifies it. If not, an AFORE must be assigned to align with their IMSS and NSS records so retirement contributions begin from day one.

Mandatory benefits

All employees in Mexico are entitled to the following benefits:

Aguinaldo (Christmas bonus): Employees must receive a year-end bonus equal to at least 15 days’ salary, payable before December20.
Paid vacations: After the first full year of service, employees get a minimum of 12 paid vacation days, increasing with seniority.
Vacation premium (Prima vacacional): On top of vacation pay, employers must give at least 25% extra pay for vacation days.
Social security (IMSS) registration: Employers must enroll workers in the social security system, granting access to healthcare, disability, pensions, and other protections.
Legal rest days and paid holidays: Workers are entitled to weekly rest days with full pay, and government‑mandated public holidays must be paid.

First-day onboarding checklist

On the employee’s first day, employers are usually required to collect some or all of the following documents:

Personal ID: INE (voter ID) or Passport
Birth Certificate: Required for social security and employment records
CURP (Clave Única de Registro de Población): Unique Population Registry Code for identification
RFC (Registro Federal de Contribuyentes): Taxpayer Registry Code for SAT and payroll purposes
Social Security Number (NSS/IMSS): For IMSS registration and benefits
Proof of Address: Utility bill, lease agreement, or official document showing current residence
Bank Account Information: For salary deposits
Emergency Contact Information: Name, phone number, and relationship
Educational or Professional Certifications (if relevant to the role)

Understanding these requirements is crucial for foreign employers, as non-compliance can lead to significant penalties and operational disruptions.

By following these steps, employers can ensure a smooth and compliant onboarding process, setting the stage for a successful employment relationship in Mexico.

As your employer of record (EOR) in Mexico, Tarmack takes care of employee onboarding in Mexico compliantly as per the local labor laws. Get a free demo today.

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Visa in Mexico

Work Visa:

Applicants may obtain a temporary (up to 4 years) or permanent resident visa, as well as a work permit, to work and live in Mexico. The necessary work visa requirements include a copy of migration documents, an invitation from a valid public or private institution or company in Mexico, proof of finances, employment, education and necessary skills, and evidence of a relationship with a Mexican citizen.

Business Visa

A business visa permits up to a 30-day stay and is valid for 180 days. The requirements for a Mexican business visa include a letter of invitation from a public or private institution, a letter from the applicant's company affirming they will cover all expenses, evidence of sufficient funds, the purpose of the trip, a duly completed Multiple Migratory Form (FMM), and travel evidence.

Work Permits in Mexico

Foreign employers relocating staff to Mexico must fully understand the legal and procedural requirements for work permits.

Overseen by the National Institute of Migration (Instituto Nacional de Migración), the system ensures that foreign employees can work legally while meeting all labor and tax obligations.

Types of Work Permits

Mexico offers several types of work permits, each tailored to different employment scenarios:

Business Visa: This visa is intended for short-term business activities, such as attending meetings, conferences, or negotiating contracts. It does not permit remunerated work in Mexico.
Temporary Resident Visa: For individuals planning to live and work in Mexico for more than 180 days. This visa is valid for up to 4 years and allows the holder to work legally in Mexico. It is the most common type of work permit for foreign employees.
Permanent Resident Visa: For those who wish to live and work in Mexico permanently. Requirements include close family ties, sufficient monthly income, or four years of regular status as a temporary resident.

Application process

The application process for a work permit in Mexico involves several steps:

1. Employer Application: The employer must apply at the National Institute of Migration. The application requires documentation such as the employee’s passport, employment contract, and proof of the company’s legal status in Mexico.

2. Employee Application: Once the employer’s application is approved, the employee applies for the visa at the Mexican consulate in their home country. The application includes the employee’s passport, proof of employment, and other supporting documents.

Registration in Mexico: After arrival in Mexico, the employee has 30 days to register with the local immigration office and receive a temporary resident card. This card is valid for up to 4 years, after which the individual must either obtain a permanent resident visa or leave Mexico.

Compliance and renewal

Foreign employers must ensure that their employees comply with all immigration and labor laws. This includes renewing work permits on time, reporting changes in employment status, and maintaining accurate records. Failure to comply can result in fines, deportation, or other legal consequences.

Again, as your employer of record (EOR) in Mexico, Tarmack assists you with an employment visa in Mexico. Contact us for more details.

Minimum Wages in Mexico

Mexico’s minimum wage in 2025 is set at 278.80 pesos per day (about USD $15.50) in most of the country, and 419.88 pesos per day (about USD $23.30) in the Northern Border Free Zone. These rates will rise again in 2026 to 315.04 pesos and 440.87 pesos per day, respectively.

Key Points on Mexico’s Minimum Wage

Two-tier system: Mexico maintains two minimum wage zones:
- General Zone: Applies nationwide.
- Northern Border Free Zone: Higher wage due to stronger regional economies and cost-of-living differences.
2025 rates:
- General minimum wage: MXN $278.80/day (~USD $15.50)
- Northern Border wage: MXN $419.88/day (~USD $23.30).
- Monthly equivalents: ~MXN $8,364 (general) and ~MXN $12,596 (border zone).
2026 increase:
- General minimum wage: MXN $315.04/day (~USD $17.20)
- Northern Border wage: MXN $440.87/day (~USD $24.10).
- Monthly equivalents: ~MXN $9,582 (general) and ~MXN $13,410 (border zone).
Annual adjustments: Wages are reviewed each year by CONASAMI (National Minimum Wage Commission), considering inflation, productivity, and living costs.
Policy goals: President Claudia Sheinbaum has pledged that by 2030, the minimum wage should cover the cost of 2.5 “canastas básicas” (basic baskets of essential goods), aiming to reduce poverty and improve living standards.

Payroll Cycle in Mexico

The cycle in Mexico can be weekly, bi-weekly or monthly. Employees are usually paid on the 15th of the month as well as the last day of the month.

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Annual Bonus in Mexico

Employers are required to pay a mandatory Christmas (also called Aguinaldo) to be paid to all employees. This bonus must be paid by 20 December. According to Mexican laws, the bonus amount must be at least a 15-day wage. It can be negotiated to be a higher rate.

Health Benefits in Mexico

Social security covers public health and life insurance in Mexico. However, most employers choose to provide their employees with private health insurance.

Working Hours and Overtime in Mexico

Work hours: A typical workday consists of 8 hours with a 48-hour work week. Night shift work time is 42 hours per week, while mixed shift is of 45 hours per week.
Break: At least a 30-minute break is to be provided for every work day.
Overtime: For overtime hours, the employees must be given 200% or 300% of their daily wage depending on the agreement.

Leaves in Mexico

Sick Leave

Employees are entitled to a paid sick leave (60% pay) of up to 52 weeks upon verification by relevant authorities. The pay is 100% if the injury is work-related.

Parental Leave

Maternity leave: Employees are entitled to a paid maternity leave of 12 weeks. The IMSS pays 60% of the wage while the employer pays the other 40% of the wage.
Paternity leave: A mandatory paid paternity leave of up to 5 days is to be granted to fathers.
Adoption leave: A six-week adoption leave is granted to female employees after the custody of the child is granted.

Annual Leaves

Upon completing one year of work, employees are entitled to 12 days of paid time off. An additional 2 days per year worked is granted for longer employment periods. After a 5-year employment period, two additional days are added for every 5 years worked as well.

Public Holidays (for the Calendar year 2024)

Some dates may vary based on official notifications and traditional calendars.

New Year's Day - 1st January
Constitution Day - 5th February
Constitution Day Holiday - 6th February
Benito Juarez Day - 18th March
Holy Thursday - 28th March
Good Friday - 29th March
Labor Day - 1st May
Anniversary of the Battle of Puebla - 5th May
Independence Day - 16th September
Day of the Race - 12th October
All Souls' Day - 2nd November
Revolution Day - 18th November
Lady of Guadalupe Day - 12th December
Christmas - 25th December

Public Holidays (for the Calendar year 2025)

Some dates may vary based on official notifications and traditional calendars.

New Year's Day - 1st January
Constitution Day - 5th February
Constitution Day Holiday - 6th February
Benito Juarez Day - 18th March
Holy Thursday - 17th April
Good Friday - 18th April
Labor Day - 1st May
Anniversary of the Battle of Puebla - 5th May
Independence Day - 16th September
Day of the Race - 12th October
All Souls' Day - 2nd November
Revolution Day - 20th November
Lady of Guadalupe Day - 12th December
Christmas - 25th December

Social Security Contributions in Mexico 2025

Social security contributions form a cornerstone of Mexico’s labor system, providing employees with healthcare, retirement, disability coverage, and family benefits.

These contributions are jointly funded by employers and employees and are managed by the Mexican Social Security Institute (IMSS).

Accurate calculation and timely payment are essential to remain compliant and protect employees’ legal rights.

What are Social Security Contributions?

Social security contributions, or aportaciones al IMSS, finance a range of social safety net programs including medical care, maternity benefits, work-related injury insurance, daycare services, pensions, and other welfare programs.

These contributions represent a legal obligation and a social commitment from employers, who cover the largest portion, employees, and the federal government to a small extent.

The contributions cover different sub-accounts under the IMSS system:

Seguro de Enfermedades y Maternidad (Health and Maternity Insurance)
Seguro de Riesgos de Trabajo (Work Injury Insurance)
Seguro de Invalidez y Vida (Disability and Life Insurance)
Guarderías y Prestaciones Sociales (Daycare and Social Benefits)
Retiro, Cesantía y Vejez (Retirement, Unemployment, and Old Age Savings - RCV)

How are social security contributions calculated in Mexico?

Calculations are based on the employee’s Salario Base de Cotización (SBC), the base salary which includes daily wages, commissions, bonuses, and certain cash or in-kind benefits.

Employers must compute contributions monthly and make payments to IMSS accordingly. Accurate recording of all employee earnings is crucial to avoid fines or underpayment.

Who pays the social security contributions?

The cost of social security contributions is shared as follows:

The employer pays the largest percentage of total contributions.
The employee contributes a smaller portion, deducted from their salary.
The federal government contributes a symbolic share to some of the insurance branches.

For example, in the Retiro, Cesantía y Vejez sub-account, employers contribute 5.15%, employees 1.12%, and the government 0.22%. These rates are updated yearly.

What are the rate adjustments for 2025?

Recent adjustments effective in 2025 maintain these contribution structures but with fine-tuned percentages and thresholds to reflect inflation and economic factors.

The monthly value of the UMA, which is used to calculate social-security bases and fines, is MXN 3,439.46 (daily UMA = MXN 113.14).

Employer contributions for the Cesantía y Vejez (retirement and old-age) fund now follow these updated brackets:

SBC range (relative to UMA)	Employer rate for 2025
1.0 SM*	3.150%
1.01 – 1.50 UMA	3.544%
1.51 – 2.00 UMA	4.426%
2.01 – 2.50 UMA	4.954%
2.51 – 3.00 UMA	5.307%
3.01 – 3.50 UMA	5.559%
3.51 – 4.00 UMA	5.747%
4.01 and above	6.422%

In practice, once you add healthcare, disability, life insurance, occupational risk, childcare, and other IMSS obligations, total employer social-security costs often fall in the 25–30 percent range of an employee’s gross salary.

These adjustments ensure the sustainability of the social security system and compliance with fiscal policies. Employers must stay updated on annual changes published by IMSS and the Mexican tax authorities to ensure payments remain accurate and timely.

Importance and compliance

Correct and timely contributions offer several advantages:

Provide employees with access to healthcare, pensions, and social benefits.
Fulfill legal obligations, avoiding fines that can reach up to 40% of unpaid contributions plus surcharges.
Enhance worker trust and retention by safeguarding their benefits.
Maintain positive relationships with labor and fiscal authorities through compliance.

Tarmack, as your employer of record (EOR) in Mexico, takes care of social security deductions as per local labor laws and ensures payments to social security authorities are made compliantly.

Trust Tarmack to manage your social security obligations accurately and on time.

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Personal Income Tax Rates 2025 in Mexico

Personal income tax, or Impuesto Sobre la Renta (ISR), is a federal tax applied to all income earned by individuals and corporations in Mexico. For employees, ISR is withheld from their salary by the employer and remitted to the tax authorities.

The ISR is a progressive tax, meaning the rate increases as income rises. The rates and brackets for 2025 remain unchanged from the previous year, as the inflation threshold for automatic adjustment has not been met according to the Ley del Impuesto Sobre la Renta.

2025 ISR Rates and Brackets

The 2025 ISR brackets for individuals are as follows:

Base Gravable Mensual (MXN) [Monthly Taxable Base (USD)]	Cuota Fija (MXN) [Fixed Fee (USD)]	Porcentaje sobre excedente [% on Excess]
Hasta 746.04 (≈ 40.8 USD)	0.00 (0.00 USD)	1.92
746.05 ~ 6,332.05 (≈ 40.8 ~ 346.7 USD)	14.32 (≈ 0.78 USD)	6.4
6,332.06 ~ 11,128.01 (≈ 346.7 ~ 608.8 USD)	371.83 (≈ 20.3 USD)	10.88
6,332.06 ~ 11,128.01 (≈ 608.8 ~ 707.9 USD)	893.63 (≈ 48.9 USD)	16
12,935.83 ~ 15,487.71 (≈ 707.9 ~ 847.1 USD)	1,182.88 (≈ 64.7 USD)	17.92
15,487.72 ~ 31,236.49 (≈ 847.1 ~ 1,709.1 USD)	1,640.18 (≈ 89.7 USD)	21.36
31,236.50 ~ 49,233.00 (≈ 1,709.1 ~ 2,693.9 USD)	5,004.12 (≈ 273.6 USD)	23.52
49,233.01 ~ 93,993.90 (≈ 2,693.9 ~ 5,140.0 USD)	9,236.89 (≈ 505.6 USD)	30
93,993.91 ~ 125,325.20 (≈ 5,140.0 ~ 6,857.6 USD)	22,665.17 (≈ 1,240.6 USD)	32
125,325.21 ~ 375,975.61 (≈ 6,857.6 ~ 20,566.5 USD)	32,691.18 (≈ 1,788.6 USD)	34
375,975.62 y más (≈ 20,566.5 USD and above)	117,912.32 (≈ 6,445.7 USD)	35

These brackets are applied monthly to the employee’s taxable income after authorized deductions.

Employers must withhold the correct amount and remit it to the Servicio de Administración Tributaria (SAT) each month. Failure to comply can result in penalties and interest charges.

How ISR Is calculated

To calculate ISR:

1. Determine the employee’s monthly gross income.

2. Subtract authorized deductions (e.g., medical expenses, mortgage interest, donations).

3. Apply the appropriate bracket and formula from the table above.

Withhold the calculated amount from the employee’s salary and remit to SAT.

Common errors to avoid

Using outdated tables from previous years.
Applying the wrong bracket for the payment period (daily, weekly, monthly).
Ignoring updates to the Unidad de Medida y Actualización (UMA), which affects deductions and exemptions.
Manual rounding or using outdated Excel templates, which can lead to discrepancies.

Impact of no bracket adjustment

Because the ISR brackets have not been updated for 2025, employees receiving salary increases due to inflation may find themselves in higher tax brackets, even if their real purchasing power has not improved. This is especially relevant for those whose salary increases only match inflation.

Tarmack as your employer of record (EOR) in Mexico takes care of personal income tax deduction as per the local labor laws and pays to the tax authorities compliantly. Get in touch to ensure your payroll is always accurate and compliant.

Mexico Payroll Compliance

Successfully running payroll in Mexico takes more than software or a simple checklist. Employers must understand how federal labor law, tax regulations, and social security rules work together. Compliance depends on following each requirement with precision, documenting every step, and staying updated as rates and regulations change each year. The following sections break down the core elements of lawful payroll administration in Mexico.

Required legal registrations for employers

Employers must complete several registrations before hiring or paying workers. These include enrollment with the Mexican Tax Administration (SAT) to obtain a Federal Taxpayer Registry number. Employers must register with the Mexican Social Security Institute (IMSS), which creates the employer identification needed for social security contributions.

Registration with INFONAVIT is required as well because employers contribute to the national housing fund on behalf of employees. Another registration involves the local payroll tax authority in each state where the company operates. These registrations establish the legal foundation that supports payroll reporting, tax withholding, and social security compliance.

Ongoing compliance obligations

Once a company is fully registered, payroll obligations become continuous. Employers must calculate taxes and social security contributions each pay cycle. They must file monthly payroll reports with IMSS and INFONAVIT, along with electronic accounting submissions to SAT. Annual filings include employee tax summaries and employer tax declarations.

Employers must also produce CFDI payroll receipts for every payment. These digital tax documents serve as formal proof of payment and must be issued through SAT’s electronic invoicing platform. Accurate and timely reporting protects the employer from audits and fines. It also ensures that employees’ benefits, contributions, and work histories are correct in government systems.

Employer pension responsibilities

Mexico’s pension system requires employers to register each employee with an AFORE. These private retirement fund administrators manage individual pension accounts.

Employers must calculate pension contributions each month, then submit both their portion and the employee’s deduction to IMSS. IMSS distributes the funds to the correct AFORE.

Employers must ensure accuracy because errors can disrupt an employee’s retirement savings. Regular reconciliation between payroll records and IMSS reports is essential. Over time, this prevents liabilities, penalties, and disputes related to missing contributions.

Statutory employment requirements

Provide a written employment contract that follows the Federal Labor Law.
Register every employee with IMSS on their first day of work.
Ensure legal benefits are applied correctly, including vacation, holiday bonus, overtime, and profit sharing.
Maintain accurate salary structures and classifications.
Keep complete documentation for onboarding, role changes, and terminations.
Provide all required protections such as social security coverage and workplace safety compliance.
Ensure all benefits, contributions, and employment terms are reflected correctly in payroll records.

Payroll standards for employers

Payroll in Mexico follows very specific rules. Employers must choose a legal pay cycle and follow it consistently. They must calculate deductions for income tax, social security, housing contributions, and pension contributions. Pay slips must be detailed and must show each earning, deduction, and employer contribution.

The company must generate a CFDI payroll XML and a human-readable PDF for each payment. These records must be stored securely for compliance and audit readiness. Mistakes in tax withholding or contribution rates can lead to retroactive payments, fines, and even disputes with employees.

Banking requirements related to payroll

Salaries must be paid through Mexican bank accounts, and employers must maintain clear records of all payroll transactions to support compliance and audit readiness.

Tarmack is your go-to employer of record in Mexico that processes payroll in Mexico compliantly as per the local labor laws. Get in touch to ensure your payroll is always accurate and compliant.

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Top Skills in Demand in Mexico

Mexico’s dynamic economy and strategic focus on technology and innovation have elevated the demand for highly technical skills across multiple sectors.

As the country pivots toward a digital and sustainable future, organizations are actively seeking professionals with expertise in cutting-edge technologies. Here are the top skills companies in Mexico are prioritizing in 2025:

1. Artificial Intelligence (AI)
Mexico is positioning itself as a regional leader in AI, with government initiatives supporting innovation hubs. Companies in sectors like manufacturing, finance, and healthcare are on the lookout for AI specialists skilled in machine learning, deep learning, and natural language processing to enhance automation and data-driven decision-making.

2. Cybersecurity
With increasing digital transformation, a surge in cyber threats has prompted a significant demand for cybersecurity professionals. Experts in threat detection, security architecture, and incident response are crucial to safeguarding Mexico’s financial institutions, government networks, and critical infrastructure from emerging cyber threats.

3. Cloud computing
The shift towards cloud adoption in Mexico supports economic diversification and digital modernization. Skills in cloud architecture, migration, and management, especially with platforms like AWS, Azure, and Google Cloud, are highly sought after to enable scalable, flexible IT environments.

4. Data science and big data analysis
As Mexico’s industries adopt data analytics to compete globally, professionals capable of collecting, managing, and analyzing large datasets are in high demand. Data scientists and analysts help optimize operations, improve customer insights, and develop predictive models.

5. Blockchain technology
The financial and logistics sectors in Mexico are exploring blockchain for secure, transparent transactions and supply chain traceability. Professionals with expertise in blockchain development, smart contracts, and decentralized applications are increasingly valuable.

6. Software development and DevOps
The ongoing digital transformation fuels demand for agile developers, DevOps engineers, and automation specialists. These professionals enable rapid deployment of applications, continuous integration, and efficiency improvements in IT operations.

Finding qualified talent in Mexico's competitive market can be challenging, especially with complex labor compliance requirements.

Tarmack simplifies this process by serving as your employer of record, handling contract negotiations, compliance, and onboarding of high-demand tech talent seamlessly.

We ensure that your hiring processes adhere to local laws, reducing risk and streamlining your expansion or recruitment strategies.

Contact us today to learn how Tarmack can help you access Mexico’s top talent quickly and compliantly for your organization’s growth.

Probation in Mexico

The probation or trial period can be from 30 days to 180 days. The period is higher for executive positions.

Termination in Mexico

Employers can only terminate the agreement on just causes such as -
- Gross misconduct
- Refusing to comply with safety protocols
- Falsification of work skills and qualifications
The notice period is usually about 30 days. A written notice must be given to the employee explaining the reasons for dismissal. Else, a termination notice must be sought from the labor board.

Severance Pay in Mexico

If the employee is dismissed with reasonable cause, the employee must receive an additional three months' salary as severance pay. For employees who have worked for 15 years or more, 20 days' pay per year worked must also be additionally given.

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Employees vs Independent Contractors in Mexico

Correctly distinguishing between employees and independent contractors is essential for compliance in Mexico. The legal obligations, tax responsibilities, and entitlement to benefits differ significantly, and misclassification can result in fines, legal disputes, and reputational risk

Legal framework

Employees: Governed by the Federal Labor Law (Ley Federal del Trabajo), employees are individuals who perform work under the direction and control of an employer, in exchange for a salary. Employers are responsible for payroll, social security, benefits, and statutory obligations such as paid vacation, sick leave, and profit sharing.
Independent Contractors: Contractors are self-employed individuals who provide services under a civil contract, not subject to the same labor protections. They are responsible for their own taxes, social security, and benefits. Contractors operate with more autonomy and are not entitled to statutory employment benefits.

Compliance obligations

1. Employees must:

Register employees with IMSS and SAT.
Withhold and remit income tax (ISR) and social security contributions.
Provide written employment contracts.
Ensure compliance with minimum wage, overtime, and statutory benefits.
Maintain detailed payroll and employment records.

2.Independent Contractors must:

Issue invoices for services rendered.
Register as self-employed with SAT.
Pay their own income tax and social security contributions.
Maintain records of income and expenses for tax purposes.

Tax and Social Security

Employees: Employers withhold ISR and social security contributions from employee salaries and remit them to the authorities. Employees receive benefits such as healthcare, retirement, and paid leave.
Independent Contractors: Contractors pay their own ISR and social security contributions. They do not receive statutory benefits and must arrange their own insurance and retirement savings.

Risk of Misclassification

Misclassifying an employee as a contractor can result in significant penalties, including back payments for social security, fines, and legal action. The Mexican authorities closely scrutinize employment relationships to ensure compliance with labor laws.

As your Employer of Record in Mexico, Tarmack ensures all workers are classified correctly and fully compliant with local labor laws.

We handle employee registration, payroll, taxes, social security contributions, and statutory benefits while minimizing your legal risk. This allows you to hire, onboard, and manage teams in Mexico seamlessly without setting up a local entity.

Global PEO in Mexico

An Employer of Record (EOR), also known as a Global PEO in Mexico, enables US-based companies to hire employees and contractors in Mexico without the need to set up a local legal entity. By partnering with an EOR, you can onboard, manage, and pay talent seamlessly, ensuring compliance with Mexican labor laws while focusing on your core business goals.

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Social security covers public health and life insurance in Mexico. However, most employers choose to provide their employees with private health insurance.

Whether you need to hire employees or contractors, Tarmack’s EOR solution for Mexico streamlines the process, making it fast, compliant, and hassle-free. Contact us today to get started with your Mexico hiring journey.

Frequently Asked Questions

What is an employer of record (EOR) in Mexico?

An employer of record (EOR) in Mexico is a third-party company that legally employs workers on behalf of a client company, allowing the client to hire in Mexico without setting up a local legal entity. The EOR handles all employment compliance, payroll, and statutory benefits, ensuring your business operates within local regulations.

What is the cost of an employer of record in Mexico?

Tarmack is a leading Employer of Record in Mexico, helping companies hire, onboard, and manage employees compliantly without setting up a local entity. It handles payroll, taxes, social security, and statutory benefits, ensuring full legal compliance. Tarmack offers a transparent flat pricing of USD 199 per employee per month.