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Hiring in Mexico? Read on to find out the employment norms (like taxes, payroll and benefits) and EOR (Employer on Record) norms in Mexico.
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
- Agreements
- Onboarding Process
- Visa
- Minimum Wage
- Payroll Cycle
- Annual Bonus
- Health Benefits
- Working Hours and Overtime
- Leaves
- Social Security
- Taxes for Employers
- Taxes for Employees
- Probation
- Termination
- Severance Pay
- Employees or Contractors
- Final Words
AgreementsOnboarding ProcessVisaMinimum WagePayroll CycleAnnual BonusHealth BenefitsWorking Hours and OvertimeLeavesSocial SecurityTaxes for EmployersTaxes for EmployeesProbationTerminationSeverance PayEmployees or ContractorsFinal Words
Agreements
- Written agreements are compulsory in Mexico.
- Contracts and agreements must be in ; which is the official language of Mexico. Contracts can be translated to the native language of the employee once written in Spanish.
- Individual employment agreements are mandatory in Mexico. If the employee is part of a union, additional collective bargaining agreements can be negotiated.
- The agreements must state all mandatory points such as the nature of work, timings, salary, benefits, vacation days, etc.
Onboarding Process
While there is no stipulated onboarding process, some common practices are -
- The employee must be given a copy of the employment agreement.
- It is common for employers to conduct background checks on their employees. Permission of the employee is required to conduct such checks.
- The new employees must be given an understanding of the company policies and common practices.
- New employees must be enrolled with relevant tax and social security authorities.
Visa
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.
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Minimum Wage
The wage in Mexico in 2023 is 207.44 MXN per day.
Payroll Cycle
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.
Annual Bonus
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
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
- 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
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 2023)
The following is a list of public holidays in Mexico for the calendar year 2023.
- New Year's Day (1 January)
- Constitution Day (5 February)
- Constitution Day holiday (6 February)
- Benito Juarez Day (20 March)
- Holy Thursday (6 April)
- Good Friday (7 April)
- Labor Day (1 May)
- Anniversary of the Battle of Puebla (5 May)
- Independence Day (16 September)
- Day of the Race (12 October)
- All Souls' Day (2 November)
- Revolution Day (20 November)
- Lady of Guadalupe Day (12 December)
- Christmas (25 December)
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Taxes for Employers
The average employer contributions range between 36.69% to 43.72% of the employee's salary. The following is the breakdown of social security tax for employers in Mexico.
- Social security (IMSS) - 26.54% to 33.58% (maternity, illness, daycare insurance, state payroll tax, disability, life insurance and labor risk insurance)
- Retirement fund - 5.15%
- National Housing Fund (INFONAVIT) - 5%
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Taxes for Employees
Income tax:
The following are the income tax brackets for Mexican residents.
- Up to MXN 8.952.49 - 1.92%
- MXN 8.952.50 to MXN 75,984.55 - 6.40%
- MXN 75,984.56 to MXN 133,536.07 - 10.88%
- MXN 133,536.08 to MXN 155,229.80 - 16%
- MXN 155,229.81 to MXN 185,852.57 - 17.92%
- MXN 185,852.58 to MXN 374,837.88 - 21.36%
- MXN 374,837.89 to MXN 590,795.99 - 23.52%
- MXN 590,796.00 to MXN 1,127,926.84 - 30%
- MXN 1,127,926.85 to MXN 1,503,902.46 - 32%
- MXN 1,503,902.47 to MXN 4,511,707.37 - 34%
- Above MXN 4,511,707.37 - 35%
Social Security Tax:
- Social security (IMSS) - 1.65% (maternity and illness)
- Retirement and old-age insurance - 1.125%
- Social security (IMSS) - 26.54% to 33.58% (maternity, illness, daycare insurance, state payroll tax, disability, life insurance and labor risk insurance)
- Retirement fund - 5.15%
- National Housing Fund (INFONAVIT) - 5%
Probation
The probation or trial period can be from 30 days to 180 days. The period is higher for executive positions.
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Termination
- 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
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.
Employees or Contractors
- Hiring independent contractors in Mexico can be complicated. Contractors and employees are treated as different entities. Employees These include retirement, medical benefits, old age benefits and more.
- In case of misclassification, the employer would be subject to lawsuits and heavy fines. The penalties depend on the laws evaded.
Final Words
The proximity of Mexico to the rest of the Americas makes it a lucrative business destination. EOR services can help potential employers navigate through the complex norms of the country. EOR services handle payroll, taxes, benefits and more leaving employers to focus on their business goals.
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